Michigan's Earned Sick Time Act: What Small Businesses Need to Know in 2026

Writer: Ed Bristow Originally published: Feb 17, 2025 | Updated: May 2026

⚡ This post has been updated to reflect the final amended rules now in effect for all Michigan employers.

Michigan's Earned Sick Time Act (ESTA) is now fully in effect — and if you're a small business owner in Michigan, this law applies to you regardless of how many employees you have. Whether you have 2 employees or 200, understanding your obligations under ESTA is one of the most important compliance steps you can take this year.

This post breaks down everything you need to know, including what's changed since the law first took effect in February 2025.

What Is the Michigan Earned Sick Time Act?

The Michigan Earned Sick Time Act (ESTA), which took effect February 21, 2025, mandates that employers provide paid sick leave to their employees. It replaced the previous Michigan Paid Medical Leave Act (PMLA), which only applied to businesses with 50 or more employees. Under ESTA, that size threshold is gone entirely — if you have even one employee physically working in Michigan, this law applies to your business.

The biggest change from the old law is that all employers in the state, except the U.S. government, must now comply with Michigan's sick time requirements. For small businesses managing their own payroll and human resource services, that's a meaningful shift in responsibility.

What Are the Key Differences Between ESTA and the Old PMLA?

In addition to expanding coverage to all employers, ESTA differs from the PMLA in several important ways — including employee eligibility, how sick time accrues, and carryover rules.

Under the PMLA, only employees working for businesses with 50 or more people were eligible, and employees had to work more hours to accrue the same amount of leave. ESTA eliminates those restrictions. Part-time, temporary, and seasonal employees are now covered, not just full-time staff.

Does It Apply to Your Business?

Businesses with 11 or more employees were required to comply starting February 21, 2025.

Small businesses with 10 or fewer employees had until October 1, 2025 to get into compliance. That deadline has passed — if you haven't addressed this yet, you're currently out of compliance.

One important detail: your employee count isn't just your Michigan headcount. It includes all employees nationwide — full-time, part-time, temporary, and staffing agency workers. If you have 11 or more workers for at least 20 workweeks in the current or prior calendar year, you're considered a large employer under the law.

Is Leave Time Capped Under ESTA?

Yes. The amount of paid sick time an employee may use per year is capped based on the size of your business:

1–10 employees (small business): Employees can use up to 40 hours of paid sick leave per year.

11 or more employees: Employees can use up to 72 hours of paid sick leave per year.

Employees may use earned sick time as soon as it accrues. Employers can also choose to frontload the full allotment at the start of the benefit year — 40 hours for small businesses, 72 hours for larger ones — rather than tracking accruals hour by hour. Many business owners find frontloading simpler to manage from a payroll administration standpoint.

How Is Sick Time Accrued?

Employees accrue one hour of paid sick time for every 30 hours worked, beginning on their first day of employment or the law's effective date, whichever is later.

New employees may be required to wait up to 120 days before using their accrued sick time, though the time continues to accumulate during that period. Employees rehired within a two-month period are considered to have continuous employment and may not be subject to the waiting period.

Is Carryover Allowed?

Yes — unused sick time carries over from year to year. However, employers can place limits on how much carries over:

Small businesses may cap carryover at 40 hours per year. Larger businesses may cap carryover at 72 hours per year.

Employees may use earned sick time in hourly increments, or in the smallest increment your payroll system uses to track absences — whichever is smaller.

Does ESTA Require Payout of Unused Sick Time?

No. The Michigan ESTA does not require employers to pay out earned but unused sick time at the end of the year or at termination, unless your company policy says otherwise. However, if an employee is rehired within two months of separation, their previously accrued sick time must be reinstated.

Employers should review their written policies on time-off payouts at termination to confirm whether any existing obligations apply.

What Are Qualified Reasons for Using Earned Sick Time?

Eligible employees can use earned sick time under ESTA for the following reasons:

• Their own physical or mental illness, injury, or health condition — including diagnosis, care, and preventative treatment

• A family member's physical or mental illness, injury, or health condition

• Attending a child's school meeting related to a health issue, disability, or effects of domestic violence or sexual assault

• Workplace or school closure due to a public health emergency

• Addressing issues arising from domestic violence, sexual assault, or stalking — including counseling, legal services, medical care, court attendance, or relocation

ESTA defines "family member" broadly, including domestic partners, individuals in committed relationships, and anyone whose relationship with the employee is the equivalent of a family relationship. This is in addition to the standard definitions: children, stepchildren, grandparents, grandchildren, spouses, and siblings.

What Are the Posting and Recordkeeping Requirements?

Employers must display the required ESTA poster in a visible location accessible to all employees. The poster is available in English, Spanish, and Arabic through the Michigan Department of Labor and Economic Opportunity (LEO).

Employers must also provide each employee with a written notice of their rights under the law — including how sick time accrues, when it can be used, and that retaliation for using sick time is prohibited. This notice must be provided at the time of hiring for all new employees going forward. Records of hours worked and sick time taken must be kept for at least three years.

What Are the Notification Requirements?

Employees may be required to give up to seven days' advance notice for foreseeable sick time use. For unforeseeable situations, notice should be given as soon as practicable.

Employers may require documentation for absences exceeding three consecutive days — but if documentation is required, the employer must cover any out-of-pocket costs the employee incurs obtaining it.

Employers cannot require employees to find their own replacement as a condition of taking sick leave.

What Are the Penalties for Not Complying?

This is where many small business owners underestimate their exposure. The ESTA has real teeth, and enforcement is now fully active across Michigan.

• Employers who fail to provide required sick time can face a civil penalty equal to 8 times the employee's normal hourly wage per violation

• Employers who retaliate against an employee for using or requesting sick time face an additional $1,000 fine

• Willful violations of the posting requirements carry a fine of up to $100 per separate violation

Employees have up to three years to file a complaint with the Michigan Department of Labor and Economic Opportunity — meaning a compliance gap today can follow your business for years.

Is Your Business Actually Compliant? A Quick Checklist

Now that enforcement is fully active, here's a simple audit to run through:

• Confirm your employee count using the ESTA definition — includes all employees nationwide, not just Michigan workers

• Confirm you're using accrual (1 hour per 30 worked) or frontloading (40 hours upfront for small businesses)

• Review your existing PTO policy to make sure it covers all ESTA-permitted uses at the required amounts

• Confirm the required ESTA poster is displayed in a visible location

• Make sure new hires receive written notice of their sick time rights at the time of hiring

• Verify your payroll system is accurately tracking sick time accruals and correct pay rates

• Confirm managers are trained — retaliation claims can arise from a supervisor's actions, not just written policy

• Make sure records of hours worked and sick time taken are being stored for at least three years

How PaySource ONE Helps Michigan Small Businesses Stay Ahead

Managing ESTA compliance isn't just a policy question — it flows directly through your payroll and HR systems. Tracking sick time accruals accurately, calculating pay rates correctly, and maintaining proper records all require a payroll management company that stays current with Michigan law.

At PaySource ONE, we've been providing HR and payroll services to Michigan small businesses for over 25 years. We're a local, family-run business based in Rochester Hills — which means when Michigan law changes, it directly affects our clients and we take that seriously.

Our cloud-based platform automatically handles sick time accruals, tracks hours worked, calculates correct pay rates, and maintains the records required under ESTA. If you're currently managing payroll manually or with a large national provider that doesn't know Michigan the way a local payroll service provider does, it may be time to take a closer look.

Is Your Small Business Struggling to Keep Up With Michigan's Changing Payroll Laws?

You're not alone — and you don't have to figure it out on your own. PaySource ONE has been helping Michigan small businesses navigate payroll and HR compliance for over 25 years. Fill out our Contact Form to have a member of our team reach out, or call us directly at (248) 601-4600. You can also visit paysourceone.com to learn more about everything we offer.

This post is for informational purposes only and should not be considered legal advice. We recommend consulting with an employment attorney for guidance specific to your business situation.

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