State of Michigan provides guidance on Earned Sick Time Act

We have previously reported on the replacement of the Michigan Paid Medical Leave Act with the more employee-friendly Earned Sick Time Act (ESTA). With the ESTA set to go into effect on February 21, 2025, the Michigan Labor and Economic Opportunity Agency (LEO) has issued frequently asked questions (FAQs) indicating how the state plans to interpret the new paid sick leave law to provide guidance to employers and employees. Here are some important concepts clarified in the guidance.

Classifying employees

With the ESTA covering all employers with one or more employees, it raises the question: Who is considered an employee?

The LEO’s FAQs indicate that the “economic reality test” will determine if a worker constitutes a covered employee or an independent contractor who is not covered. The ESTA isn’t intended to be any broader or narrower in terms of the definition of employee than existing Michigan law.

The LEO has clarified that the ESTA applies to all employees who are physically located in Michigan regardless of where the employer is located.

Accrual of leave

Under the ESTA, employers must allow up to 72 hours of accrued paid sick time to be used for qualifying purposes. Small businesses, however, can require that 32 hours of the 72 be unpaid. An employer is a small business if it employs fewer than 10 employees. When employment levels fluctuate, if an employer employs 10 or more employees in 20 or more workweeks in the current or preceding calendar year, it is not a small business.