Michigan Supreme Court Restores Voter-Initiated Minimum Wage and Paid Leave Laws

The Michigan Supreme Court has ruled that the state’s legislature exceeded its authority when it amended ballot initiatives to increase the minimum wage and require paid sick leave. If left standing, the ruling means the minimum wage will increase, the tip credit will be phased out, and paid sick leave requirements will expand beginning Feb. 21, 2025. 

The Details

Background

A proposed minimum-wage increase and paid-sick-leave requirement were set to be part of the voter ballot in the general election in Nov. 2018. However, the Michigan legislature stepped in to adopt both measures in Sept. 2018, removing them from the ballot. Because many in the legislature opposed the ballot measures, the passage of the laws was seen as a strategic maneuver to give the legislature a better opportunity to amend the laws and scale them back, which the legislature eventually did with Senate Bill 1171 and Senate Bill 1175 in the same legislative session.

Michigan Court of Claims Decision in July 2022

On July 19, 2022, the Michigan Court of Claims found the legislature’s maneuver was unconstitutional and voided the amended/scaled-back versions of the laws. The decision would have meant the original versions of the laws would apply. On July 29, 2022, the same court entered an order delaying the effect of its decision until Feb. 19, 2023, to give employers and state agencies additional time to accommodate the changes.

Michigan Court of Appeals Decision in January 2023

Jan. 26, 2023, a three-judge panel of the Michigan Court of Appeals ruled that the legislature had the authority to adopt and amend the ballot initiatives in the same legislative session, reversing the Michigan Court of Claims decision. As a result, the legislature’s scaled back versions of the minimum wage and paid sick leave laws continued to apply. Under such a scenario, the minimum wage would remain $10.10 throughout 2023 and $10.33 throughout 2024 and only employers with 50 or more employees would be required to comply with the state’s paid sick leave requirement. The plaintiffs appealed the decision.

Michigan Supreme Court Decision in July 2024

On July 31, 2024, the Michigan Supreme Court ruled that the state’s legislature exceeded its authority when it amended ballot initiatives to increase the minimum wage and require paid sick leave. The ruling means the minimum wage and paid sick leave requirements will revert back to the way they were prior to the legislature’s amendments, effective February 21, 2025. Until Feb. 21, 2025, the state minimum wage is $10.33 per hour.

Here’s a summary of what will change when the original versions of the laws go into effect on Feb. 21, 2025.

Minimum Wage

Paid Sick Leave

• The paid sick leave requirement will apply to all employers (as opposed to those with 50 or more employees) and all employees.
• The accrual rate will change and the number of hours that can be accrued will increase.
• The reasons for which employees may take leave will expand.
• The definition of covered family members will expand.
• The rules regarding pay during leave will change.
• Employer and employee notice requirements will change.
• Recordkeeping requirements will expand.

Paid Sick Leave Details

Here are details on the paid sick leave rules when the original laws go into effect on Feb. 21, 2025.

Coverage

The paid sick leave requirement will generally apply to all employers and all employees who work in the state.

Accrual and Carryover

Employees will be entitled to accrue one hour of sick leave for every 30 hours worked. Employers will be required to 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) will be entitled to use up to 72 hours of accrued paid sick leave per year. For the purpose of determining whether the 10-employee threshold is met, all individuals working for compensation on a full-time, part-time or a temporary basis must be counted.

Employees of employers with fewer than 10 employees will also be 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 will be 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.
• 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.

Family member will be defined 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.
• 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 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

Employers will be required to provide written notice to existing employees and new hires 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 will be required to retain a record of all hours worked and sick leave taken by employees for at least three years.

Documentation

If employees use more than three consecutive days of sick leave, employers will be able to 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 will be required to 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" will be the average hourly wage during the pay period immediately prior to the use of the leave.

Note that unlike the previously amended ballot initiative, the revived requirements are silent on whether employers are required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, or gratuities in the calculation of an eligible employee's normal hourly wage.

Relationship to Existing PTO Policies

Employers will be able to 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.

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.

Next Steps

• Prepare to comply with the expanded minimum wage and paid sick leave requirements when they go into effect. As of now, employers should expect the expanded requirements to go into effect on Feb. 21, 2025.
  
  
• Monitor the situation closely for developments, including checking the Michigan Department of Labor and Economic Opportunity’s webpage on the decision.
  
  
• Watch for updates from ADP.