Michigan Legislature Adopts Minimum Wage Increases and Paid Sick Leave: Political Poker Is Alive and Well in Michigan

After various court battles, two ballot initiatives were set to be on the November ballot for voter consideration. If passed, one would have increased the state minimum wage and the other would have required employers to provide sick leave to employees. Under Michigan law, though, the Legislature is permitted the opportunity to foreclose the issues from appearing on the ballot by adopting those initiatives through legislation.

Even though the Republican majority of both houses appeared philosophically opposed to the initiatives, on September 5 both houses voted to adopt both of them. Ironically, even though the Democratic minority appeared anxious to have the initiatives on the ballot, most Democrats voted against their adoption by the Legislature.

Are you cross-eyed yet? What accounts for what most would consider ironic? It’s all a matter of sophisticated and high-stakes politics. By the Legislature taking ownership of both laws, the Legislature can more easily amend them during the coming lame-duck session, or even after a new Governor takes office. Voter initiatives require a three-fourths legislative majority to be amended, versus the simple majority required laws like these that are passed through the normal legislative process. Thus, though these actions are technically set to become law at this moment, they may be amended before their early 2019 effective dates.

In the meantime, Michigan has officially joined the ranks of states continually raising their minimum wages, and perhaps more significantly, the small minority of states which have enacted some sort of general paid leave requirement.

The Minimum Wage Increases, as Passed

The Improved Workforce Opportunity Wage Act (the “IWOA”) primarily does two things: a) it raises the state’s general minimum wage, and b) it eventually eliminates the lower minimum wage for employees who typically receive tips, a/k/a "tip credits." The increases will be phased in over three years, as follows:

	General Minimum Wage	Tipped Employees' Minimum Wage
Current	$ 9.25	$ 3.52
January 1, 2019	$10.00	$ 4.80
January 1, 2020	$10.65	$ 6.39
January 1, 2021	$11.35	$ 7.95
January 1, 2022	$12.00	$ 9.60
January 1, 2023	COLA Increase	90% of Gen’l. Minimum
January 1, 2024	COLA Increase	100% of Gen’l. Minimum

Each year after 2022, the general minimum wage will be subject to an increase based on the percentage increase to the CPI provided the CPI has not increased over the prior year by more than 8.5 percent. This automatic indexing is a new feature to Michigan’s minimum wage law.

The Paid Sick Leave Law, as Passed

The Legislature also passed the Earned Sick Time Act (the “ESTA”). This law allows most Michigan employees to earn paid sick time. The ESTA requires employers with more than 10 employees to grant one hour of paid sick time for every 30 hours worked by each employee. For employers with less than 10 employees, the law requires their Michigan employees to earn one hour of paid sick time for every 40 hours of work. No employer with 10 or more employees, though, is required to permit employees to use more than 72 hours of paid sick leave a year, and smaller employers may cap their use to 32 hours per year.

Paid sick time earned under the law may be used by employees for time off needed: a) due to the employee’s or family member’s health condition or injury, including preventative care or diagnosis; b) due to the employee’s or family member’s treatment, services, relocation, or participation in criminal proceedings, relating to being a victim of domestic violence or sexual assault; or c) due to the temporary closure of a business or school due to a public health concern.

What the Legislation Means for Employers

These acts could have widespread impact on employers, but it is unlikely that they will go into effect as currently written. Since the Legislature adopted the initiatives instead of allowing a popular vote on them, there is more room for amendment; there already is serious talk in the Legislature about possible amendments. Amendments may adjust how the changes are phased in, address the new automatic minimum wage indexing provision, or even repeal either or both of the new laws. Until that happens, these provisions are Michigan law and employers with employees in Michigan should begin the process for complying with them in their current form. Waiting for possible amendments will be too speculative and, without planning now, adjusting pay scales, changing leave policies and union contracts, preparing to accrue paid sick time and budget for higher wages at the last minute may be impracticable. 

The above descriptions of the laws are only basic summaries. There are details employers need to appreciate and conform to with respect to each of these laws. For assistance in this regard, contact the authors of this alert or any other member of Dykema’s Labor and Employment Law Practice Group.