Standing Up for Small Businesses via Amicus Brief
The Southwest Michigan Regional Chamber, as part of the Small Business for a Better Michigan coalition, has officially filed an amicus brief with the Michigan Court of Appeals (COA) urging them to reverse the Michigan Court of Claims’ (COC) July 19, 2022 decision that found the enactment of Michigan’s existing paid sick leave and minimum wage laws unconstitutional.
We’ve taken this extraordinary step because there’s a lot at stake in this case. Should the lower court’s ruling be allowed to stand, it could have dire consequences for Michigan’s job providers, economy, and overall business climate. Here’s what you need to know:
In July, the COC ruled that the Michigan Legislature’s 2018 “adopt and amend” 2018 strategy to address two previous ballot initiatives increasing the minimum wage and enacting a paid sick leave law was unconstitutional. In doing so, the judge voided the Legislature’s amended version of the laws, which have been in effect since March 29, 2019 and ordered that the standards as initially proposed via ballot proposal and adopted be deemed the law.
Recognizing the significant impact on the policies, procedures and bottom line of most businesses operating in Michigan, the COC judge subsequently stayed his own ruling until Feb. 19, 2023, saying “there are justified concerns regarding the ability of employers and the relevant state agencies to immediately accommodate the changes required by [the statute].”
After a Motion to Expedite the case was filed by attorneys on both sides of the issue, the COA agreed to take the case and set the matter for first available case call – which would be November – to enable the court to issue a decision before Feb. 1, 2023.
What’s at stake:
While it might be tempting to look at this issue and think the court’s decision probably doesn’t apply to your business either way, we’d encourage all businesses operating in Michigan to take a closer look at the details.
Public Act 338 of 2018, the Earned Sick Time Act (“ESTA”), requires that employees earn a minimum of one hour of sick time for every 30 hours worked. Employees of “small businesses” (employers with fewer than 10 employees and which includes many of the Coalitions’ members) accrue up to 40 hours of paid sick time and 32 hours of unpaid sick time each year. Earned sick time will carry over from year to year up to the annual maximums. Under the ESTA, employers cannot require employees to arrange for coverage during an absence and are not required to give documentation for an absence until three days after the absence is incurred.
Further, the ESTA definition redefines the term “employee” to include anyone that performs a service for an employer—which may even include contract employees. Because employers must allow employees to accrue paid sick leave as they work (as opposed to front loading annual sick time at the beginning of the year), employers will face increased administrative burdens allocating and tracking the new system. These higher benefit costs may also force employers to reduce workers’ pay by approximately the cost of providing the benefit, and employers will need to spend more on leave benefits and less on wages—often hurting their employees.
Under Public Act 337 of 2018, the Improved Workforce Opportunity Wage Act (“IWOWA”), Michigan businesses—no matter their size—would be forced to quickly raise minimum wages with annual adjustments for inflation. The compelled re-enactment of IWOWA would cause these immediate, adverse consequences. These changes would apply equally to all employers, including hospitals, schools, local governments, and universities. An increase in costs to governmental entities in turn increases costs for employers through inevitable increased taxation. What’s worse, the overnight elimination of the tip credit, which is a 156% labor cost inflation, will put the restaurant industry into a tailspin at a time when our state, communities, and families can least afford it.
How we’ve intervened
Understanding the ramifications of these potential changes, our coalition filed an amicus brief with the COA on Sept. 28, 2022 to defend the integrity of the legislative process as well as the welfare of our state’s business community.
In its ruling, the COC held that the Legislature does not have the ability to adopt and amend an initiated petition in the same legislative session, however, our coalition argues this finding is supported by the plain language of the Michigan Constitution. We also argue that the COC relied heavily on selected constitutional history and former Attorney General Kelley’s 1964 advisory opinion, despite a 2018 superseding opinion by Attorney General Schuette finding. The Schuette opinion found the Constitution permits the Legislature to enact a law proposed by the people through the initiative process and subsequently amend that law during the same session.
As of writing this column, we have yet to receive word on an appeals panel and hearing date. Rest assured, we will remain engaged and ‘in the gap’ for our members on this issue.