Michigan Supreme Court Issues Decision on Employee Paid Leave & Minimum Wage
August 1, 2024
Authors:Ron Reynolds, Jill Miller, & Jeremy Oreinstein
On July 31, 2024, The Michigan Supreme Court issued a significant decision that will have a major impact on employers for both the minimum wage and employee paid leave. In a narrowly divided opinion, the Court imposed the original ballot initiatives known as the Improved Workforce Opportunity Act (IWOWA) and the Earned Sick Time Act (ESTA), which will become effective February 21, 2025.
Background on Improved Workforce Opportunity & Earned Sick Time Acts
In 2018, IWOWA and ESTA were approved as ballot initiatives, which would have been placed on the 2018 ballot before the general electorate. Instead, the Legislature adopted and then amended the initiatives, softening their impact. Several policy advocacy groups challenged the Legislature’s conduct in the courts, and the case eventually found its way to the Michigan Supreme Court. In a 4-3 decision, the Michigan Supreme Court held that the Legislature’s actions were unconstitutional.
What Happens Next
Minimum Wage
Beginning on February 21, 2025, the Michigan minimum wage will increase to $10/hour, plus an inflation adjustment to be determined by the State Treasurer. The State Treasurer will determine the inflation adjustment on November 1, 2024. The minimum wage will increase each year thereafter until it reaches $12 in 2028, plus the annual inflation adjustment determined by the State Treasurer. Beginning in 2029, the minimum wage will be annually adjusted for inflation.
Special Implications for Tipped Employees
Tipped employees will see increases in their minimum wage to 48% of the minimum wage earned by all other employees in 2025, increasing incrementally each year until 2029, when there will be no distinction between tipped employees and all other employees.
Paid Sick Leave
ESTA grants all employees, including part-time employees and seasonal employees, one hour of paid leave for every 30 hours worked, up to 72 hours annually. Numerous types of absences will qualify for paid leave, including absences for both personal and family situations.
No Fault Attendance Policies
These policies may run afoul of ESTA, which prohibits an employer’s absence control policy to treat earned time off under the ESTA as an absence that may lead to, or result in, a retaliatory employment action.
Employers with fewer than 10 employees
Employers with fewer than 10 employees need to provide up to 40 hours paid leave under ESTA, rather than 72 hours.
Notice and Record Retention
ESTA contains detailed employee notice requirements and employer record retention requirements.
Employee Friendly Remedies
ESTA protects employees who “mistakenly but in good faith” allege a violation of the law and provides for a “rebuttable presumption of violation” against an employer for adverse employment actions taken with 90 days of specified employee acts.
What You Should Do Now
Prepare for compliance with the new minimum wage beginning on February 21, 2025. The State Treasurer will announce the minimum wage inflation adjustment on November 1, 2024.
Review your leave policies to ensure compliance with the new requirements of ESTA. Contact Hilger Hammond to assist you in bringing your leave policies into compliance with the new law.
