Publication date: September 4, 2024

In our last blog, we shared an overview of the new Earned Sick Time Act (ESTA) legislative changes coming in February 2025. We advised to pause the implementation of significant changes right now (tempting though, it may be) and instead prepare by: listening, reading, and asking questions. 

So, for this blog, we’re going to share a few insights to questions we’ve been asked. We’re focusing first on PTO (paid time off) policies and how those might interact with the new Earned Sick Time guidelines. If you submitted a question and don’t see the answer in this blog, stay tuned! 

Q: Is it possible this is all going to go away before next year and we can just ignore it? Perhaps the courts will block it or change it substantially? 

A: That looks highly unlikely. The courts have already ruled and this is a law now. The ESTA regulations will only change if the legislature makes and approves amendments. Our GR legal community is cautiously optimistic that the MI agency that is tasked with enforcement, LARA (Licensing and Regulatory Affairs), may issue regulatory guidance prior to 2/21/25 to address the many gaps and uncertainties and clarify administrative details. We’ve started to hear rumblings that conversations are beginning to take shape. Public interest groups, especially in the hospitality sector, are lobbying for changes. So what we’re hearing is: “Don’t bank on it changing.”

Q: If we currently have a PTO policy with an accrual of greater than 72 hours, is this sufficient?

A: Possibly. Does the policy permit usage for all of the required reasons? Are part time employees eligible? Is there a waiting period for usage? Are there any requirements around how and when PTO should be submitted? Additionally, we will also likely have a lot of additional responsibilities – accrual calculation, documentation, notice requirements, etc. For example, if someone works overtime and puts in an excess of 2,160 hours in a year, they are entitled to more than 72 hours. And, there is unlimited carry over from year to year. Given all these factors to consider, most of us will likely still need to make changes to any current PTO policy. 

Q: Should we separate ESTA from PTO and have two distinct accruals/banks?? 

A: Separating earned sick time from PTO is one possible approach, but it may or may not be the best approach, depending on the company. Separating the two will ensure the additional requirements imposed on sick time by the legislation (like accrual, documentation, unlimited carryover, etc.) will only be required for sick time, not vacation time or PTO. Separating sick time will also give us the option to continue some old rules, like requiring 2 weeks advance notice for vacation/PTO requests. However, separating time also means that administration rules become more complex and strong guidelines are needed to keep the two time buckets separate. Two time off policies also imply we can afford to offer the potential for 72 hours of sick PLUS additional PTO/vacation time.

Our advice is to think both of what you CAN do and what you WANT to do. Embrace it, take into consideration the ability and ease of administration, cost, how employees will react to the changes, and how you communicate it. Make sure the final policy fits your company’s culture, but also make sure it complies with the soon-to-be-released LARA guidance. Compliance is key, but so is keeping your team engaged and informed.

Q: How will this impact unlimited PTO policies?

A: Employers may want to consider whether or not to continue an unlimited PTO policy in light of the mandate to accrue and allow unlimited carryover of sick time. If we continue to offer these policies we are still required to calculate the accrual for each employee based on hours worked. And, employees will still have the right to carry over their full accrual each year with no cap. Keep in mind while unlimited PTO policies can be used for a sick day, many of unlimited PTO policies limit usage for an extended leave of absence (i.e. medical or parental leave), which may NOT comply with the new ESTA leave-usage requirements. Employers may want to consider adding a way for the employee to request paid job protected leave under ESTA.  

 Q: Does paid time off (PTO), vacation time, or holiday time. count towards calculating the 30 hours worked? 

A: No. Earned Sick time is calculated based on hours actually WORKED.

Keep your questions coming (submit them here) and we will keep sharing what we learn!