Michigan’s Earned Sick Time Act (ESTA) significantly changed the state’s requirements for employee sick leave. While the law took effect for many employers on February 21, 2025, qualifying small businesses received additional time to comply. Under the current rules, employees of small businesses generally began accruing earned sick time on October 1, 2025, or when employment began, whichever was later.
That means Michigan small business owners who previously treated paid sick leave as an optional benefit may now have a legal obligation to provide it.
The rules affect more than just payroll. Employers need to understand which employees are covered, how leave accrues, when it can be used, what documentation may be requested, and how existing PTO policies interact with the law.
What Is Michigan’s Earned Sick Time Act?
ESTA requires covered Michigan employers to provide eligible employees with earned sick time that can be used for purposes specified by the statute.
The current version of the law has an unusual history. After litigation concerning earlier amendments, the Michigan Supreme Court revived the original 2018 initiative, with an effective date of February 21, 2025. The Legislature then enacted Public Act 2 of 2025, which amended several provisions of ESTA and took immediate effect on February 21, 2025.
For business owners, the important point is that compliance should be based on the current amended version of ESTA, not older descriptions of Michigan’s paid-leave requirements.
What Counts as a “Small Business”?
Under the amended statute, a small business is generally an employer with 10 or fewer employees. The determination is based on the number of employees on the payroll during a particular week, and the statute contains rules for determining small-business status when an employer’s workforce fluctuates.
The distinction matters because small businesses receive different treatment under ESTA.
Most notably, qualifying small businesses may limit an employee’s use of paid earned sick time to 40 hours in a year, while other employers are generally subject to a 72-hour annual use limit.
Employers close to the 10-employee threshold should therefore pay particular attention to how their workforce is counted rather than assuming they permanently qualify for the small-business rules.
How Much Sick Time Must Employees Earn?
Under the accrual method, employees of a small business generally earn at least one hour of paid sick time for every 30 hours worked.
Importantly, accrual and annual use are not necessarily the same thing.
For example, Michigan’s guidance explains that an employee at a small business could accrue more than 40 hours based on hours worked, but the employer may generally limit the employee to using 40 hours during the year, unless the employer chooses a higher limit.
Special rules apply to salaried employees. An employee exempt from federal overtime requirements is generally presumed to work 40 hours per week for ESTA accrual purposes unless the employee’s normal workweek is less than 40 hours.
Can a Small Business Frontload the 40 Hours Instead?
Yes. Employers do not necessarily have to track accrual hour by hour.
For a full-time employee, a qualifying small business may generally frontload at least 40 hours of earned sick time at the beginning of the benefit year. For an employee hired during the year, frontloaded time may be prorated as permitted by the statute.
Frontloading can simplify administration for some employers because employees receive their available leave in advance rather than accumulating it as they work.
However, employers should make sure their PTO and payroll systems actually comply with the frontloading requirements. Simply offering “some PTO” does not necessarily establish compliance if employees cannot use that time for all purposes protected by ESTA.
Why Legal Guidance Matters
For a small business, even a relatively straightforward paid-leave requirement can create questions about employee classification, payroll, attendance policies, PTO, documentation, discipline, and recordkeeping.
Duff Law can help Michigan business owners review employment policies, understand how ESTA applies to their workforce, and address compliance questions before they develop into employee disputes or regulatory problems.