With much talk around changes to the Earned Sick Time Act and minimum wage law, the changes have officially been signed by Governor Gretchen Whitmer. Bill 4002 was passed by the House and Senate and has been signed into effect by the Governor as of Feb. 21, 2025.

While several important changes were made, the below includes some of key changes businesses need to note:

Employee exemptions – As with previous changes, nearly all employers are subject to these requirements. However, in addition to employees of the federal government, exempt employees now include: employees who work in accordance with a policy that allows the individual to schedule his/her own hours and has a policy that prohibits the employer from taking adverse personnel action if the individual does not schedule a minimum number of working hours, plus unpaid trainees or unpaid interns or individuals employed in accordance with the Youth Employment Standards Act.

Grace period - New businesses (as of Feb. 21, 2025, or after) will have a three-year grace period after forming to comply and small businesses (those with less than 10 employees) will have until Oct. 1, 2025, to comply with the requirements.

Accrual – As included in the changes already planned, employees are eligible to accrue one hour of earned sick time (EST) for every 30 hours worked. Employees working for small businesses (less than 10 employees) will accrue at the same rate but will only be eligible for 40 hours of paid leave annually with no unpaid leave. If employers opt to use the accrual method, carryover of 72 hours or 40 hours is required.

Frontloading – Employers may choose to frontload 72 hours at the beginning of a benefit year (40 hours for small businesses); employers only need to track how many hours of paid leave time employees have used annually. No carryover is required if employers opt to frontload. For part-time employees, employers may prorate the amount of paid leave frontloaded.

Waiting period – New employees can be required a 120-day waiting period to begin using their paid sick time.

Combining ESTA with paid time off (PTO) – If an employer’s PTO policy satisfies the ESTA requirements, they are not required to create a separate paid sick time policy.

Rate of pay – An employee’s normal hourly rate does not include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips or gratuities in calculating the rate for paid sick leave.

Minimum wage – The minimum wage rate will increase from $10.56/hour to $12.48 on Feb. 21, 2025, $13.73 on Jan. 1, 2026, and $15 Jan. 1, 2027. From there, inflationary increases will follow Jan. 1, 2028, and each subsequent year using the Midwest Consumer Price Index (CPI).

For tipped employees, the tipped minimum wage will stay at 38% in 2025 and jump 2% per year beginning in 2026 until it hits 50% in 2031.

For more on what has changed and to read the bill now in place, view Bill 4002. Doeren Mayhew recommends seeking legal counsel for advisement and direction on the implications of these changes and how they could impact your business.