In a significant decision that impacts Michigan employers and workers, the Michigan Supreme Court breathed new life into two voter-initiated laws boosting the minimum wage and expanding paid sick leave. On July 31, 2024, the court ruled that the legislature’s controversial “adopt-and-amend” strategy—which effectively nullified the initiatives passed by voters in 2018—violated the constitutional rights of Michigan voters. With substantial changes to minimum wage structures and sick leave policies on the horizon, Michigan employers should begin preparing for the changes which are set to take effect on February 21, 2025.
Changes to Minimum Wage Laws
Currently, Michigan’s minimum wage stands at $10.33 per hour. However, the court’s decision sets in motion a series of annual increases over the next five years.
New Minimum Wage Scale
Starting February 21, 2025, Michigan’s minimum wage will undergo the following changes:
- 2025: The minimum hourly wage will reset to $10.00, plus an inflation adjustment calculated by the state treasurer. This adjustment will use July 31, 2024, as its endpoint, ensuring that the new minimum wage reflects recent economic conditions.
- 2026: The base rate will increase to $10.65, again with an inflation adjustment based on the July 31, 2024 endpoint.
- 2027: Another bump will bring the base rate to $11.35, with the same inflation adjustment applied.
- 2028: The base rate will be $12.00, once more adjusted for inflation since July 2024.
- 2029 and beyond: The minimum wage will be entirely based on the state treasurer’s inflation-adjusted calculations, as outlined in the statute.
Tipped Wages
The ruling also significantly impacts tipped workers, gradually bringing their minimum wage in line with other workers:
- 2025: Tipped wage set at 48% of the standard minimum wage
- 2026: Increases to 60% of the standard minimum wage
- 2027: Rises to 70% of the standard minimum wage
- 2028: Reaches 80% of the standard minimum wage
- 2029: The separate tipped wage is eliminated entirely
Revival of the Earned Sick Time Act
The court’s ruling also resurrects the Earned Sick Time Act, currently known as the Paid Sick Leave Act. Under the revived act, employees will now accrue one hour of paid sick time for every 30 hours worked. This accrual system allows for a maximum of 72 hours per year for businesses with 10 or more employees, while small businesses are required to provide 40 hours of paid sick time, with an additional 32 hours of unpaid time. The scope of this sick time is broad, covering not just personal illness but also family health needs, medical appointments, and issues related to domestic violence or sexual assault. Unused sick time can be carried over to the next year. However, the act still maintains annual usage caps. Employers are required to inform employees of their rights under the act and maintain accurate records of sick time accrual and usage.
Regarding documentation for sick leave, while employers can require reasonable supporting documentation for absences exceeding three days, the act generally prohibits interference with an employee’s attempt to use their accrued sick time.
The act also establishes a private cause of action for violations. Significantly, it creates a presumption of retaliation if an adverse action is taken within 90 day after an employee uses their earned sick time.
Next Steps for Employers
The sweeping nature of these changes means that most businesses in Michigan will be affected. Unlike some labor regulations that exempt smaller businesses, the Earned Sick Time Act applies to employers of all sizes. This means that even companies with just a handful of employees need to be just as vigilant about compliance as their larger counterparts.
It’s important for employers to understand and keep in mind the act’s establishment of a private cause of action for violations, which opens the door to potential litigation, as well as the presumption of retaliation, which can shift the burden of proof onto the employer. This makes it crucial for businesses to document their decision-making processes carefully.
So what steps should Michigan employers be taking now to prepare for February 21, 2025, when these laws take effect? First and foremost, employers should conduct a comprehensive review of existing policies with experienced legal counsel. Employee handbooks, sick leave policies, and PTO structures should be reviewed and likely amended to ensure compliance with the new requirements.
Payroll systems will also need to be updated to account for the new minimum wage scales and the gradual increases in tipped wages. This will be an ongoing process, as the inflation adjustments mean that wages will need to be recalculated annually.
February 2025 may seem far off, but for Michigan employers, it’s important to get ready now. If you have any questions or require assistance, please contact Zana Tomich.
