The Sophisticated Employer Blog

On July 31, the Michigan Supreme Court, in a 4-3 decision, overturned the Michigan Court of Appeals, reinstating higher minimum wage and sick time laws.
 
The new wage rates will go into effect on Feb. 21, 2025. This update seeks to provide you with a full review of the decision and the current versions of the Improved Workforce Opportunity Wage Act (Wage Act) and the Earned Sick Time Act (EST Act).

What Happened?

The Michigan Constitution allows citizens to bring an initiative forward which may become law. If a proposal gets signatures of 8% or more of the voting population from the most recent gubernatorial election, the Michigan Legislature can do one of three things:

1. Adopt the original initiative as is;
2. Reject the initiative which then places it on the upcoming ballot; or
3. Reject or amend portions of the initiative, and the new and original version of the initiative is placed on the upcoming ballot.

 
In 2018, the Michigan Legislature adopted the initiatives of the Wage Act and the EST Act and did not place either on the ballot. Later, the Michigan Legislature amended the acts in what has since become known as “Adopt-and-Amend.” When adopted, the Wage Act and the EST Act would have gradually increased minimum wage to $12 by 2025. But the amendments passed by the Legislature pushed the timetable for a $12 minimum wage to 2030.
 
The Michigan Supreme Court held: “This decision to adopt the initiatives and then later amend them in the same legislative session violated the peoples’ constitutionally guaranteed right to propose and enact laws through the initiative process.”

How Did We Get Here?

 An action was brought in the state’s Court of Claims against Michigan Attorney General Dana Nessel, in her official capacity, challenging the Legislature’s use of Adopt-and-Amend. The Court of Claims determined that Adopt-and-Amend was unconstitutional.
 
But the Michigan Court of Appeals reversed that decision, finding that there was no prohibition against Adopt-and-Amend in the Michigan Constitution. The appellate court’s decision effectively postponed the initiative to increase minimum wage to $12 by 2025.
 
On July 31, the Michigan Supreme Court held that by adopting these laws and then later stripping them of key features in the same legislative session, the Michigan Legislature overstepped initiative rights and violated the Michigan Constitution.

What Does This Mean?

The Supreme Court reasoned that it is constitutional and most appropriate to reinstate the original initiatives as they were adopted but adjusted the wage rates for inflation because several years have passed since they were first proposed.
 
On Feb. 21, the minimum wage will rise to approximately $12.50. The final amount will be determined by the state treasurer. Employers should anticipate a rate around $12.50, which is a rate based on the Federal Bureau of Labor Statistics inflation figures.
 
There are three key takeaways for Michigan employers regarding the Wage Act:

1. The original initiative wage rates are effective with adjustments for inflation;
2. The wage rates are effective Feb. 21; and
3. Employers are not liable for violations until Feb. 21.

The EST Act supplants the Paid Medical Leave Act (PMLA) and is more expansive. Important differences include:

• All employers are covered, regardless of size, whereas the former PMLA applied only to companies with 50 or more employees.
• All employees are entitled to sick leave, regardless of whether they are part-time, temporary, exempt, or non-exempt.
• Employees accrue one hour of earned sick time for every 30 hours worked.
• Employees may use up to 72 hours of earned sick time per year, versus 40 hours per year under the PMLA. For large employers (those with 10 or more employees), all 72 hours must be paid. For employers with less than 10 employees, only 40 hours must be paid.
• All earned sick time rolls over to the next year, subject to the usage cap.
• Employers may request documentation to substantiate the need for earned sick leave only after the absence is for four or more consecutive days.
• Workplace posters need to be updated, and employers must provide a notice of rights to new hires and current employees.
• The EST Act provides employees with a private right of action against an employer who interferes with or retaliates because of use of earned sick time.

How Are Employers Affected?

Employers have until Feb. 21 to make necessary changes. In the interim, employers should review employee wages and consider revising any policies or handbooks related to this decision. Consulting with your employment attorney on such complex issues is always prudent.