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Mandatory Paid Leave and Minimum Wage Laws

Executive Summary 

We wish to advise you of upcoming changes to the mandatory paid leave and minimum wage laws taking effect in February of 2025. These changes require all Michigan employers (except for the U.S. government) to amend existing paid leave policies or implement new leave policies by February 21, 2025. In order to comply with the new laws regarding earned sick time, employers must:

• Accrue sick time for covered employees at a rate of at least one hour of earned sick time for every 30 hours work;
• Allow employees to use up to 72 hours of paid earned sick time per year (for employers with 10 or more employees); or allow employees to use up to 40 hours of paid earned sick time per year (for employers with fewer than 10 employees);
• While employers may limit an employee's use of earned sick time to 72 hours in any year, any other provision prohibiting the carryover or capping unused sick time is unenforceable.

In addition, beginning February 21, 2025, minimum wage will increase to approximately $12.48 per hour and the tipped wage rate will increase to 48% on February 21, 2025. Both minimum wage and tipped wage credit will continue to increase on an annual basis. 

Details and Advice

Please see below for more details on earned sick time, minimum wage, and tipped wage credit laws.

The Michigan Supreme Court recently issued an opinion reviewing the constitutionality of the Michigan legislature’s “adopt and amend” strategy. In 2018, the Michigan legislature adopted, and then immediately changed, two ballot proposals that would otherwise have been included in the November ballot. The two ballot proposals related to (1) Michigan minimum wage (Improved Workforce Opportunity and Wage Act ("IWOWA")) and (2) paid sick leave requirements (Earned Sick Time Act ("ESTA")). The “adopt and amend” strategy resulted in the enactment of the Michigan Paid Medical Leave Act ("PMLA") and the minimum wage provisions in 2018 remained in effect. While the “adopt and amend” strategy has been challenged for many years, it wasn't until recently that the Michigan Supreme Court found that the strategy violated the Michigan Constitution. In its ruling, the Michigan Supreme Court determined that each of the ballot initiatives, ESTA and IWOWA, should be reinstated. The reinstatement becomes effective February 21, 2025. The analysis below will be applicable absent further judicial, legislative, or voter-driven constitutional action.

1.   Requirements of Earned Sick Time Act ("ESTA")

ESTA offers broad coverage and more complex usage rules for employers to understand. As it stands, ESTA is an aggressive and groundbreaking time-off mandate in Michigan’s history. All covered employers must amend existing paid leave policies or implement new leave policies by February 21, 2025. The amended policies must comply with the following:

• All Michigan employers, except for the U.S. government, are covered;
• All employees of a covered employer are covered, including temporary, seasonal, and casual employees. Notably, the categorization of employees under PMLA has been removed;
• Covered employers must accrue sick time for covered employees at a rate of at least one hour of earned sick time for every 30 hours worked;
• Employers with 10 or more employees must allow employees to use up to 72 hours of paid earned sick time per year; 
• Employers with fewer than 10 employees must provide up to 40 hours of earned paid sick time and may provide remaining earned sick leave up to the required 72 hours per year on an unpaid basis, rather than paid;
• Employers may not prohibit the carryover or cap the accrual of unused earned sick time; however,
• Employers may limit the use of earned sick time in any year to 72 hours.

2.  Requirements of Improved Workforce Opportunity and Wage Act ("IWOWA")

The minimum wage ballot proposal, IWOWA, also takes effect February 21, 2025, but is subject to a “phase in” of certain requirements. On February 21, 2025 the minimum wage will be set at $10.00 per hour and will incrementally increase through 2029. The state treasurer will calculate the inflation-adjusted minimum wage annually. Restaurants and tipped-waged employers will also need to deal with the scheduled removal of the tipped wage credit. As it stands, the tipped wage credit is 38% of minimum wage. On February 21, 2025, the tipped wage credit will increase to 48% of minimum wage. Over the next five years, the tipped wage credit will continue to increase until it no longer exists and those employees will receive regular minimum wage rates. 

3.   Advice for Employers regarding ESTA

At the time of hiring, an employer must provide notice of the amount of earned sick time to be provided, how a year would be calculated, terms of use, the prohibition on retaliation, and the right to a private suit. Similarly, paid leave may not be treated as an absence under an employer’s attendance policy. Any poster notices must be in English, Spanish, and any other language used by at least 10% of employees in the workplace. Employers must maintain timekeeping records for three years (increased from one year in PMLA) and the state can inspect these at any time. Importantly, employers are prohibited from retaliating against an employee who has exercised their rights under ESTA (e.g. using earned sick time, filing a complaint, informing any person of ESTA rights).

If you wish to discuss these legal updates and its impact to your company, please reach out to our office at (269) 492-1040, or contact Attorney Davis C. Martin at Dmartin@willis.law.

As always, it is our pleasure to be of service to you.

Best Regards,

Michael J. Willis, J.D., C.P.A.