The Michigan Department of Labor & Economic Opportunity (LEO) recent hosted a webinar to help businesses understand recent changes to Michigan’s minimum wage and earned sick time laws and how the new laws will affect workers and businesses. The key points to both laws are outlined below.
Senate Bill 8 will incrementally increase the minimum wage to $15 per hour by 2027. House Bill 4002 amends the existing Earned Sick Time Act and will expand paid sick leave.
Key Points for Earned Sick Time
- Frontloading Paid Sick Time: As an alternative to the accrual method, employers can choose to frontload at least 72 hours of paid sick time for immediate use each year, or 40 for a small business, which eliminates the requirement for carryover or accrual tracking for full-time employees.
- Frontloading Part-time Employees: As an alternative to the accrual method, employers may frontload paid sick time for part-time employees as well, with a prorated amount, subject to specific notice and true-up requirements.
- Accrual Method: If choosing the accrual method, employees accrue 1 hour of paid sick time for every 30 hours worked, and unused paid sick time rolls over up to 72 hours. Employers may limit the use of earned sick time to 72 hours, or 40 for a small business, in the 12-month period.
- New Hire Waiting Period: If using the accrual method, employers may have a policy for new employees hired on or after 2/21/25 requiring these employees to wait up to 120 days before using accrued sick time. Employees accrue earned sick time during this waiting period. If frontloading, hours are available for immediate use.
- Small Business Compliance: Small business is defined as an employer having 10 or fewer employees. Small businesses have until October 1, 2025, to comply with ESTA requirements.
- PTO Policy: Employers can use a combined paid time off (PTO) policy to meet ESTA requirements, as long as the total paid leave meets or exceeds the necessary amounts and may be used for the same purposes.
- Hourly Rate: For ESTA purposes, an employee’s hourly rate is their normal hourly wage or base rate and excludes overtime, holiday pay, bonuses, commissions, tips, etc.
- Enforcement: The Department of Labor and Economic Opportunity (LEO) is responsible for enforcing ESTA.
- Sick Time Increments: Employers may choose to use either one-hour increments or the smallest increment for tracking sick time usage.
Key Points for Minimum Wage
- Tipped minimum wage: Senate Bill 8 gradually increases the minimum cash wage for tipped employees from 38% of the full minimum wage to 50% of the regular minimum wage by 2031.
- Wage changes: Tipped minimum wage is $4.74 for the rest of 2025.
- Regular minimum wage: Senate Bill 8 keeps the minimum wage to $12.48 starting Feb. 21, reaching $15 by 2027, and adjusts for inflation after that.
