Michigan High Court Revives Paid Sick Leave Requirements and Minimum Wage Hike with Significant Impact for Michigan Employers

On Wednesday, July 31, 2024, the Michigan Supreme Court issued a sweeping change to employers’ bottom line. The Court held that the state legislature acted unconstitutionally when it adopted but then amended in the same session two 2018 ballot initiatives providing earned paid sick leave for most Michigan workers and increasing the minimum wage for all employees, including eliminating the sub-minimum wage for tipped workers. Because the amendments to the Wage Act and the Earned Sick Leave Act are void as unconstitutional, the Court found the pre-amendment Wage Act and the Earned Sick Leave Act as originally proposed in the ballot initiatives are the law in Michigan.

To lessen the immediate financial impact and account for the six-years that have passed since the initiatives were voted on, the Court ruled that the Wage Act and the Earned Sick Leave Act will not become effective until February 21, 2025. On November 1 each year from 2024 until 2029, the state treasurer will announce the inflation adjustment. The changes are then rolled out:

• February 21, 2025: Minimum hourly wage will be $10 plus the state treasurer’s inflation adjustment, AND tip credit will be increased to 48% of the minimum wage.
• February 21, 2026: Minimum hourly wage adjusted to $10.65 plus the state treasurer’s inflation adjustment, AND tip credit will be increased to 60% of the minimum wage.
• February 21, 2027: Minimum hourly wage adjusted to $11.35 plus the state treasurer’s inflation adjustment, AND tip credit will be increased to 70% of the minimum wage.
• February 21, 2028: Minimum hourly wage adjusted to $12.00 plus the state treasurer’s inflation adjustment, AND tip credit will be increased to 80% of the minimum wage.
• February 21, 2029 (and after): Minimum hourly wage adjusted to inflation-adjusted minimum wage AND tip credit no longer exists, and tipped workers become entitled to the full minimum wage.

Paid Sick Leave

In addition to the above schedule for the minimum wage increases, the Earned Sick Leave Act also goes into effect on February 21, 2025. The Earned Sick Leave Act will require any employer (other than the U.S. government) with one or more employees to provide paid sick time, accruing at a rate of one hour for every 30 hours worked – for all employees including part-time and seasonal workers. Employers with 10 or more employees must allow employees to accrue and use up to 72 hours of paid sick leave per year. “Small employers” with fewer than 10 employees must allow employees to use and accrue up to 72 hours of sick leave per year, but only 40 hours must be paid. Employees can carry over from year to year any number of accrued hours, however, they may only use up to 72 hours per year. This decision potentially impacts thousands of previously exempt employers.

In the coming months, Michigan employers should review their wage and paid time off policies to ensure compliance with the new laws by February 21, 2025, and brace for higher labor costs. Members of the Rhoades McKee Human Resource and Employment Law Team are here to help employers navigate these new challenges.