It’s been an interesting 24 hours in the legislature passing Minimum Wage, Tipped Wages, and Earned Sick Time.

Down to the wire, the following changes have been passed, pending final signature by the Governor today – February 21, 2025.

Minimum Wage

The hourly minimum wage rose to $12.48 with subsequent annual increases:

• $13.73 in 2026
• $15.00 in 2027

Beginning in 2028, the minimum will increase with inflation every year except if the unemployment rate is 8.5% or higher.

Tipped Wage

The tipped wage, 38% of the minimum, rose to $4.74 (38% of the minimum wage) with subsequent 2% increases each year:

• $5.49 in 2026
• $6.30 in 2027

This will continue until reaching 50% in 2031.

Earned Sick Time

Key changes were made and/or clarified from the original act:

• An all-encompassing PTO policy complies with the ESTA requirements, so long as it provides employees the same or greater amount of time (72 hours for 10+ employees; 40 hours for <10 employees), and employees can use the time a covered ESTA reason or any other purpose.
• Time can be front loaded.
• If time is front loaded, the carry over provision does not
• Employers can prorate the amount of time frontloaded for part time employees.
• Employers can enact an 120 days waiting period to use time, rather than 90 days.
• Postings and notice must be made within 30 days from effective date (2/21/2025).
• Sick time can be used in 1 hour increments or “the smallest increment that the employer uses to account for absences of use of other time.”
• Employers are required to reinstate any accrued benefits within 2 months of rehire, a modification from a 6 month rehire window.
• Employers can still require documentation after an absence of 3 or more days. Employers are not responsible for any out of pocket costs.
• The rate of pay calculation can exclude overtime, holiday pay, bonuses, commissions, supplemental pay, tips, gratuities, or piece rate pay.
• Employees can receive adverse action, up to and including termination for misuse of sick time or policy violations.
• Exempt employees include:
  • employees of the federal government
  • employees who work in accordance with a policy allowing the individual to schedule his/her own hours, where the employer has a policy that prohibits adverse action if the individual does not schedule a minimum number of working hours
  • unpaid trainees and unpaid interns
  • individuals employed under the Youth Employment Standards Act.
• The Private Right of Action has been eliminated, in which LEO will handle all complaints.

Additionally, For businesses with less than 10 employees:

• Delayed effective date to 10/1/2025
• No requirement for 32 unpaid hours of sick time, requiring 40 hours total paid sick leave
• New, Small Businesses: New businesses have a grace period of three years from hiring their first employee to comply with ESTA.

With these changes, are your policies in line and ready for rollout? Connect with us for support.