Changes to Michigan’s Minimum Wage and Paid Medical Leave Laws
Last month, Michigan’s Court of Claims ruled the Michigan Legislature’s 2018 “adopt and amend” strategy employed to find a workable compromise to two ballot initiatives was unconstitutional. This sent shockwaves throughout the state’s business community and immediately triggered a vigorous court battle to slow down and/or reverse the ruling. Why? Because the decision would single-handedly alter Michigan’s current minimum wage and paid sick leave laws and impact every employer in the state.
Here’s what you need to know:
Background
In 2018, a coalition called One Fair Wage launched a ballot proposal for the 2018 November election. Funded almost entirely by out-of-state interests, this ballot proposal sought to increase Michigan’s minimum wage to $12 per hour by 2022 (up from the current $9.87 per hour), tie annual increases to the rate of inflation, and eliminate the tipped minimum wage “tip-credit” in Michigan by 2024.
That same year, a different coalition called MI Time to Care put forth a separate ballot initiative to create the Earned Sick Time Act in Michigan. This proposal, among other things, would have required employers with fewer than 10 employees to accrue 40 hours of paid sick time per year for their employees and employers with 10 or more employees to accrue 72 hours per year.
The initiatives, however, did not see a statewide vote as the Republican-led Legislature adopted them first and then moved after Election Day to amend the laws with a simple majority in an effort to make the proposals more palatable to employers. Had the Legislature allowed the citizens-initiatives to proceed to the 2018 general election ballot, any future amendment would have required a three-fourths vote of the Legislature.
Court of Claims
Four years later, Judge Douglas B. Shapiro, a 2009 appointee of Democratic Gov. Jennifer Granholm, ruled against this legislative-maneuver saying they only had three options to address a law proposed through the initiative process – enact it; reject it; or propose an alternative and present it to the People for a vote.
“Once the Legislature adopted the Earned Sick Time Act and the Improved Workforce Opportunity Act, it could not amend the laws within the same legislative session,” Shapiro’s 25-page opinion reads. “To hold otherwise would effectively thwart the power of the People to initiate laws and then vote on those same laws – a power expressly reserved to the people in the Michigan Constitution.”
As a result, the Public Acts under which Michigan’s current law is governed are now void and state law effectively reverts back to Public Act 337 and 338 of 2018 – i.e. the unaltered, unamended ballot language initially adopted by the Legislature.
Potential Impact
Because the court’s decision holds the ballot initiatives as originally adopted are “in effect,” major changes for paid medical leave and the minimum wage are in play.
Michigan’s minimum wage would see an immediate $1.90 increase to $12 per hour and a further adjustment after 2022 to account for inflation. Reverting to the ballot language also strips several safeguards on future wage increases put in place by the legislature and ties future increases to the annual rate of inflation as well. (Keep in mind, as of July 13, 2022, the Consumer Price Index had increased 9.7 percent over the last 12 months)
Additionally, the elimination of the “tip credit” would force Michigan’s restaurateurs to directly pay servers and bartenders $12 an hour, instead of $3.75, inevitably leading to menu increases and mass layoffs for Michigan’s already struggling hospitality industry.
The changes to the paid medical leave law are similarly substantial as the ballot language would remove a key legislative exemption for businesses with fewer than 50 employees. Now, employers with fewer than 10 employees must accrue 40 hours of paid and 32 hours of unpaid sick time per year for their employees and employers with 10 or more employees must accrue 72 hours per year (up from 40). The language would also do away with most rights for employers to require documentation as well as the credit for already-provided vacation or PTO.
As the “Voice for Business” in Southwest Michigan, we are deeply concerned about the negative ramifications these changes would have on employers throughout the region if the decision were to stand. Businesses are already grappling with the economic headwinds of a recession, record inflation, historic labor shortages, and significant supply chain disruptions. Now is not the time to make matters worse.
Where it stands
Thankfully, the legislature and the state have appealed the Court of Claims decision to the Michigan Court of Appeals and requested an immediate stay to prevent the original ballot initiatives from going into effect. That stay was granted on July 29, 2022 for a period of 205 days (i.e. through February 19, 2023) due to ”justified concerns regarding the ability of employers and the relevant state agencies to immediately accommodate the changes…”
Michigan’s Department of Labor and Economic Opportunity, which has executive oversight over minimum wage and paid medical leave laws, has also indicated it will not enforce the Court of Claims ruling until the appeals process plays out. This means employers, at least for now, do not have to make any immediate changes.
What’s Next
A battle will ensue in the courts that could potentially take years to reach a final resolution. We will continue to monitor the situation and notify our region’s employers of any notable developments so that they remain in compliance. In the meantime, if you have questions about these new changes and their potential effects, please don’t hesitate to reach out.
