ESTA Changes to Be Implemented: What Your Business Must Do Now

With only two days before the Earned Sick Time Act (ESTA) and the minimum wage changes take effect, Michigan businesses need to be prepared for absolute compliance on Feb. 21. While the Detroit Regional Chamber continues to advocate for changes to both requirements, companies need to meet compliance as soon as possible to avoid any penalties. You can read the Chamber’s summary of the two new laws below.  

Under ESTA, all employees not employed by the federal government, regardless of type, must have paid leave. This includes temporary, seasonal, and casual employees, as well as employees outside the state of Michigan who are selling services in Michigan.

Employees accrue one hour of paid time for every 30 hours worked, up to 72 hours a year. Employers with less than 10 employees can cap accrual at 40 hours and must offer 32 hours of unpaid leave. Unlike the Paid Medical and Leave Act (PMLA), ESTA does not allow frontloading. Employees can carry over unused leave from year to year. However, if the employer has more than 10 employees, they can limit the use of carried-over leave to 72 hours per year. The limit for employers with less than 10 employees is 40 paid and 32 unpaid hours.
 

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, the terms of use, the prohibition on retaliation, and the right to a private suit. Further, any poster notices will need to 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, which the state can inspect at any time. This is an increase from the previous requirement of one year under PMLA. Under ESTA, an employer is prohibited from taking retaliatory action if the employee has exercised their ESTA rights, including using earned sick time, filing a complaint about any alleged employer ESTA violation, and the right to inform any person of their ESTA rights.  

Paid leave may not be treated as an absence under your attendance policy. An employee also has the right to file a claim for payment for unused earned sick time, rehiring or reinstatement, back wages, restoration of benefits, liquidated damages, and attorney fees. If an employer takes adverse action within 90 days or a question about an employer’s compliance with an employee’s right to earned sick time under ESTA and the employer does not have or grant access to records, there is a violation presumption, which can only be rebutted by clear and convincing evidence. If found guilty, an employer must pay a $1,000 fine for each violation, including retaliation, failure to provide leave, or failure to post or distribute notice. 

Effective Feb. 21, there will be a drastic change in the schedule for tipped minimum wage. A phase-out will take place on the following schedule: 

• Feb. 21, 2025: 48% of tipped employees’ minimum wage, which will likely be over $6 from the current $3.93. 

• February 2026: 60% of the wage. 

• February 2027: 70% of the wage. 

• February 2028: 80% of the wage. 

• February 2029: Tipped wage will no longer exist and must follow regular minimum wage rates. 

These mandatory changes will have an overwhelming impact on Michigan businesses across industries and sizes, requiring proactive assessment of current benefit and wage structures based on the ruling’s current status. While the Chamber is hopeful that there will be legislative action to fix many loopholes and blatant issues with the legislation, businesses need to prepare for compliance on Feb. 21. This includes being informed through the Chamber’s latest webinar discussion with the Michigan Department of Economic Labor and Opportunity.