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Michigan Supreme Court Puts Earned Sick Time and Minimum Wage Increases Back in Business: What Employers Need To Know and Do Now
After a lengthy legislative and judicial back-and-forth, the Earned Sick Time Act (ESTA) and Improved Workforce Opportunity Wage Act (IWOWA), as originally approved by Michigan’s voters in 2018, will become effective on February 21, 2025, signifying significant changes in leave and minimum wage policy that will affect a majority of Michigan’s employers.
The Michigan Supreme Court, in its July 31, 2024, decision in Mothering Justice v. Attorney General, reversed an appellate court ruling and held that the legislature’s “adopt-and-amend” approach to both initiatives, in which the legislature adopted and then amended the voter-approved versions in the same legislative session, was unconstitutional.
For Michigan employers, the Court’s 4-3 decision means the respite from more generous paid sick time and increased minimum wage obligations will soon end. By February of next year, most private and non-federal public employers in the state will likely need to pay a $12/hour minimum wage and provide between 40 and 72 hours of paid and unpaid sick leave to every employee, depending on the size of their workforce.
How We Got Here
The Supreme Court’s decision was the end of a years-long dispute over the voter-approved initiatives. In December 2018, just weeks after voters approved both ESTA and IWOWA, the Republican-controlled legislature “amended” both statutes.
Specifically, it changed IWOWA to defer the effective date of the minimum wage increase until 2030 and eliminated a provision that increased wages for tipped employees. The legislature also “amended” ESTA by passing the current version of the Michigan Paid Medical Leave Act (PMLA), which had been in effect since 2019. The PMLA’s paid leave provisions were far narrower than those in ESTA.
Litigation over the legislature’s efforts to modify the voter-approved laws commenced in due course, with challengers arguing that amending the laws during the same legislative session in which they were approved violated Michigan’s Constitution. In a 3-0 decision, a panel from the Michigan Court of Appeals overturned a Court of Claims decision and held that the “adopt-and-amend” strategy used for both laws was not unconstitutional. As a result, employers availed themselves of the more limited paid leave requirements and lower minimum wage outlined in the “amended” statutes.
But, the Michigan Supreme Court disagreed with the appellate court. It held that amendments to voter-approved laws made during the same legislative session in which the laws were enacted are, in fact, unconstitutional. As a result, the Court reinstated both ESTA and IWOWA as initially passed by voters.
Paid Sick Time Obligations
Effective February 21, 2025, the ESTA requires employers with more than one employee to provide paid sick time as follows:
- Covered employees will earn one hour of paid leave for every 30 hours worked.
- For employers with ten or more employees, all full-time and part-time employees will be entitled to up to 72 hours of earned paid sick time each year.
- Employers with fewer than ten employees must provide up to 40 hours of paid sick time and 32 hours of unpaid sick time per year.
- Earned sick time will carry over from year to year.
- Almost all employees, including part-time and temporary employees, will be eligible for earned sick time.
- Employers cannot require an employee to provide documentation supporting the need for paid sick leave unless an employee is absent for more than three days. Any such documentation need not be detailed.
- Employees will now have a private cause of action for any alleged violation of paid sick leave requirements or for retaliation for the employee exercising their rights under the act.
Minimum Wage Requirements
The Supreme Court reinstated the minimum wage hike as set forth in the IWOWA. Still, given the almost six years that have passed since its enactment, it adjusted the schedule and amounts for the phased increases provided for in the original law. Accordingly, the new minimum wage requirements are as follows:
- February 21, 2025: The minimum wage will be $10.00 per hour plus the state treasurer’s inflation adjustment (projected to be approximately $12). The tip credit will be 48% of the minimum wage (projected to be approximately $5.76).
- February 21, 2026: The minimum wage will be $10.65 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 60% of the minimum wage.
- February 21, 2027: The minimum wage will be $11.35 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 70% of the minimum wage.
- February 21, 2028: The minimum wage will be $ 12.00 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 80% of the minimum wage.
- February 21, 2029: The state treasurer shall calculate the inflation-adjusted minimum wage as set forth in 2018 PA 337, § 4(2). The tip credit will cease to exist.
Employers should consult with counsel between now and next February and modify their existing leave policies and wage structures to ensure compliance when the two laws become effective. If you have questions or concerns about the Court’s decision and how it will impact your business, please contact Jordan Small at Maddin Hauser.