20 July 2022

Michigan Court of Claims Voids Current Minimum Wage and Paid Medical Leave Laws, Reinstating Original Versions from 2018

On Tuesday, July 19, 2022, the Michigan Court of Claims determined that the Michigan Legislature violated the Michigan Constitution when it adopted and then amended two ballot petition initiatives in 2018. Importantly, this ruling voids two laws—the current minimum wage law (called the Improved Workforce Opportunity Act) and the current Paid Medical Leave Act—and reinstates the versions originally proposed by the ballot initiatives and then adopted by the Legislature. If the Court’s decision remains in effect, it will significantly impact all employers in Michigan.

How Did We Get Here?

In 2018, two advocacy groups circulated petitions to raise the state’s minimum wage and enact a paid sick time law. Both petitions gathered the requisite number of eligible voter signatures and were submitted to the Legislature pursuant to the process outlined in the Michigan constitution.

In September 2018, the Legislature adopted both proposed laws prior to the election, and both laws were slated to take effect in March 2019. However, after the election the same Legislature (and in the same Legislative session), amended both laws. The amended laws took effect in March 2019. Those laws increased the Michigan minimum wage to $9.45/hour as of March 31, 2019 (with incremental increases annually thereafter) and established the Paid Medical Leave Act (“PMLA”).

What Is the Difference Between the Laws Amended By The Legislature And The Original Ballot Initiatives?

The laws as amended by the Legislature were quite different from the original ballot initiatives in a number of ways. Among other differences, the amended Michigan minimum wage law removed provisions in the original initiative that would have: (a) brought the state’s minimum wage to $12/hour by 2022, (b) removed the lower minimum wage for tipped workers by 2024, and (c) tied minimum wage increases to inflation.

The PMLA was substantially different from the original initiative, which was to be called the “Earned Sick Time Act.” The primary differences are that the Earned Sick Time Act:

  • applies  to employers with at least 1 employee (the PMLA only applied to employers with 50 or more employees);
  • does not exempt any employee (i.e., exempt, part-time, temporary, and casual employees are eligible for earned sick time, as are employees covered by collective bargaining agreements);
  • expands the definition of a “family member” to include domestic partners and other individuals related by blood or affinity whose close association with the employee is equivalent to a family member;
  • mandates that employees accrue 1 hour of sick leave for every 30 hours worked (the PMLA only required accrual at a rate of 1 hour for every 35 hours worked);
  • only allows for the accrual method (the PMLA also allowed for the lump sum method);
  • requires employers to allow employees to use up to 72 hours of earned sick leave per year unless they are a “small business” with less than 10 employees, in which case they may only allow use of 40 hours of paid leave, but must also allow 32 additional hours of unpaid leave;
  • mandates that employers allow use in increments of no greater than 1 hour or the smallest increment otherwise available in the employer’s payroll system;
  • orders employers to allow carry over of unused leave from year to year;
  • expressly prohibits retaliation against an employee who exercises rights under the act, and retaliation includes a “threat” of adverse action;
  • creates a “rebuttable presumption” of retaliation if adverse action is taken against an employee within 90 days of various “protected activity” including if an employee informs anyone of their rights under the Act; and
  • allows employees to file a civil action directly against the employer for violations of the Act within 3 years of the alleged violation and entitles employees to liquidated damages plus costs and attorneys fees if they prevail.

What Does This Mean?

Absent a stay, appeal or legislative action, the Court of Claims ruling states that the minimum wage and paid sick leave laws immediately revert back to the 2018 ballot initiative language. This means that the Earned Sick Time Act replaces the PMLA, the Michigan minimum wage increases to $12/hour and the tipped employee minimum wage increases to 80% of the minimum wage.

The Legislature, however, is expected to promptly appeal the Court of Claims decision, and the decision may be stayed during the appeal process. If a stay is entered, the status quo will remain and the original language of the 2018 ballot initiatives will be temporarily unenforceable pending the outcome of the appeal. The Legislature could also pass new legislation that mirrors its 2018 amendments so that the PMLA and minimum wage requirements remain in place. If the Legislature does so, it’s unclear whether Governor Whitmer would sign that new legislation.

Many Questions Remain

A number of questions about the impact of the decision remain, such as whether a stay will be issued, whether the decision will be appealed, whether employers could be liable for complying with the original ballot initiative language and whether the Michigan Legislature will respond to the ruling with new legislation.

Miller Johnson is closely monitoring all and will continue to alert clients of important information. In the meantime, employers should contact their Miller Johnson attorney to discuss the impact of this decision on their compensation and paid leave policies and practices.