Last week the Michigan Supreme Court ruled that the "adopt and amend” enaction of our current minimum wage and paid medical leave was unconstitutional. This means that PA 337 and PA 338, the original ballot initiatives of 2018, will take effect February 21, 2025. It also means larger employers that adopted paid time off benefits compliant with the amended law will have to modify their paid time off policies to comply with the originally passed law. It also means small employers, those with under 50 employees, will now have to offer paid sick leave and other types of paid time off to all their employees.

The Improved Workforce Opportunity Wage Act minimum wage law originally passed, and then amended shortly thereafter, raised Michigan’s minimum wage to $12/hr. by 2022.  However, the supreme court ordered that the minimum wage be revised according to a new schedule consistent with the graduated phase in the original law. It is to be set from the new date of enactment next year and reflect the original law's inflation index. This schedule as it is currently estimated is shown below.

NOTE: This minimum wage schedule below is pursuant to the Court Opinion and the Court’s estimate of a new minimum wage schedule calculated on the inflation rate going back the original law. The below information should be used as an estimated guideline and not the actual minimum wage rate that will be in effect. The Michigan agency assigned to administer this law will issue an updated minimum wage schedule.

February 21, 2025 (originally 2019): The minimum wage will be $10.00/hr. plus the inflation adjustment determined by the state treasurer, using July 13, 2024, as the endpoint for that calculation. The tip credit will be 48% of the minimum wage.

February 21, 2026 (originally 2020): The minimum hourly wage will be $10.65 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 60% of minimum wage.

February 21, 2027 (originally 2021): The minimum hourly wage will be $11.35 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 70% of minimum wage.

February 21, 2028 (originally 2022): The minimum hourly wage will be $12.00 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 80% of minimum wage.

February 21, 2029 (originally 2023 and after): The state treasurer shall calculate the inflation-adjusted minimum wage as set forth in 2018 PA 337, § 4(2). The tip credit will no longer exist.

Michigan’s current minimum wage is $10.33/hr. This change to Michigan’s minimum wage will impact small businesses in the retail and hospitality industries in particular.

This decision also impacts tipped workers. Those workers that are tipped and previously made 38% of the general minimum wage will now have their minimum wage increase to 100% of the non-tipped worker minimum wage by the end of this law’s phase-in. Other wage payment changes would also apply under the original law.

The paid time off law originally passed (the Earned Sick Time Act) provided paid time off to pretty much all workers at a rate of one (1) hour of paid sick time for every thirty (30) hours of work each week, subject to certain maximums. This law originally provided paid time off for employees to use due to physical or mental health issues as well as their family members including a family member who was a victim of domestic violence or sexual assault.

The Earned Sick Time Act covers all employers. Employers that have 10 employees or less must provide 40 hours of paid time off per year and up to an additional 32 hours of unpaid time off while employers with 10 employees or more must provide 72 hours of paid earned sick leave per year. The rate of pay for this benefit must be equivalent to the normal hourly wage for that employee. Exempt employees must be paid at their normal salaried rate for time off under this law.

Employees taking leave which is foreseeable will be required to provide advance notice of at least seven (7) days prior to the date of the anticipated absence the earned sick time begins.

The paid sick time law states employers may not interfere with, restrain, or deny an employee the right to take time off under this law. Penalties for violation of this law include civil action, reinstatement if the employee loses their job, payment of back wages, and re-establishment of employee benefits.

Employers will have to provide notice about this law to employees covered by this act. The date this will have to occur is presumed to be on or before February 21, 2025.

As of this writing business groups as well as their allies in the Michigan Republican party are marshalling their resources to call for a legislative compromise to moderate the laws that will impact so heavily on them early next year. ASE encourages our members to contact their state legislators to work on amending or overturning this onerous paid time off law.

For a more detailed comparison of the current law and the laws that will take effect next year (2/21/2025) click here to download a chart. 

ASE will continue to follow developments and report on any updates to this major change to Michigan employment law.

Join us this Friday, August 9th, for a webinar presented by Clark Hill Attorney Vincent Sallan. To register for this complimentary program, click here.