Knowledge Base

Executive Summary: Michigan Earned Sick Time Act (ESTA) – March 2025 Update

• Employers with 10 or fewer employees: October 1, 2025
  
• Employers with 10+ employees: February 21, 2025
  

We want to acknowledge the confusion surrounding Michigan’s Earned Sick Time Act (ESTA). Due to last-minute amendments and shifting legislative discussions, many businesses—including yours—have faced challenges understanding their obligations. Michigan’s Department of Labor and Economic Opportunity (LEO) has confirmed that businesses across the state are experiencing similar concerns.

That said, House Bill 4002 is now law, with an effective date of February 21, 2025, and ChampionPEO is here to ensure your full compliance without disruption to your operations.

The Michigan Earned Sick Time Act (ESTA) has undergone significant updates, impacting all employers in Michigan. These changes expand paid sick time requirements, modify carryover and accrual rules, and provide additional protections for employees.

This summary breaks down what businesses with 10 or fewer employees and 10+ employees must do to comply with the updated law.

To All Clients who must have adhered by 2/21/25: Your account manager and the entirety of ChampionPEO’s Payroll Department have been allocating the required sick time minimums since the implementation date of 2/21/25 due to the last-minute changes and overall uncertainty building up to and surrounding ESTA. This ensures compliance has been upheld and maintained since ESTA went live regardless of the last-minute amendments.

Key Compliance Requirements

1. Employer Size Matters

• Employers with 10+ employees → Must provide up to 72 hours of paid sick leave per year.
  
• Employers with 10 or fewer employees → Must provide 40 hours of paid sick leave + 32 hours of unpaid sick leave (total of 72 sick hours per year).
  

Important: If an employer has multiple locations or EINs under the same ownership/control, they are counted as one entity when determining total employee count.

2. Sick Leave Accrual & Usage

✅ Accrual caps per employer size:

✅ Sick leave can be used for:

• Employee’s own illness, medical care, or preventative care
  
• Caring for a family member’s medical needs
  
• Recovery from domestic violence, sexual assault, or stalking
  
• Public health emergencies (e.g., business closures, quarantines)
  

3. Waiting Period for New Hires

• Employers may impose a 120-day waiting period before new employees can use accrued sick time.
  
• However, frontloaded sick time must be available for immediate use.
  

4. Carryover Rules

• Employers with 10+ employees → Must allow unused sick time to carry over, up to a minimum of 72 hours per year.
  
• Employers with 10 or fewer employees → Only accrued sick time carries over, but it cannot exceed 72 hours at any time.
  
• If an employer frontloads sick time, carryover is not required.
  

5. Payment Rules for Sick Time

• Sick time must be paid at the employee’s regular wage rate.
  
• Sick leave must be paid in the smallest increment of time used for payroll tracking (e.g., if an employer tracks time in 15-minute increments, sick leave must be allowed in 15-minute increments).
  

6. Employer Responsibilities

• Notify Employees: Employers must inform employees in writing about their sick leave rights under ESTA.
  
• Provide an ESTA-Compliant PTO Policy: If an employer already offers PTO that meets or exceeds the ESTA minimums, they are already compliant.
  
• Display the Updated ESTA Poster: The updated Michigan ESTA poster must be displayed in a conspicuous location (e.g., breakroom).
  
• Maintain Records: Employers must keep sick leave records for at least 3 years.
  

Violations can result in penalties, fines, and potential lawsuits.

8. Special Considerations for PTO Policies

However, the employer must still document this policy and inform employees.

Compliance Deadlines & Next Steps

What Employers Should Do Now:

Please Note: If ChampionPEO has already been in discussions with your company’s PTO Policy, you will be contacted directly by your account manager and/or HR rep. to finalize your policy and handbook.

Review & Update Sick Leave Policies → Ensure compliance with ESTA’s new sick leave structure

-          Decide Between Accrual or Frontloading → Determine the best approach for providing sick leave

-          Inform Employees in Writing → Update employee handbooks, new hire paperwork, and workplace notices

-          Post the Updated ESTA Poster → Display in a visible location by the required date

-          Implement Recordkeeping Procedures → Maintain sick leave records for at least 3 years

Michigan’s Earned Sick Time Act (ESTA) represents a significant shift in paid sick leave requirements, affecting all businesses statewide. Employers should proactively update policies, communicate changes, and ensure compliance before the mandatory deadlines.

For ChampionPEO clients, we are handling ESTA compliance on your behalf, including policy adjustments, payroll tracking, and employee notifications. If you have questions or need assistance, please contact Matthew Smith at mjsmith@championpeo.com or by phone at 586-408-1046.

Thank you,

Matthew Smith

Director of HR