Michigan Court Decision Substantially Alters Michigan Minimum Wage and Paid Sick Leave Laws Pending Appeal

On July 19, 2022, the Michigan Court of Claims determined that the “adopt-and-amend” strategy used by the Legislature to alter two voter-initiated laws—the “Earned Sick Time Act” (“ESTA”) (renamed the Paid Medical Leave Act) and the “Improved Workforce Opportunity Wage Act” (“IWOWA”)—was unconstitutional. As a result, the Court voided the amendatory acts, putting the initiatives initially adopted by the Legislature into full effect. A non-exhaustive summary of the laws as originally enacted is below:

The Earned Sick Time Act

• The ESTA applies to all employers who employ one or more individuals except for the United States Government. In contrast, the Paid Medical Leave Act only applied to employers with over 50 employees.
• Small Business employees accrue one hour of earned sick time for every 30 hours worked. Small business employees are entitled up to 40 hours of paid earned sick time and an additional thirty-two hours of unpaid sick time in a given year. “Small business” is defined under the ETSA as an employer with fewer than 10 employees during a given week.
• Employers with more than 10 employees are required to provide up to 72 hours of paid earned sick time per year for each employee. Employees at these employers accrue one hour of paid earned sick time for every 30 hours worked.
• The ESTA requires employers to provide written notice to each employee at the time of hiring of certain rights under the act.
• The ESTA creates a private right of action for employees, including a rebuttable presumption that the ETSA was violated in certain circumstances.

The Improved Workforce Opportunity Wage Act

• Under the IWOWA, the minimum wage would immediately be increased to $12/hr.
• Beginning October 2022, the minimum wage will be adjusted every year by the rate of inflation. The revised rate will be effective January 1 of the succeeding year.
• Tipped employees must be paid 80% of the minimum hourly wage rate for 2022. Thus, tipped employees must be paid at an hourly rate of $9.60 in 2022.
• Tipped employees must be paid 90% of the general minimum wage in 2023 and 100% of the general minimum wage in 2024.

A motion to stay the Court of Claims’ decisions pending appeal has been filed. If the motion is granted, the Court of Claims’ Order will not take effect until the appeal is resolved. Without a stay, employers must comply with the ESTA and the IWOWA immediately. The Michigan Department of Labor and Economic Opportunity has not issued any guidance regarding the two acts as of this date.

We will continue to monitor developments surrounding the status of these laws. If employers have specific questions about how the effective legislation affects their business, employers should contact Nikole Canute, Scott Dwyer, Nate Wolf, Dominic Clolinger, or Kathryn Zoller as soon as practicable.