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Michigan Adopts Minimum Wage Increase, Paid Sick Leave Requirement

10/01/18

Author: ADP Admin/Wednesday, October 3, 2018/Categories: Michigan

Overview: The Michigan Legislature has adopted two ballot measures that would increase the minimum wage and require employers to provide paid sick leave. However, the legislature may amend one or both of the laws before they take effect.

Effective Date: See below.

Details:

Background:
A proposed minimum wage increase and paid sick leave requirement were set to be part of the voter ballot in the upcoming general election. However, the Michigan legislature stepped in to adopt both measures earlier this month, removing them from the ballot. Because many in the legislature opposed the ballot measures, the passage of the laws is seen as a strategic maneuver to give the legislature a better opportunity to try to amend the laws. If the laws are amended, we will update this alert accordingly. If no amendments are passed, the provisions of the law will stand as follows:

Minimum Wage:
Unless amended, the new law raises Michigan’s minimum wage to:
  • $10.00 per hour on January 1, 2019.
  • $10.65 per hour on January 1, 2020.
  • $11.35 per hour on January 1, 2021.
  • $12.00 per hour on January 1, 2022.
Beginning January 1, 2023, the minimum wage will be adjusted annually for inflation.

Tipped Employees:
Unless amended, the new law increases the minimum direct cash wage tipped employees must receive as follows.
  • 48 percent of the minimum wage in 2019
  • 60 percent of the minimum wage in 2020
  • 70 percent of the minimum wage in 2021
  • 80 percent of the minimum wage in 2022
  • 90 percent of the minimum wage in 2023
  • 100 percent of the minimum wage in 2024 and thereafter.
If the employee’s direct cash wage and tips fail to meet or exceed the applicable minimum wage, the employer must make up the difference.

Pay Equity:
The law also prohibits employers from paying wages to employees in the establishment at a rate less than that of the opposite sex for equal work that requires equal skill, effort, and responsibility and that is performed under similar working conditions. There are exceptions made for one or more of the following:
  • A seniority system.
  • A merit system.
  • A system that measures earnings by quantity or quality of production.
  • A differential based on a factor other than sex.
Employers that are paying a wage differential in violation of the law are prohibited from reducing an employee’s wages to comply with the law.

Paid Sick Leave:
Michigan’s Earned Sick Time Act is scheduled to take effect 90 days from adjournment of the legislature (around March or April 2019). As mentioned, the legislature may try to amend the law prior to the effective date.

Coverage:
The law generally applies to all employers and all employees who work in the state.

Accrual and Carryover:
Employees are entitled to accrue one hour of sick leave for every 30 hours worked. Employees begin accruing leave on their date of hire or the effective date of the law, whichever is later. Employers must carryover unused sick leave to the following year. While there are generally no caps on accrual and carryover, employers may establish caps on use.

Use:
Employees of employers with 10 or more employees (for 20 or more calendar weeks in either the current or preceding year) are entitled to use up to 72 hours of accrued paid sick leave per year. Employees of employers with fewer than 10 employees are also entitled to use up to 72 hours of accrued sick leave per year, but only 40 hours of it must be paid (the other 32 hours may be unpaid).

Employees hired on or before April 1, 2019 may use leave as it accrues. Employees hired after this date, may be required to wait 90 days after their start date before using accrued sick leave.

Employees are entitled to use accrued sick leave for the following purposes:
  • The employee’s or a family member’s mental or physical illness, injury, or health condition;
  • The employee’s or a family member’s medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition, or preventive medical care;
  • For medical care, counseling, obtaining legal services, or participating in a civil or criminal proceeding when the employee or a family member is a victim of domestic violence or sexual assault; and
  • The closure of the employee’s place of business due to a public health emergency, the closure of their child’s school or place of care due to a public health emergency, or when a health care provider has determined that the employee’s or a family member’s presence in the community would jeopardize the health of others.
The law defines family member as:
  • A child, stepchild, legal ward, a child of a domestic partner, or a child to whom the employee stands in place of a parent;
  • Grandchild;
  • Grandparent;
  • Parent or parent of spouse or domestic partner;
  • Sibling;
  • Spouse or domestic partner; and
  • Any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.

Employee Notice:
If the need for leave for leave is foreseeable, employers may require employees to provide up to seven days’ advance notice. If the need for leave is not foreseeable, employers may require employees to provide notice as soon as practical.

Employer Notice:
At the time of hire or by April 1, 2019, whichever is later, employers must provide written notice to employees about their rights under the law. The notice must be provided in English, Spanish, and any other language spoken by at least 10 percent of the employer’s workforce (provided the state has translated the notice into that language). Employers must also display a poster in the workplace.

The state’s Department of Licensing and Regulatory Affairs is responsible for creating a notice and poster for employers to use.

Records:
Employers must retain a record of all hours works and sick leave taken by employees for at least three years.

Documentation:
If employees use more than three consecutive days of sick leave, employers may require reasonable documentation that the leave has been used for a covered reason. See the law for details on requiring documentation.

Pay During Leave:
During paid sick leave, employers must pay employees their normal hourly wage or the minimum wage, whichever is greater. For employees whose hourly wage varies depending on the work performed, the “normal hourly wage” is the average hourly wage during the pay period immediately prior to the use of the leave.

Relationship to Existing PTO Policies:
Employers can use their existing paid time off policy to satisfy the law, as long as:
  • Leave accrues at a rate equal to or greater than required by the law;
  • Employees are entitled to use at least the same amount of leave that the law requires; and
  • The leave may be used for the same purposes and under the same conditions as the law requires.

Note: Employers with fewer than 10 employees must allow employees to use paid leave before using unpaid leave.

Retaliation Prohibited:
Employers are prohibited from retaliating against employees for exercising their rights under the law.

Action Required: Employers with employees working in Michigan should review their policies, forms, and practices to prepare for these changes. Given the intentions of some legislators to amend one or both of the laws prior to the effective dates, employers should watch closely for developments. We will continue to monitor these laws and provide updates as needed.

As always, please be sure to contact your HR Business Partner if you have any questions.

This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice.

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Tags: Compliance Corner10/01/18State Update

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