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Navigating Employment Law in Michigan: 5 Key Issues Small Business Owners Need to Know

As a Michigan small business owner, it is essential to understand and comply with employment laws to avoid costly legal disputes and maintain a positive work environment. 

Employment-related disputes are among the most common legal issues a small business owner faces—a 2019 study by Hiscox, a global insurance company, reported that U.S. businesses had a 10.5% chance of facing an employment-related lawsuit, with the average cost of such claims being $160,000. 

In this article highlight, we address five of the important employment law issues that Michigan small business owners need to know, and provide practical tips for compliance.

I. Wage and Hour Laws

A. Minimum wage requirements

Michigan has its own minimum wage, which differs from the lower federal minimum wage. Small business owners must comply with the state minimum wage, which increased from $9.87 to $10.10 per hour this year. Wages for tipped employees also to $3.84 per hour. Minimum wage requirements apply to Michigan employers who employ two or more employees over the age of 16 at the same time within a calendar year. A civil fine of $1,000 can be assessed to an employer who does not pay minimum wage or overtime (as discussed below).

B. Overtime regulations

Employers in Michigan must adhere to federal overtime regulations outlined in the Fair Labor Standards Act (FLSA). Non-exempt employees are entitled to overtime pay at a rate of one and a half times their regular pay rate for any hours worked beyond 40 hours in a workweek.

To be exempt from overtime regulations under the FLSA, most employees need to be paid at least $684 per week or $35,568 annually, a threshold referred to as the “salary level” test. To be exempt, an employee must also pass the “job duties” test (executive, administrative, professional or outside sales work), the elements of which vary depending on the job/position at issue.

In a ruling that caught many employers by surprise, the U.S. Supreme Court recently held that an employee who earned more than $200,000 per year was nonetheless entitled to overtime pay under the FLSA. In light of this decision, and because FLSA violations can give rise to significant penalties, employers, in consultation with legal counsel, should proactively review and analyze their reliance on the highly compensated employee exemption.

C. Recordkeeping requirements

Michigan employers must maintain accurate records of employee hours worked, wages, and other employment-related information. Inadequate recordkeeping can lead to fines and penalties.

For example, the FLSA mandates that employers keep specific records for non-exempt employees, such as (i) hours worked each day and total hours worked each workweek (ii) basis on which employee’s wages are paid (e.g., “$15 per hour” or “salary”), and (iii) regular hourly pay rate, among other things.

Michigan’s Payment of Wages and Fringe Benefits Act also requires employers to keep records of the following information for each employee:

  • Employee’s name, address, and occupation
  • Employee’s rate of pay, hours worked, and total wages earned
  • A detailed record of any fringe benefits provided to the employee

Additional recordkeeping requirements may also apply under various state and federal employment laws, such as the Family and Medical Leave Act (FMLA), the Michigan Paid Medical Leave Act (PMLA), the Americans with Disabilities Act (ADA), and the Equal Pay Act (EPA).

II. Discrimination and Harassment

Michigan’s Elliott-Larsen Civil Rights Act (ELCRA) and federal laws such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA) protect employees from discrimination based on race, color, religion, sex, national origin, age, disability, and other characteristics.

On March 16, 2023, Governor Whitmer signed into law a bill that expands the ELCRA, reaffirming legal protections for sexual orientation and expanding coverage to include gender identity and expression.

Businesses of all sizes in Michigan must be aware of these important changes, as the ELCRA applies to even the smallest of businesses—those with one or more employees. 

Given these recent developments, employers, businesses offering public accommodations, educational institutions and other organizations covered by the ELCRA should review and update, as necessary, their policies and practices to ensure they protect against relevant forms of discrimination. They should also educate and train managers and employees so they are cognizant of the changes.

In short, small business owners must create a workplace free from discrimination and harassment. This includes implementing policies, providing training, and promptly addressing complaints.

Employers must take all complaints seriously and conduct thorough investigations. Inadequate responses to complaints can lead to costly litigation.

Learn more about how to respond to workplace harassment complaints.

III. Family and Medical Leave

A. Overview of the Family and Medical Leave Act (FMLA)

The FMLA applies to employers with 50 or more employees and grants eligible employees up to 12 weeks of unpaid, job-protected leave for certain family and medical reasons. It’s important to note that the FMLA applies not just to onsite workers, but to remote workers as well.

B. Michigan Paid Medical Leave Act (PMLA)

The PMLA applies to Michigan employers with 50 or more employees and requires covered employers to provide eligible employees with up to 40 hours of paid medical leave per benefit year. Employees accrue paid leave at a rate of one hour for every 35 hours worked.

C. Coordinating FMLA and PMLA leave

Employers must understand how the FMLA and PMLA interact, as both laws can apply simultaneously. When both laws apply, employers should provide the most generous benefits available to the employee.

IV. Worker Classification

Properly classifying workers as employees or independent contractors is crucial, as misclassification can lead to significant fines and penalties. Independent contractors generally have more control over their work, while employees are subject to an employer’s control.

It’s important to stay on top of new developments in this area, because the standards for worker classification frequently change under state and federal law.

For example, on October 11, 2022, the U.S. Department of Labor released a proposed rule interpreting how a worker is classified under the FLSA. The proposed rule adopts an “economic realities test,” under which the standard for determining if a worker is an employee or an independent contractor is based on whether the worker is economically dependent on the employer for work (i.e., an employee) or is in business for themselves (i.e., an independent contractor.

Misclassification can result in back pay, overtime, taxes, and penalties, as well as potential liability for employee benefits and workplace injuries.

To ensure your business is compliant:

  • Review the IRS and Michigan Department of Labor guidelines on worker classification
  • Regularly assess worker relationships and update classifications as necessary
  • Consult with legal counsel for guidance on classification

V. Workplace Safety and Health

The Michigan Occupational Safety and Health Act (MIOSHA)establishes workplace safety and health standards for Michigan employers. Employers must provide a safe work environment, free from recognized hazards that could cause death or serious harm.

While these issues were top of mind for every employer during the COVID-19 pandemic, a time at which a host of new workplace safety regulations were imposed, employers must always stay vigilant when it comes to workplace safety.

An employer’s responsibilities for maintaining a safe workplace include:

  • Develop and implement safety policies and procedures
  • Provide safety training and equipment
  • Regularly inspect the workplace for hazards

Employers must report certain workplace injuries and illnesses to MIOSHA. Failure to report can result in fines and penalties.


Small business owners in Michigan must stay current with evolving employment laws to avoid legal risks and promote a positive work environment. By understanding and addressing the top five employment law issues discussed in this article, employers can reduce the likelihood of costly lawsuits and government enforcement actions. As always, consulting with a knowledgeable employment attorney is essential for guidance and compliance assistance.

If you have questions or require assistance with employment-law-related issues, please contact Zana Tomich.

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