Summary — HB 4253 (2025)
Title: Labor: benefits; certain types of accrued leave; require an employer to pay to an employee when employment is terminated. Amends secs. 1 & 5 of 1978 PA 390 (MCL 408.471 & 408.475).
Sponsor: Rep. Veronica Paiz
Status (as of document): Introduced March 18, 2025; committee substitute reported favorably April 28, 2025; committee report to Calendars May 5, 2025. Effective date if enacted: January 1, 2027. Companion bills: SB 396, HB 2272.
Purpose
- Amend Michigan’s wage-payment statute (1978 PA 390) to (1) clarify definitions (including paid vacation/paid time off and fringe benefits), (2) update the named department, and (3) require employers to pay employees for accrued-but-unused paid vacation leave at separation from employment, subject to limited exceptions.
Key provisions and changes
- Definitions (amends MCL 408.471):
- Updates the named state department to “labor and economic opportunity.”
- Clarifies “employer” to include public and private entities (state agencies, local governments, school districts, institutions of higher education, and others) and states that, except as provided in a franchise agreement, a franchisee is the sole employer for workers covered by the franchisee’s benefit plan or payroll.
- Defines “fringe benefits” to include holiday pay, sick/injury leave, paid vacation leave (paid time off), bonuses, authorized expenses, and employer contributions.
- Defines “furlough” as a separation resulting from a full or partial shutdown that is intended to (and does) last ≤ 30 days, or that results from a federal or state-declared emergency.
- Defines “paid time off”/“paid vacation leave” as employer-paid time off usable for any reason.
- Clarifies “wages” do not include fringe benefits.
- Payment timing (amends MCL 408.475):
- For employees who voluntarily quit: employer must pay all wages earned and due as soon as the amount can, with due diligence, be determined. Special rule: hand-harvest crop workers must be paid as soon as determinable and in any event no later than 3 days after voluntary termination.
- For employees discharged: employer must immediately pay all wages earned and due as soon as the amount can be determined.
- For employees working under contract where final amounts cannot be determined until contract termination: employer must pay estimated wages as nearly as they can be determined, with final payment at contract termination (in accordance with section 2).
- New requirement: except as provided below, when an employee is separated from employment the employer must pay the employee for all accrued but unused paid vacation leave.
- Exceptions to the PTO payout requirement:
- No payout required if the separation is a furlough (as defined).
- No payout required if the employer provided an unlimited amount of paid vacation leave.
Who is affected
- Employers of all sizes in Michigan (the statutory “employer” definition expressly covers employers that employ one or more individuals, including public entities).
- Employees who accrue paid vacation leave/PTO — including employees of franchise operations where the franchisee provides benefits — who separate from employment.
- Employers will need to track accrued PTO and may face obligation to pay accrued balances at separation unless an exception applies.
Procedural / timeline notes
- Introduced March 10/18, 2025; committee hearings and substitute considered in April 2025; committee report to Calendars May 5, 2025.
- If enacted, the bill takes effect January 1, 2027.
Potential impacts (practical considerations)
- Employers may incur increased short-term cash obligations at employee separations to pay accrued PTO; small employers will also be covered.
- Employers may update PTO policies, payroll and record-keeping systems to track accruals and to document exceptions (furloughs, unlimited PTO).
- Franchise relationships are clarified for benefit/payroll responsibility (franchisee generally treated as sole employer unless franchise agreement provides otherwise).
- Employees gain clearer statutory entitlement to accrued paid vacation leave upon separation, subject to the stated exceptions.
