In mid-July 2022, the 2018 version of Michigan’s Earned Sick Time Act (ESTA) was reinstated by the Michigan Court of Claims, effectively raising state minimum wage and expanding paid and unpaid sick leave benefits for nearly all Michigan employees. On January 26, 2023, a three-judge Court of Appeals panel reversed this decision, ruling that the Michigan Legislature of 2018 was constitutionally entitled to adopt and amend petition initiatives in a single legislative session rather than push the initiatives to the ballot in November of that year.
Most labor law experts believe the case will now go to the Michigan Supreme Court on appeal of the Court of Appeals ruling. If the Court of Appeals decision is overturned on appeal, it will nullify the Paid Medical Leave Act (PMLA) and the amended version of the Improved Workplace Opportunity Wage Act (IWOWA) and require Michigan employers to abide by renewed ESTA standards regarding sick leave and minimum wage in 2023 and beyond. Although the reinstatement of ESTA was originally slated to take effect on February 19, 2023, the timeline of this regulatory change is now in limbo and dependent on the outcome of a likely Michigan Supreme Court appeal.
From 2019 to 2022, both the PMLA and IWOWA significantly amended the original 2018 ESTA, reducing the sick time annual usage cap from 72 to 40 hours and enacting a 40-hour accrual cap that was not present in the original 2018 ESTA. Although the Michigan Court of Appeals’ decision temporarily reverses the Court of Claims’ ruling to reinstate ESTA, it’s essential for Michigan employers to prepare for changes in the event that ESTA is restored by a Michigan Supreme Court ruling later in 2023.
In this article, we’ll outline how a renewed ESTA would affect sick day policy requirements for employers in the state of Michigan and how to prepare for these potential changes. We’ll also explore how the potential reinstatement of the original IWOWA would impact minimum wage standards in the state of Michigan.
Required Changes – Paid Leave/Sick Day Policies
Assuming original ESTA and IWOWA regulations are reinstated later in 2023, paid leaves of absence will become a required offering for all employees (including temporary, part-time and exempt workers) and for businesses of all sizes; the only exclusion applies to federal employees. Unlike PMLA, which requires paid sick leave only for large employers with 50 or more employees, ESTA would require paid sick leave for all businesses, including small businesses with less than ten employees.
Here are some additional changes to consider:
- ESTA would require employers with less than 10 employees to offer at least 40 hours of paid sick leave and 32 hours of unpaid leave. Employers with more than 10 employees would be required to provide at least 72 hours of paid sick leave to employees.
- Although the above annual limits would take effect, ESTA would not permit an employer to cap employee accrual or carryover of earned sick time. Employers should speak with qualified HR consultants to prepare ESTA-compliant policies for employee requests of sick leave and year-to-year carryover of unused leave.
- Under ESTA, qualifying employees would accrue 1 hour of sick time for every 30 hours worked. Under PMLA, employees earn 1 hour for every 35 hours worked.
- ESTA guidelines and regulations would modify the definition of family member, the permissible use of leave time, employee notice requirements, and more.
State Minimum Wage
If the Michigan Court of Appeals’ decision is overturned on appeal, it will reinstate the original ESTA and IWOW regulations, affecting minimum wage standards in the state of Michigan. As a result, hourly minimum wage would be raised from $10.10 to $13.03 and tipped minimum wage would be raised from $3.84 to $11.73. In 2024, a single/uniform minimum wage would apply to all employees.
For now, Michigan’s hourly and tipped minimum wages will remain at $10.10 and $3.84, respectively. However, in the event of a successful appeal with the Michigan Supreme Court, these hourly wage requirements could change in conjunction with paid and unpaid sick leave policies.
How to Prepare
Cello HR will continue to provide updates regarding the status of any appeals to the Court of Appeals’ ruling and offer best practices for adapting to ESTA sick leave and minimum wage requirements in the event that ESTA is restored in 2023. Employers should, at bare minimum, review ESTA and IWOW policies, follow the Michigan DOL website, and keep HR and managerial employees informed of ongoing changes.
Long-Term Compliance and HR Best Practices with Cello HR
Whether it’s aligning your HR policies with ESTA and IWOW regulations or adapting to a host of other labor law changes, Cello HR offers comprehensive support and expertise to keep your business legally compliant and connected with intuitive, integrated HCM technology that streamlines onboarding, payroll, timekeeping, benefits administration and more.
Contact us today to let us know how we can support your business.