Since the fall of 2018 Michigan employers have faced the prospect of significant increases in the minimum wage rate and in the amount of paid sick leave they had to offer to employees. Both of these potential increases were the result of successful voter petition campaigns to put the issues on the ballot for a vote by the general public. With respect to wages, the petition called for the minimum wage to increase to $12 per hour by 2022 with upward adjustments for inflation each year thereafter and gradually increased the tipped minimum wage to match the regular minimum wage by 2024. With respect to paid sick leave, the petition called for any employer with more than ten employees to provide one hour of paid sick leave for every 30 hours worked up to 72 hours per year for a variety of absences (illnesses and injuries; to care for themselves and family members; domestic violence, sexual assault; and certain business and school closures) and for employers with less than ten employees to provide up to 40 hours of paid leave and 32 hours of unpaid leave per year. Rather than let the proposed increases pass as proposed, the Michigan Legislature enacted both of the voter-initiated proposals and then amended them to significantly reduce the wage and paid sick leave benefits.

As a result of the amendments enacted by the Legislature, the minimum wage increase was scaled back to $9.45 per hour in 2019 with gradual increases up to $12.05 per hour in 2030 and the paid sick leave was reduced to 40 hours per year for only those employers with more than 50 employees.

The process by which the Legislature changed the voter-initiated legislative changes were challenged in Court. In July of 2022, the Court of Claims ruled that the legislature’s amendments violated the Michigan constitution and that the voter-initiated legislation adopted by the legislature remained in effect without the legislature’s later amendments. The ruling was appealed and then put on hold through February 20, 2023, leaving employers with the possibility of significant changes to their wage and sick pay benefits in the first quarter of this year.

Court of Appeals to the Rescue

On January 26, 2023, the Michigan Court of Appeals reversed the Court of Claims ruling that the legislature acted inappropriately when it adopted and then amended the voter initiatives. As a result, the looming February 2023 changes to wage and sick pay will not be implemented. It is likely, however, that the ruling by the Court of Appeals is not the last word on the subject. An appeal is expected to the Michigan Supreme Court.

Current Laws Remain in Effect

As a result of the ruling by the Court of Appeals, Michigan Employers can continue to pay the current minimum wage of $10.10 per hour. Small employers will have no paid sick leave obligations. Employers with over 50 employees will continue to provide paid sick leave at the rate of 1 hour for every 35 hours worked with a total accumulation of no more than 40 hours per year. This, of course, could change either by intervention of the Michigan Supreme Court or by the newly empowered majority of Democrats in both the Michigan House and Senate who may seek to resurrect the original versions of the voter-initiated laws.

The Employment Team at Rhoades McKee will continue to monitor the wage and sick time litigation as well as any legislative proposals for developments related to minimum wages and sick time benefits that may impact Michigan Employers.

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