Michigan’s Earned Sick Time Act Expands to Small Employers This Fall

As a reminder, Michigan’s Earned Sick Time Act (ESTA) will soon cover nearly all employers. Starting October 1, 2025, businesses with 10 or fewer workers will be expected to provide paid sick time, closing the gap that left smaller employers temporarily exempt. Larger organizations have already been operating under the law since February 21, 2025, and a deeper overview of those requirements can be found in our earlier client alert.

Determining Employer Size

Whether you count as a “small” or “large” employer isn’t based solely on your Michigan workforce. Instead, headcount includes all employees nationwide—full-time, part-time, temporary staff, and even individuals provided by staffing agencies. If an employer has 11 or more workers for at least 20 workweeks in the current or prior calendar year, it is considered a “large” employer and must stay in that category through the end of the following year.

What Employees Receive

Workers in small organizations will be guaranteed up to 40 hours of paid sick time per year. Businesses can provide that benefit in two different ways:

• Accrual model – Sick time accrues at the rate of one (1) hour for every 30 hours worked. Employers can limit both annual use and rollover to 40 hours. Accrual begins October 1, 2025 (or upon hire, if hired after that date). A waiting period of up to 120 days can be applied to new hires, although time continues to accrue during the waiting period.
• Frontload model – Instead of tracking accrual, employers can grant the full year’s allotment at the beginning of the benefit year. Full-time staff must receive at least 40 hours; part-time employees receive a prorated share. Time granted up front must be available for use immediately, with no waiting period. Employers choosing this approach need to follow special notice rules and may need to add more hours later if the initial grant proves insufficient based on the hours worked.

For perspective, larger employers must offer up to 72 hours under the same rules.

Covered Reasons for Leave

Sick time under ESTA covers far more than personal illness. Workers may use it to:

• Recover from their own medical condition or seek preventative care
• Care for a family member
• Address matters tied to domestic violence or sexual assault

Employers may deduct leave in hourly increments (or the smallest increment tracked in their payroll system) and must pay the employee’s regular hourly rate for those hours. Overtime premiums, bonuses, commissions, tips, and holiday pay are excluded.

Using PTO to Comply

Many businesses already offer paid time off (PTO) banks. ESTA allows employers to rely on these policies if they are at least as generous as the law requires and allow time off for all ESTA-covered purposes. For small employers, that means at least 40 hours annually available for all ESTA-covered reasons. Employers using PTO to comply should check whether their current policies align with the law’s rules on carryover, accrual methods, and usage.

Notice and Posting Obligations

Employers must provide workers a written summary of their ESTA rights. This notice must explain how sick time accrues, when it can be used, the measurement year, protections against retaliation, and how to file a complaint. In addition, employers are required to display the official state poster in English, Spanish, and any other language spoken as a first language by at least 10% of the workforce—provided the state issues a translation.

Preparing for October 2025

With the October 1 deadline approaching, small employers should take deliberate steps now to avoid last-minute surprises:

• Audit your headcount – Count every worker, including part-time, temporary, and staffing-agency employees. Keep weekly records to determine whether you cross the 20-week, 11-employee threshold.
• Choose your compliance method – Decide whether you’ll use the accrual approach (1 hour per 30 worked, with a 40-hour cap) or frontload time at the start of the year.
• Review existing PTO banks – If using a PTO policy to comply with ESTA, confirm that your current policies meet or exceed ESTA’s requirements and can be used for all covered reasons.
• Update payroll and HR systems – Configure your systems to properly track accruals, caps, and rollovers, and to ensure pay is issued at the regular rate.
• Provide notices and posters – Issue required written notices and post multilingual state posters as applicable.
• Train supervisors – Ensure managers understand the new rules, including anti-retaliation protections, and can apply policies consistently.

Taking these steps now will make the transition smoother. For assistance, please contact one of Honigman’s Labor and Employment attorneys here.