Did you know that nearly one in four U.S. workers lacks access to paid sick leave? Starting Feb. 21, 2025, Michigan’s Earned Sick Time Act (ESTA) is aiming to change that — ensuring employees statewide have the right to take time off when they need it. But what does this mean for Michigan businesses? Are small businesses exempt from this rule? Keep reading to find out.

What Is the ESTA, and How Does it Work?

Starting Feb. 21, all Michigan employers with at least one employee — regardless of size — will be required to provide sick leave to all employees. The scope of the changes depends on the size of the company. Here’s what the law requires:

Sick Time Accrual and Usage

• Companies with one to nine employees must provide up to 40 hours of paid sick time per year and up to 32 hours of unpaid sick leave. 
• Employers with 10 or more employees must allow workers to use up to 72 hours of paid sick time annually and offer employees one hour of paid sick time for every 30 hours worked.
• Salaried workers are assumed to work 40 hours each week. 
• Earned sick time carries over from year to year, but employers can cap annual usage at the above limits.

Reasons Employees Can Use Sick Time

Employees may use their earned sick time for:

• Their own illness, injury, or medical care.
• A family member’s medical needs.
• Attending meetings at a child’s school related to health or disability.
• Issues related to domestic violence or sexual assault.
• Work or school closures due to a public health emergency.

Employer Compliance Requirements

Employers must:

• Allow sick time to be used in one-hour increments (unless a different written policy is in place allowing smaller time increments).
• Pay employees for sick leave at their regular wages or Michigan’s minimum wage, whichever is higher.
• Not require employees to find replacements before taking sick time.
• Retain records on sick time accrual and use.

Legal Recourse for Employees

Employees who believe their ESTA rights have been violated can:

• File a claim with Michigan’s Wage and Hour Division; or
• Take legal action against an employer, seeking unpaid wages, reinstatement, and damages.

What Employers Should Do Now

• Stay updated on potential legislative changes that could impact implementation.
• Review your company’s sick leave policies to ensure they meet or exceed ESTA requirements.
• Consult legal or HR professionals for guidance on compliance.

The Background: How We Got Here

ESTA was originally passed as a ballot initiative in 2018, but Michigan lawmakers quickly amended it into the Paid Medical Leave Act (PMLA) — a move challenged in the courts. In July 2024, the Michigan Supreme Court ruled in Mothering Justice v. Attorney General that this legislative process violated the state constitution. As a result, the original ESTA provisions must now be enforced, returning to the broader paid sick leave requirements initially approved by voters.

The Role of Time Tracking and Payroll in ESTA Compliance

Employers are required to track the accrual of paid sick time based on hours worked. Thus, with ESTA’s implementation, accurate time tracking and payroll processing are more critical than ever. Employers must ensure that sick time accruals, usage, and wages are properly recorded and paid.

Why Time Tracking Matters

• Ensures Accurate Accruals – Employees earn one hour of sick time for every 30 hours worked. A reliable time tracking system ensures employers are correctly calculating accrued leave and preventing errors.
• Simplifies Payroll Processing – Paid sick time must be compensated at the employee’s regular rate or Michigan’s minimum wage, whichever is higher. Integrating time tracking with payroll software helps automate these calculations, reducing administrative burden.
• Prevents Compliance Issues – Employers must retain records of sick time usage. A digital time tracking solution ensures accurate reporting, helping businesses avoid penalties or disputes.

How Payroll Integration Helps

• Automates Sick Pay Calculations – Payroll software can automatically apply paid sick time at the correct wage rate, preventing errors in employee compensation.
• Tracks PTO and Sick Leave Balances – Employees and employers can see real-time updates on available sick leave, ensuring transparency.
• Reduces Manual Work – Automating time tracking and payroll eliminates manual data entry, saving time and minimizing costly mistakes.

Be Proactive with Time Tracking & Payroll

Employers who digitize their time tracking and payroll processes will have a much easier time complying with ESTA. Implementing a comprehensive time tracking system — like OnTheClock — can help businesses stay compliant while also saving time and money. Start tracking your sick time with OnTheClock today. For more information, visit www.ontheclock.com.