What Employers Need to Know: The Earned Sick Time Act (ESTA) Takes Effect February 21, 2025

On February 21, 2025, Michigan’s Earned Sick Time Act (ESTA) will go into effect, bringing significant changes to the way businesses handle sick time for their employees. This law applies to all employers with one or more employees, excluding the U.S. Government, and it mandates that employees begin accruing earned sick time. Let’s take a closer look at what employers need to know to prepare.

Accrual and Limits

• Accrual Rate: Employees will accrue 1 hour of sick time for every 30 hours worked, which breaks down to roughly 0.0334 hours per 1 hour worked.
• Caps: Employers can choose to cap accrual at 72 hours of sick time per year. However, any unused time must roll over year to year, with no cap on the amount that can accumulate. Keep in mind that while rollover is unlimited, employees can be restricted to 72 hours per year unless the employer opts for a higher limit.

Tracking and Usage

• Smallest Increments: Employers must allow employees to use sick time in the smallest increment used by the payroll system. For example, if employees are paid per minute, sick time can be taken minute-by-minute.
• Non-Disciplinary Absences: ESTA time is exempt from disciplinary policies. Absences taken under this leave cannot be counted against an employee in terms of any absence policy.

Documentation and Restrictions

• Reasonable Documentation: After three consecutive days of leave, employers can request reasonable documentation for sick time. However, employers cannot require employees to search for a replacement worker.
• No Payout at Termination: Employers are not required to pay out unused sick time upon termination. However, if an employee is rehired within 6 months, they are entitled to keep their accrued sick time.

Family Members

• Who’s Covered? ESTA defines family members broadly, including children, parents, grandparents, and even siblings, as well as individuals with whom the employee shares a close relationship. Employees can use sick time for their own or a family member’s illness, medical appointments, or issues related to domestic violence and sexual assault.

Key Considerations for Employers

• Tracking Records: Employers must maintain records of earned sick time for at least one year. However, most recommend keeping these records for seven years by integrating them into payroll systems.
• Discipline Policies: Be mindful of your discipline policies, especially if you plan to avoid tracking reasons for ESTA absences. This could complicate any progressive discipline process related to attendance.

Does ESTA Affect Collective Bargaining Agreements?

Yes, if employees are part of a collective bargaining agreement (CBA), the terms of the CBA may affect how ESTA applies. The law does not override sick leave benefits negotiated in an existing CBA unless that agreement is silent on the issue.

Action Items for Employers:

1. Review and Adjust Policies: Ensure that your sick leave policies comply with ESTA, including accrual rates, limits, and rollover rules.
2. Update Payroll Systems: Verify that your payroll system can track sick leave accruals accurately and in the smallest increments.
3. Plan for Documentation: Review your documentation process for sick time, especially regarding medical leave requests after three consecutive days.
4. Prepare for Compliance: Since ESTA applies to all employees, regardless of work location (as long as they are in Michigan), ensure that your records reflect the correct status for any employees working out-of-state.

With ESTA taking effect in just over a month, it’s crucial to start preparing now. Employers who don’t comply with the new law could face penalties. If you need assistance in adjusting your policies or ensuring compliance, we’re here to help.

Stay informed, and make sure your business is ready for the upcoming changes.