Michigan Amends New Minimum Wage, Paid Sick Leave Laws

Author: Robert S. Teachout, XpertHR Legal Editor

UPDATE: The Michigan Supreme Court has been asked to issue an advisory opinion on the constitutionality of the state paid medical leave law.

December 18, 2018

Last week, Governor Rick Snyder signed amendments to Michigan's new minimum wage and paid sick leave laws.  The laws were passed in September by the GOP-led state legislature to preempt passage of ballot initiatives in the November election to raise Michigan's minimum wage and require employers to offer paid sick leave. Both new laws will become effective 91 days after the legislature officially adjourns for the year (expected December 20).

Improved Workforce Opportunity Wage Act

As originally passed, the Improved Workforce Opportunity Wage Act would have raised the minimum wage rate to $12 per hour by 2022 and indexed future increases to the rate of inflation. The law also phased out the ability of employers to use a tip credit when paying tipped employees.

Under the recently passed amendment, the minimum wage rate will be increased by $0.23 to $0.25 on January 1 of each year until 2030, when it will be $12.05 per hour. However, a scheduled increased will be postponed if the state's unemployment rate for the previous calendar year is 8.5% or greater.

Employers will be required to pay tipped workers, such as bartenders and wait staff, a cash wage rate equal to 38% of the minimum hourly wage. The tipped cash wage in 2019 will be $3.59, and employers may use a maximum tip credit of $5.86. By 2030, the cash wage will increase to $4.58 with a maximum tip credit of $7.47.

Michigan enacted the Earned Sick Time Act on September 5, 2018, joining several other states in mandating paid sick leave for employees. But the newly signed amendments reduce many of the law's requirements and renamed it the Paid Medical Leave Act.

Key provisions changed under the new law include:

  • The law covers only employers with at 50 or more employees, whereas the original law had no employee threshold.
  • The definition of "employee" is narrowed to include only individuals for whom the employer must withhold federal income tax, and excludes employees who work fewer than 25 hours per week, employees who work 25 weeks or fewer per year and exempt employees.
  • The leave time accrual rate was lowered to one hour of paid leave for every 35 hours worked (instead of 30 hours), and caps accrual, usage and carryover to 40 hours in a benefit year.
  • The amendments allow an employer to "frontload" leave time at the start of a calendar year as an alternative to accrual, whereas the original law did not include a frontloading option.

Remaining from the original law are posting and record retention requirements and a provision allowing an employer's paid time off policy in certain circumstances to satisfy the paid sick leave requirements.