MAA Member Alert - Michigan Legislature Amends Employers' Earned Sick Time and Minimum Wage Obligations

Last night, the Michigan Legislature passed a bill that amends the Michigan Earned Sick Time Act (ESTA), which the Michigan Supreme Court reinstated last year. The court took such action after concluding that the Legislature’s “adopt and amend” strategy concerning the 2018 ballot initiative was unconstitutional, as we covered in a previous eAlert. Under ESTA’s initial text, all Michigan employers were required to provide employees 72 hours of earned sick time per benefit year, with virtually no limits on the accrual, use or carryover of such time. ESTA was set to take effect today. House Bill 4002 (the “Amendment”) amends ESTA in many respects. Among the most significant changes, certain gig workers, certain unpaid interns and trainees and minors would not be eligible for earned sick time. Small employers (those with 10 or fewer employees) only have to provide 40 hours of paid earned sick time and will have until Oct. 1 to comply with the law. As an alternative to allowing employees to accrue time, employers are permitted to front-load the requisite minimum number of hours (72 for larger employers and 40 for small employers) at the beginning of a benefit year. Employers can also front-load a proportional amount of time for their part-time employees. Employers who allow their employees to accrue earned sick time must allow them to carry-over unused time, but that carry-over can be capped at 72 or 40 hours, respectively for large and small employers. Employers who front-load earned sick time are not required to allow carry-over of unused time or pay-out unused time. Overtime, holiday pay, commissions, bonuses, tips and gratuities can be excluded from the rate of pay used for earned sick time. Additionally, employers may now require employees to use earned sick time in hourly increments, even if they use a smaller increment to account for absences. With respect to new hires, an employer may require them to wait until 120 days after starting employment before they can use the time. Lastly, employers may establish and publish procedures for requesting earned sick time and discipline employees who fail to abide by those procedures or who misuse earned sick time. The Amendment was presented to Governor Gretchen Whitmer last night, and she is expected to sign it. Once signed, the Amendment takes effect immediately and employers will have 30 days from today’s date to provide employees notice concerning their rights and obligations under ESTA, as amended. With the passage of the Amendment, Michigan’s Improved Workforce Opportunity Wage Act (IWOWA) will also be revised. Like ESTA, IWOWA is also a 2018 ballot initiative that the Michigan Supreme Court reinstated last year. Under IWOWA, Michigan’s minimum wage was set to gradually increase to nearly $15 per hour by 2028, and the state’s tipped minimum wage would be phased out entirely by 2030. Earlier this week, however, the Legislature passed Senate Bill 8, which modifies IWOWA’s wage adjustment schedule. Under Senate Bill 8, Michigan’s minimum wage will reach $15 a year sooner, by 2027. The tipped minimum wage, though, will no longer be phased out entirely and will instead gradually raise to 50% of the state’s general minimum wage by 2031. Notably, the passage of Senate Bill 8 was contingent on the Legislature reaching a compromise concerning ESTA. With the Amendment’s passage, both measures can be signed into law. Although these amendments provide employers much-needed relief from ESTA and IWOWA’s initial obligations, employers must still review their existing leave policies and wage and hour practices to ensure that they comply with ESTA and IWOWA, as amended. If you have questions about either amendment, their effect on your business or if you need assistance complying with these changes, please contact a member of Warner’s Labor and Employment Practice Group. Warner’s Labor and Employment Practice Group has also developed a modified ESTA policy template for a purchase price of $400.00 (or $200.00, for employers who have purchased a previous ESTA policy). If you are interested in purchasing the template, please contact your Warner attorney or Liz Burnson at eburnson@wnj.com or 616.752.2450.