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Preparing Your Township to Comply with the New Mandatory Paid Sick Time

A new mandatory paid sick time law will go into effect for all Michigan employers next year. After a lengthy legal battle, the Michigan Supreme Court held in July that the Earned Sick Time Act (“ESTA”) will take effect February 21, 2025, replacing the Paid Medical Leave Act. The ESTA is a broad, employee-friendly law that significantly departs from current sick time laws in several ways.

Who is required to provide sick time?

Unlike many other employment laws, the ESTA requires all Michigan employers (including townships) to provide paid sick time to their employees. When an employee uses paid sick time under the ESTA, they must be paid their normal hourly wage. Unlike most other employment laws that only apply to employers of a certain size, the ESTA applies to all Michigan employers, regardless of how many employees they have. Even if your township has only a few part-time staff, the ESTA will apply: it will require the township to grant accrual and permission to use paid sick time for those employees.

Who can accrue and use paid sick time?

The ESTA requires that all employees, regardless of full-time, part-time, seasonal, or temporary status will be entitled to accrue and use paid sick time. That means, however, elected officials and policymaking appointed officials (e.g., members of a planning commission, zoning board of appeals, or board of review) are NOT considered employees under the ESTA and will NOT accrue paid sick time. Properly classified independent contractors are also not considered employees and, therefore, not entitled to accrue and use paid sick time. Aside from those extremely limited exceptions, you should assume every single township employee is eligible to accrue and use sick time under the ESTA unless and until additional information comes forward from the State and/or Legislature. That means seasonal staff, temporary election workers, paid-on-call firefighters, and any other person for whom your township withholds payroll taxes and issues a W2 should accrue sick time.

How does accrual and use of sick time work under the ESTA?

Employees will be entitled to accrue one (1) hour of paid sick time for every thirty (30) hours worked. It does not matter how long it takes an employee to work those 30 hours. For example, if a part-time employee only works ten hours per week, they will accrue a single hour of paid sick time every three weeks. For properly classified salaried, exempt employees, the ESTA assumes they will work 40 hours per week unless their ordinary workweek is shorter than 40 hours.

Employees are always entitled to carry over their sick time bank from one year to the next. An employee’s sick bank cannot be cashed out during employment. The township also cannot impose a “use it or lose it” sick time policy that has employees forfeit sick time if not used within a certain timeframe. However, the ESTA does not require employers to pay out accrued but unused sick time when the individual’s employment ends.

Townships cannot limit how much paid sick time an employee accrues, but you can cap the use of sick time. How much is dependent on how many employees your township has.

  • Fewer than 10 employees? You may cap annual use at 40 hours of paid sick time and 32 hours of unpaid sick time. Paid sick time must be exhausted before an employee’s sick time can be unpaid.
  • 10 or more employees? You may cap annual use of sick time to 72 hours of paid sick time. There is no further obligation under the ESTA to offer unpaid sick time.

For what purposes can an employee take sick time?

  • Personal or family member mental or physical illness, injury, or health condition. This includes time off for the illness/injury as well as time for diagnosis, treatment, or preventative care.
  • Time off for medical or psychological care, to obtain victim services, to relocate, to obtain legal services, or to participate in legal proceedings if the employee or a family member is the victim of sexual assault or domestic violence.
  • School meetings needed as the result of the employee’s child’s disability or effects of domestic violence or sexual assault.
  • Closure of the employee’s place of business or their child’s school or place of care, due to a public health emergency.

 

Be prepared that the ESTA drastically limits an employer’s ability to request a doctor’s note or other documentation to substantiate the use of sick time. An employer can only request documentation if an employee has missed more than three consecutive workdays. After that, the employer can request documentation but will be required to cover the entire out-of-pocket cost for the employee to obtain that documentation.

How will the ESTA impact union contracts?

Any collective-bargaining agreement in effect when the ESTA becomes effective will not be impacted. Collective-bargaining agreements do not need to comply with the ESTA’s requirements until the first time they expire and are re-negotiated after February 21, 2025.

What should my township be doing to prepare for the effective date of the ESTA?

Immediately begin preparing for February 21, 2025.

  • First, assess whether you’re a small (fewer than 10 employees) or large employer (10 or more employees). Smaller employers have lesser ESTA obligations.
  • Ensure that you have a plan to track accrual and use of paid sick time for all employees. If your current policies only permit paid sick time for certain employees, those will need to be greatly expanded to cover all employees. Your payroll processing company may be able to assist here.
  • If your current policy requires forfeiture or buy back of sick time at any time other than separation, you will need to consider alternatives.
  • Familiarize your decision makers with the permitted reasons to take paid sick time. Some of the permitted reasons go beyond what your township may have traditionally considered permitted use of sick time.

Crafting an effective and lawful sick time policy

We recommend that all employers draft a sick time policy in consultation with your township attorney. As you prepare to discuss policy drafting, consider the following:

  • Do you already provide paid leave to employees?

If you do, do you provide enough paid leave to satisfy the ESTA’s minimum requirements?

  • Will your township meet the minimums established by the ESTA or will you permit employees to accrue and/or use more sick time than is required by law?
  • Will your township lump sick time into an all-purpose paid-time-off (“PTO”) bank or will you create a separate bank for sick time?

An all-purpose PTO bank is convenient but, if sick time comes from a PTO bank, all leave time in the PTO bank must adhere to all the requirements of the ESTA.

  • Will you frontload the paid sick time or accrue throughout the year?

Employers are permitted to frontload sick time so long as the frontloaded amount still meets at least the 30:1 ratio required by the ESTA. Although it is more convenient, frontloading runs the risk that an employee will work more hours than anticipated and end up short of the minimum accruals required by the ESTA.

  • Be cautious about paying out unused sick time upon separation of employment. Those policies may have been drafted under the assumption that an employee’s sick bank would be paid out or forfeited every year, but buy outs and forfeitures are not allowed on an annual or other basis under the ESTA. The ESTA merely permits an employer to pay out some, all, or none of the accrued sick time at the individual’s end of employment.

If you do wish to pay out sick time upon separation, consider adding a limit to the number of hours that may be paid out to manage costs.

This information about the Earned Sick Time Act is current as of the publication date. However, it is possible that the Michigan Legislature will amend the ESTA before it becomes effective. We will continue to monitor developments in this area and provide updates as warranted. We are also prepared to assist you in updating policies, training your management teams, and preparing you and your employees for all these upcoming changes. If you have further questions, contact

 

By Chad Karsten

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

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