Be sure you know which workers are covered under Michigan’s Earned Sick Time Act

Employers know by now that Michigan’s Earned Sick Time Act (ESTA) will become effective in February 2025. As HR professionals plan to implement ESTA-complaint policies, one of the big questions is: Who, exactly, does ESTA cover?

Clear exclusions under PMLA

The definition of “eligible employee” under Michigan’s Paid Medical Leave Act (PMLA) was fairly simple. It meant “an individual engaged in service to an employer in the business of the employer and from whom an employer is required to withhold for federal income tax purposes.” There were then a number of exclusions, including employees working primarily outside the state of Michigan, seasonal employees, and part-time employees.

Given the inclusion of the tax withholding requirement, the PMLA clearly did not apply to independent contractors.

What about ESTA?

ESTA defines “employee” as “an individual engaged in service to an employer in the business of the employer, except that employee does not include an individual employed by the United States government.”

Note that ESTA’s definition of “employee” does not include the requirement that payment be subject to tax withholding. When the Michigan legislature adopted and amended ESTA to create the PMLA, they sought to eliminate any ambiguity about who could be considered an employee by adding the tax withholding requirement. When the Michigan Supreme Court reinstated ESTA, this ambiguity returned.