Michigan Minimum Wage, Paid Sick Leave Laws Rise From the Dead

Author: Michael Cardman, XpertHR Legal Editor

UPDATE: July 29, 2022 - The Michigan Court of Claims has stayed its July 19, 2022 Opinion and Order (reinstating the previous versions of the state's minimum wage law and paid sick leave law) through February 19, 2023. As a result, the current versions of the Improved Workforce Opportunity Wage Act and the Paid Medical Leave Act remain the law in Michigan.

July 21, 2022

Michigan employers should prepare for more employee-friendly minimum wage and paid sick leave laws in the wake of an important new court ruling.

The Michigan Court of Claims has struck down the state's current minimum wage law, known as the Improved Workforce Opportunity Wage Act, and its paid sick leave law, known as the Paid Medical Leave Act.

In their place, the court restored earlier versions of the laws passed in 2018, which are significantly more beneficial to employees.

It is unclear whether employers must immediately comply with the 2018 laws - and if so, whether they must do so retroactive to the court's ruling on July 19, 2022, or to their passage on September 5, 2018.

It also remains to be seen whether the State of Michigan plans to appeal the ruling and/or seek a stay.

When asked these questions by XpertHR, the Michigan Department of Labor and Economic Opportunity would only say, "The Department is committed to making sure that workers and families have access to the pay and benefits they deserve, and we are reviewing the judge's decision to determine next steps and ensure the state is in compliance with the law."

In a statement, the Michigan Chamber of Commerce said, "We are incredibly concerned about the crippling effect this ruling could have on Michigan employers and employees alike. While we are still sorting through the details, we are stunned by this determination and its many varied implications. The talent shortage has employers already paying historic wages and benefits - all while facing rising inflation and supply chain chaos - just to keep the doors open. ... We remain hopeful the Court of Claims decision ultimately will be overturned."

Background

Michigan is one of several states that allow voters to initiate legislation via petitions.

In 2018, a coalition of advocacy groups gathered signatures and successfully petitioned to add initiatives to raise Michigan's minimum wage and require employers to offer paid sick leave.

At this point, the state legislature had three options:

  • Adopt the proposals as is, without change;
  • Reject the proposals, meaning they would then be placed on the fall ballot and could either be accepted or rejected by voters (and, if adopted by voters, the legislation could then have been amended only with a three-quarters majority in the legislature); or
  • Propose an alternative version for voters to also consider.

The legislature chose option one and adopted the proposals as is. However, later that session, the legislature passed amendments that watered down the original versions.

Back to the Future

The changes were "substantial," according to the court. For instance, the Improved Workforce Opportunity Wage Act was amended to:

  • Reduce the scheduled increases in the minimum wage;
  • Repeal annual inflation adjustments in later years; and
  • Restore the tip credit, which was to have been phased out under the original version.

The table below shows the two versions side by side.

  Minimum Wage Minimum Direct Cash Wage for Tipped Employees Maximum Tip Credit
Year Original Amended Original Amended Original Amended
2018 $9.25 $9.25 $3.52 $3.75 $5.73 $5.50
2019 $10.00 $9.45 $4.80 $3.75 $5.20 $5.70
2020 $10.65 $9.651 $6.39 $3.75 $4.26 $5.90
2021 $11.35 $9.65 $7.95 $3.75 $3.40 $5.90
2022 $12.00 $9.87 $9.60 $3.75 $2.40 $6.12
2023 TBD2 $10.10 TBD3 $3.75 TBD $6.26
2024 TBD2 $10.33 TBD3 $3.75 N/A $6.40
2025 TBD2 $10.56 TBD3 $3.75 N/A $6.55
2026 TBD2 $10.80 TBD3 $3.75 N/A $6.70
2027 TBD2 $11.04 TBD3 $3.75 N/A $6.84
2028 TBD2 $11.29 TBD3 $3.75 N/A $7.00
2029 TBD2 $11.54 TBD3 $3.75 N/A $7.15
2030 TBD2 $11.79 TBD3 $3.75 N/A $7.31
2031 TBD2 $12.05 TBD3 $3.75 N/A $7.47

1 Michigan's minimum wage originally was scheduled to increase to $9.87 per hour effective January 1, 2021, but this increase and subsequent increases were delayed by a year under a provision pausing scheduling increases when unemployment exceeds 8.5%.

2 Under the original Improved Workforce Opportunity Wage Act (IWOWA), the minimum wage was to be adjusted for inflation starting on January 1, 2023, and every January 1 thereafter.

3 Under the original Improved Workforce Opportunity Wage Act (IWOWA), the minimum direct cash wage was scheduled to increase to 90% of minimum wage effective January 1, 2023, and to 100% of the minimum wage effective January 1, 2024, meaning the tip credit would effectively be eliminated.

The amendments to the Paid Medical Leave Act (which originally was called the Earned Sick Time Act) also were substantial. Among other things, they:

  • Exempted employers with fewer than 50 employees;
  • Lowered the minimum number of hours that could be used in a year; and
  • Repealed retaliation protections.
  Earned Sick Time Act (Original) Paid Medical Leave Act (Amended)
Employer Coverage One or more employee 50 or more employees
Employee Coverage Almost all employees, except federal government workers Only individuals for whom the employer must withhold federal income tax; excludes employees who work fewer than 25 hours per week, employees who work 25 weeks or fewer per year, independent contractors and others
Accrual One hour of paid leave for every 30 hours worked, up to 72 hours of paid time One hour of paid leave for every 35 hours worked, up to 40 hours of paid time
Frontloading No frontloading option An employer may "frontload" leave time at the start of a calendar year as an alternative to accrual

By making such significant changes after adopting the original versions, the legislature "effectively thwarted the intent of the People and denied them the opportunity to vote on whether they preferred the voter-initiated proposal or the Legislature's suggested modifications," the court held.

For this reason, the court held that the amended versions are void and the original laws are once again in effect.