If Pain, Yes Gain – Part 123: Michigan Supreme Court Resuscitates State's Earned Sick Time Act Of 2018

What You Need to Know:

• On July 31, 2024, the Michigan Supreme Court issued its long-awaited decision in Mothering Justice et al. v. Attorney General et al., holding in a 4-3 ruling that Michigan's current paid sick leave law, the Paid Medical Leave Act, is unconstitutional and reinstating the State's Earned Sick Time Act of 2018. This resolved nearly six years of uncertainty as to the status of paid sick leave in Michigan.
• Michigan's Paid Medical Leave Act has been in effect since March 2019. However, the mandate's longevity has been an open question because it was implemented through an "adopt-and-amend" procedure that replaced the Earned Sick Time Act (see further, below). The legality of that procedure was the subject of this decision.
• This week's Michigan Supreme Court decision also held that Michigan's Amended Wage Act was similarly unconstitutional, which will result in an increase to Michigan's minimum wage (likely by at least $2).
• Accordingly, the Earned Sick Time Act will replace the Paid Medical Leave Act effective February 21, 2025. This same effective date applies to changes in Michigan minimum wage under the Wage Act.
• Notably, the Earned Sick Time Act is a significantly more pro-employee mandate than the current standards under the Paid Medical Leave Act, and will provide more generous paid sick leave rights than many other states.
• • Nonexclusive highlights include: broader employee eligibility; broader employer coverage; a faster paid sick leave accrual rate; an increased annual usage cap; likely no annual accrual cap or year-end carry over cap; and broader reasons for use and covered family members.
• Important for employers, the Michigan Supreme Court determined that employers cannot be held liable for their reasonable reliance on the State government's assurances that the Paid Medical Leave Act and amended Wage Act were good law. Thus, employers that followed the amended laws will not be penalized.

Background:

Paid sick leave mandates have rapidly proliferated in states and municipalities around the country for more than a decade.¹ Each law brings a unique set of substantive requirements, as well as its own backstory on how and why the law was ultimately enacted. Michigan's paid sick leave saga is especially distinct,² with the latest – and perhaps final – chapter being written earlier this week by the Michigan Supreme Court.

Michigan's complicated paid sick leave history began nearly six years ago. In September 2018, the Michigan Legislature approved a ballot initiative, known as the Michigan Earned Sick Time Act ("ESTA"). The initiative, which was scheduled to go into effect on April 1, 2019, required employers statewide to provide employees with paid sick leave for certain covered absences. Since ESTA was adopted by the Legislature, as opposed to public vote, the Michigan Legislature reserved the right to amend the law with a simple majority vote before its effective date.

On December 5, 2018, the Michigan Legislature amended ESTA by adopting the Paid Medical Leave Act ("PMLA") (i.e., the "adopt-and-amend" procedure mentioned above), which constituted a major overhaul of the ESTA standards (see comparisons below). The PMLA, rather than ESTA, went into effect on March 29, 2019. Covered employers have had to comply with the PMLA ever since.

In May 2021, two Michigan employees, two Michigan nonprofit corporations, and the two organizations that circulated the statutory initiative petitions to provide earned paid sick leave to Michigan workers filed Mothering Justice and sought to (1) render the PMLA null and void on constitutional grounds because it amended the proposal that the Legislature had adopted during the same legislative session, and (2) reinstate the 2018 ESTA and original wage increases.

On July 19, 2022, the Michigan Court of Claims held that the adopt-and-amend process that the Legislature used to enact the PMLA violated the Michigan Constitution and that the original September 2018 version of the sick leave law (ESTA) had to be reinstated. For several months, it appeared that the ESTA was going to begin in mid-February 2023. However, in late-January 2023, the Michigan Court of Appeals overturned the Michigan Court of Claims decision, which left the PMLA in effect indefinitely.

The Michigan Court of Appeals decision was appealed to the Michigan Supreme Court shortly thereafter. In July 2023, the Michigan Supreme Court agreed to hear the matter. On July 31, 2024, the Michigan Supreme Court issued its decision, which as noted above, resulted in the reinstatement of the ESTA, effective February 21, 2025.

Michigan ESTA vs. PMLA:

The ESTA and PMLA differ in a number of significant substantive ways. Here are some highlights:

• Employee Eligibility:
• • PMLA (current): Specifies 12 exclusions from its definition of "eligible employee." To be eligible under the PMLA, employees must have (a) worked an average of 25 or more hours per week in the immediately preceding calendar year, and (b) their primary work location be in Michigan. The PMLA's protections also do not extend to a number of other individuals, including but not limited to, the following:
  • • employees exempt from overtime under the FLSA;
    • private sector employees covered by a CBA;
    • certain temporary help service firm employees disqualified from receiving benefits under the Michigan Employment Security Act;
    • variable hour employees as defined by federal regulations governing the Affordable Care Act;
    • individuals employed by an employer for 25 weeks or fewer in a calendar year for a job scheduled for 25 weeks or fewer;
    • an employee as described in Section 201 of the Railway Labor Act; and
    • individuals employed by an air carrier as a flight deck or cabin crew member that is subject to Title II of the Railway Labor Act.
  • ESTA (begins 2/21/2025): ESTA contains a much broader definition of "employee" than does the PMLA. Specifically, "employee" means an individual engaged in service to an employer in the business of the employer, with the only carveout being an individual employed by the United States government.
  • Takeaway: Many Michigan employees who have not been eligible for paid sick leave under the PMLA will be entitled to paid sick leave under the ESTA when it goes into effect.³ Employers should review their policies to ensure excluded employees are covered.
• Employer Coverage:
• • PMLA (current): Only employers with 50 or more individuals are subject to paid sick leave obligations under the PMLA.
  • ESTA (begins 2/21/2025): ESTA contains a much broader scope of employer coverage than the PMLA. Specifically, "employer" means a person, firm, business, etc. that employs one or more individuals. While ESTA does allow for reduced paid sick leave obligations for "small businesses" (see below), the threshold to qualify is having fewer than 10 individuals work for compensation during a given week, and even then certain paid sick leave standards still apply.
  • Takeaway: Smaller Michigan employers who are not currently subject to paid sick leave obligations under the PMLA will be covered by the ESTA when it goes into effect. Such employers should begin preparing for ESTA compliance.
• Accrual Rate:
• • PMLA (current): Employees accrue paid sick leave at the rate of one hour for every 35 hours worked.
  • ESTA (begins 2/21/2025): Employees accrue paid sick leave at the rate of one hour for every 30 hours worked.
  • Takeaway: Employees will accrue paid sick leave faster under the ESTA than they currently do under the PMLA.
• Accrual Cap:
• • PMLA (current): Employers can cap employees' paid sick leave accrual at a maximum of 40 hours per benefit year.
  • ESTA (begins 2/21/2025): No express cap on how much paid sick leave eligible employees can accrue in a benefit year.
  • Takeaway: Employees will likely accrue greater amounts of paid sick leave in a benefit year under the ESTA; absent further guidance from the State, employers should ensure that their processes do not halt accrual at 40 hours.
• Annual Usage Cap:
• • PMLA (current): 40 hours per year.
  • ESTA (begins 2/21/2025): 72 hours per year. Reduced paid leave for "small businesses."⁴
  • Takeaway: Employees will be able to use greater amounts of available paid sick leave in a benefit year under ESTA than they currently do under the PMLA. The 72-hour usage cap is among the higher usage caps nationally.
• Year-End Carryover:
• • PMLA (current): Employers can set a 40-hour cap on the amount of earned, unused paid sick leave that employees can carry over at year-end.
  • ESTA (begins 2/21/2025): No express cap. Law states "earned sick time shall carry over from year to year."
  • Takeaway: Employees likely will be able to carry over more earned, unused paid sick leave at year-end under ESTA than they currently can under the PMLA.
• Frontloading:
• • PMLA (current): Employers that provide eligible employees with a frontloaded grant of at least 40 hours of paid sick leave at the start of a benefit year can avoid the law's accrual and year-end carryover obligations.
  • ESTA (begins 2/21/2025): No express provision.
  • Takeaway: It is unclear at this time whether Michigan employers that frontload paid sick leave at the start of a benefit year will be able to avoid accrual and carryover obligations when the ESTA goes into effect.
• Covered Reasons for Use:
• • Takeaway: While the ESTA and PMLA largely cover the same absences for purposes of proper use of paid sick leave – employee or covered family member illness, injury, health condition, or preventative care; certain absences where the employee or covered family member is a victim of domestic violence or sexual assault; absences due to certain public health emergencies – the ESTA also covers meetings at the employee's child's school or place of care related to the child's health or disability, or the effects of domestic violence or sexual assault on the child.
• Covered Family Members:
• • Takeaway: The ESTA and PMLA both consider "family member" to include an employee's child, parent, spouse, grandparent, grandchild and sibling. However, the ESTA also covers "domestic partner" and "any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship" in its definition of "family member."
• Use of PTO (or Other Paid Time Off) for Compliance:
• • PMLA (current): The PMLA contains language establishing a rebuttable presumption of compliance for employers that provide employees with at least 40 hours of paid leave each benefit year. Under the PMLA, "paid leave" includes, but is not limited to, paid vacation days, paid personal days, and paid time off (i.e., PTO).
  • ESTA (begins 2/21/2025): Under the ESTA, in order to use a non-sick paid leave or paid time off policy for compliance, the employer must provide other paid leave in at least the same amounts, that may be used for the same purposes and under the same conditions as those called for under the ESTA, and that is accrued at a rate equal to or greater than the rate under the ESTA.
  • Takeaway: While employers can use non-sick paid time off policies (i.e., PTO, vacation, personal time, etc.) for paid sick leave compliance under the ESTA, more burdensome criteria must be met in order to do so.
• Increments of Use:
• • PMLA (current): 1-hour increments.
  • ESTA (begins 2/21/2025): Paid sick leave may be used in the smaller of hourly increments or the smallest increment that the employer's payroll system uses to account for absences or use of other time.
  • Takeaway: Depending on the employer's payroll system setup for tracking absences or use of other time, the ESTA could require that employers allow employees to use available paid sick leave in smaller increments than is currently the case under the PMLA.
• Documentation:
• • PMLA (current): The PMLA does not restrict employers' ability to require reasonable documentation following a paid sick leave absence of less than three consecutive days. Instead, employees must comply with their employer's usual and customary documentation requirements for requesting leave when using paid sick leave.
  • ESTA (begins 2/21/2025): An employer must wait for an employee to be absent for more than three consecutive days before it can require the employee to provide reasonable documentation justifying that paid sick leave was used for a proper reason.
  • Takeaway: The ESTA imposes greater burdens on employer paid sick leave documentation practices than is currently the case under the PMLA. However, this requirement is similar to many other national paid sick leave laws.
• Unlawful Retaliation / Interference:
• • PMLA (current): No express provisions.
  • ESTA (begins 2/21/2025): Contains provisions prohibiting both unlawful retaliation and unlawful interference.
  • Takeaway: Employers face greater risk of being penalized for unlawful retaliation and unlawful interference based on their Michigan paid sick leave policy and practices under the ESTA than they currently do under the PMLA.
• Enforcement and Statute of Limitations:
• • PMLA (current): The PMLA does not provide a private civil cause of action to aggrieved employees. Instead, the PMLA requires aggrieved employees to file a claim with the Michigan Department of Licensing and Regulatory Affairs (the "Department") within six months after the alleged violation.
  • ESTA (begins 2/21/2025): An employee who believes an employer has violated the ESTA may file a civil action against the employer at any time within three years after the violation or the date when the employee knew of the violation. Filing a claim with the Department is neither a prerequisite nor a bar to bringing a civil action.
  • Takeaway: The risk of being penalized for paid sick leave law noncompliance is greater under the ESTA than it is under the PMLA.
• Other Standards: In addition to the above, there are a number of other substantive topics worth assessing to determine whether and, if so how, they differ between the PMLA and the ESTA. Nonexclusive examples include employee notice to the company, recordkeeping, posting and notice, reinstatement of earned, unused time upon rehire, and rate of pay.

Employer Takeaways:

As noted above, given the ways the ESTA expands paid sick leave entitlements and conditions compared to the current standards under the PMLA, Michigan employers should prepare for an increase in job-protected paid sick leave absences when the ESTA begins. Employers should also consider taking the following steps to comply with the ESTA (and new minimum wage requirements) in advance of the February 21, 2025 effective date:

• Review existing policies, practices, procedures, and systems to ensure compliance with the ESTA and the new minimum wage requirement. Specifically, employers should ensure all necessary employees receive paid sick leave under the ESTA.
• Train supervisory and managerial employees, as well as HR, on the new requirements.
• Monitor the Michigan Department of Labor and Economic Opportunity's website for updates, including but not limited to, potential rulemaking, FAQs, and model notices.

We will continue to monitor and provide updates on Michigan paid sick leave developments as the ESTA's new effective date approaches and on any subsequent changes.

Footnotes

1. Today, the states that have enacted a statewide general non-COVID-19 paid sick leave or paid time off mandate include: (1) Arizona; (2) California; (3) Colorado; (4) Connecticut; (5) Illinois (PTO law) (effective 1/1/2024); (6) Maine (PTO law); (7) Maryland; (8) Massachusetts; (9) Michigan; (10) Minnesota (effective 1/1/2024); (11) Nevada (PTO law); (12) New Jersey; (13) New Mexico; (14) New York; (15) Oregon; (16) Rhode Island; (17) Vermont; and (18) Washington. In addition, (19) Virginia has a statewide paid sick leave law that applies only to certain home health workers. There also is a non-COVID-19 paid sick leave mandate in (20) Washington, D.C.. Further there are more than two dozen municipalities with non-COVID-19 paid sick leave or paid time off mandates in the United States.

2. Seyfarth has been tracking the evolution of Michigan paid sick leave for the last six years as part of our "If Pain, Yes Gain" dedicated paid sick leave and paid time off law article series. Our prior Legal Updates on Michigan are available: here, here, here, here, here, and here.

3. With respect to employees covered by a CBA, the ESTA states that if such a CBA is in effect on the effective date of the ESTA, the law will apply beginning on the stated expiration date in the CBA, notwithstanding any statement in the CBA that it continues in force until a future date or event or the execution of a new CBA.

4. For "small businesses," ESTA sets a 40 hour annual usage cap for paid sick leave. However, if an employee of a small business accrues more than 40 hours of sick leave in a year, the employee is entitled to use an additional 32 hours of unpaid sick leave in that year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.