Save MI Small Business: Fixing Minimum Wage and Paid Leave

Key Changes to ESTA:

Governor Whitmer has signed Public Acts 1 & 2 of 2025 which provide significant improvements to the Earned Sick Time Act (ESTA) and preserve the tipped wage system. The bipartisan legislation provides more flexibility for employers while ensuring employees continue to receive earned sick time benefits. These updates took effect February 21, 2025, and impact businesses of all sizes. 

Small Business Flexibility

• Employers with 10 or fewer employees must now provide 40 hours of paid sick time per year (eliminating the previous 32 unpaid hours).
• These small employers have until October 1, 2025, to comply.
• New businesses are exempt from ESTA for the first three years.

Streamlined Processes

• Employers can now frontload sick time instead of tracking accrual.
• One-hour increments are the smallest amount of sick time that can be used.
• Accrual-based sick time can carry over up to 72 hours, unless the employer opts to pay out unused time at year-end.
• PTO policies can be used instead of separate sick time banks for easier management.

Notification and Exemptions

• Employers can require written policies for sick time use, ensuring more accountability.
• ESTA now exempts youth workers and unpaid interns.
• Seasonal employers benefit from a 120-day waiting period for new hires to use sick time. If an employee is rehired after two months, the waiting period resets.

Employer Protections & Compliance Adjustments

• Eliminates presumption of employer guilt in complaints filed with the state.
• Removes employees’ ability to sue employers directly for violations.
• Provides exemptions for employers with employment contracts effective January 31, 2025.

What’s Next?

As businesses adjust to these changes, employees can begin using sick time as soon as it is accrued. Employers have 30 days to issue written notices informing employees about their earned sick time and related policies.

Meanwhile, the Michigan Department of Labor and Economic Opportunity (LEO) is actively updating its compliance resources. While full enforcement is not yet underway, businesses should begin preparing now. An updated FAQ and revised workplace posters are already available on LEO’s website to assist employers in meeting these new requirements.

The Grand Rapids Chamber is here to help you navigate ESTA compliance. Stay tuned for more resources and upcoming discussions on implementation strategies.