Michigan Court Reinstitutes Higher Minimum Wage and More Generous Paid Sick Time Laws, Effective Immediately

On August 2, 2022, we published an updated version of this alert to address the Michigan Court of Claims staying its decision to reinstitute higher minimum wage and more generous paid time sick laws.

On July 19, 2022, the Michigan Court of Claims ruled that the “adopt-and-amend” strategy the Michigan Legislature used in 2019 to enact minimum wage and paid sick time laws was unconstitutional. Those laws were regarded as more favorable to businesses, but they amended and substantially differed from the voter-initiated laws the Legislature adopted earlier in the same legislative session. For example, the amended laws reduced the increase of the minimum wage from $12 to $10.10 per hour, lowered the required amount of paid sick time from 72 to 40 hours, exempted employers with fewer than 50 employees, and exempted certain employees, such as executive, administrative, professional and outside sales employees. Part-time employees who worked an average of fewer than 25 hours per week were also exempted from the paid sick leave law. The laws are known as the Earned Sick Time Act (ESTA), which the Legislature amended and renamed the Michigan Paid Medical Leave Act (MPMLA), and the Improved Workforce Opportunity Wage Act (IWOWA), which was amended under the same name.

According to the court, the Michigan Legislature has only three options in response to a proposed law initiated by voters: (a) adopt the initiative as presented, (b) reject the petition, or (c) propose an alternative law. The Michigan constitution does not permit the tactic used by the Legislature to amend the voter-initiated laws which, in the court’s review, “effectively thwarted the intent of the People.” As a result, the laws that have governed Michigan employers since 2019 have been “voided,” and the original voter-initiated laws are effective immediately.

Michigan employers might find themselves suddenly out-of-compliance with the unexpectedly reinstated laws. Unless the Michigan Court of Appeals or Supreme Court issues a stay pending an appeal, the reinstituted laws require that Michigan employers immediately pay most employees a minimum wage of $12 per hour (tipped employees must earn 80% of the minimum wage). All Michigan employees are now eligible for paid sick leave, including previously exempted part-time, executive, administrative, professional and outside sales employees. Employers must provide one hour of sick leave for every 30 hours worked (instead of the prior 1:35 ratio). Unused earned sick time must roll over to the next year (previously, an employer could front-load the time to avoid the rollover requirement). Although there is no statutory cap on carryover or accrual of paid time, annual use of paid time is capped at 72 hours (if the employer has 10 or more employees) or 40 hours (if the employer has fewer than 10 employees). For purposes of determining the employer’s size, all employees must be counted, including temporary workers.

Paid time off under existing policies can be applied to satisfy the ESTA, provided the time is in at least the same amounts as above and available to use for the same purposes and under the same conditions as provided in the ESTA. However, Michigan employers with 10 or more workers who cap use at less than 72 hours of paid time annually (or employers who did not provide paid time to employees who were exempt under the MPMLA) should discuss their compliance options with legal counsel. This includes Michigan employers who previously adopted 40-hour paid time off policies to comply with the now-stricken MPMLA.

Given that the ESTA is now restored — including its robust protections against retaliation — Michigan employers should be careful to avoid even the appearance of retaliatory conduct in connection with paid sick time. The ESTA creates a rebuttable presumption of retaliation if an employer takes adverse action against an employee within 90 days after any protected conduct, such as informing a person of his or her rights under the law or alleging to any person that an employer violated the law, among other things.

Additionally, the reinstated minimum wage and paid sick time laws require employers to post notices to advise employees of their rights. As of the writing of this alert, the Michigan Department of Labor & Economic Opportunity (the agency tasked with enforcing these laws) has not made any announcements concerning forthcoming guidance, model notices or enforcement of the reinstated laws. However, the laws do allow for private civil action by aggrieved employees. We are monitoring closely for any pronouncements from the state agency and any appeals filed by the State of Michigan.

Michigan employers are encouraged to contact the authors or their Faegre Drinker employment counsel for guidance concerning compliance and next steps.