Is Your Employee Handbook Ready for ESTA? Key Updates Small Businesses Must Make Before October 1, 2025

If your Michigan business has 10 or fewer employees, the clock is ticking — the Michigan Earned Sick Time Act (ESTA) compliance deadline for small employers is October 1, 2025. This law introduces new requirements for paid sick leave that will directly impact your employee handbook.

Failing to update your handbook could leave your business vulnerable to compliance violations, fines, and employee disputes. Here’s what you need to know and what changes you should start making now.

1. Add a Paid Sick Time Policy That Meets ESTA Requirements

Your handbook must clearly explain how employees earn, use, and request paid sick time under ESTA. Key policy elements include:

• Eligibility – All employees (full-time, part-time, temporary, and seasonal) are covered once they meet minimum work hour thresholds.
• Accrual Rate – At least 1 hour of paid sick time for every 30 hours worked.
• Annual Cap – Up to 40 hours per benefit year for small businesses.
• Frontloading Option – Employers may choose to provide the full 40 hours at the start of the benefit year instead of tracking accrual.
• Carryover Rules – If using accrual, employees can carry over up to 40 unused hours into the next year.

2. Define the Permitted Uses for Paid Sick Time

ESTA allows employees to use sick time for a variety of reasons beyond personal illness, including:

• Their own physical or mental illness, injury, or medical care.
• Caring for a family member with a health condition.
• Absences related to domestic violence or sexual assault.
• Public health emergencies that close the business or a child’s school.

3. Describe the Notice and Documentation Requirements

ESTA permits employers to require advance notice when the need for sick time is foreseeable, and to request documentation for absences of more than three consecutive days. Your handbook should:

• Explain how employees should provide notice (email, phone, HR portal, etc.).
• Set reasonable timelines for notice.
• Detail acceptable documentation types (doctor’s note, public health notice, etc.).

4. Clarify Pay Rate and Recordkeeping

Paid sick leave must be compensated at the greater of the employee’s regular rate of pay or the Michigan minimum wage. Your policy should reflect this and align with your payroll practices.

You must also maintain accurate records of accrual, usage, and balances for at least three years — consider adding a section to your handbook noting how employees can check their balance.

5. Update Related Policies for Consistency

ESTA compliance can affect other areas of your handbook. Review and adjust:

• Paid Time Off (PTO) policies, if sick time is combined with vacation.
• Attendance and disciplinary policies, to ensure they don’t penalize lawful sick time use.
• Leave of Absence sections, to coordinate with ESTA requirements.

6. Include the Anti-Retaliation Provision

ESTA prohibits retaliation against employees who request or use paid sick time. Your handbook should explicitly state that employees are protected from discipline, demotion, or termination for exercising their rights under the Act.

Yeo & Yeo Can Make the Process Easy

Updating your handbook doesn’t have to be overwhelming. Yeo & Yeo can make the handbook and policy process simple — whether you need custom policies and handbook updates or a templated approach that gets your small business in line with ESTA quickly. Our process is designed to be easy for you, while we take the heavy lift, handling the compliance details so you can focus on running your business.

Get Started Today

Begin with our complimentary ESTA Readiness Assessment — in just a few minutes, we’ll help you gauge your compliance level and outline the next steps.

Then, access the Yeo & Yeo ESTA Toolkit — a comprehensive set of guides, checklists, and templates designed specifically for Michigan small businesses facing the October 1, 2025, deadline.

As always, your Yeo & Yeo advisor is here to walk you through the process, answer your questions, and ensure your handbook protects both your business and your employees.