Two pieces of advise. First and most importantly, don't leave your kids at this place. Second, don't worry about the two week notice, especially if you did not know of this condition when you began having this institution watch your children.
I know day care is really expensive but the old addage is true - You get what you pay for. This place sounds like a concentration camp. You can tell the day care owner that you don't have to give you two week notice and you are not going to pay anything to her. PERIOD. You might also want to mention that you are going to call the State of Michigan and lodge a complaint. If you suspect your child was abused by the day care then contact your local police department and file a complaint. They take these things rather seriously. Good Luck.