Michigan Court of Appeals Reverses Court of Claims’ Decision on Minimum Wage, Earned Sick Time Changes

On January 26, 2023, the Michigan Court of Appeals issued an order reversing the Court of Claims regarding minimum wage and paid sick time laws in Michigan. As a result, the changes scheduled to go into effect on February 19, 2023, which we discussed here in our alert issued last week, will not be implemented.  The decision comes as welcome news to Michigan employers, who faced significant increases in wage and paid sick leave obligations if the Court of Claims’ decision took effect.

In its published order, the Michigan Court of Appeals found that the Michigan Legislature did not violate the Michigan Constitution by adopting certain 2018 ballot initiatives and then amending them before they took effect. As a reminder, the Michigan Legislature amended the Improved Workforce Opportunity Act and the Earned Sick Time Act, in November 2018, and (1) significantly reduced the number of employers subject to paid sick leave obligations and the amount of paid sick leave Michigan employees could accrue, and (2) delayed and reduced increases in the state minimum wage.  The Michigan Legislature also removed provisions that would have phased out the “tip credit” that permits employers to pay tipped workers a reduced tipped minimum wage.

Michigan Improved Workforce Opportunity Act

Had the Michigan Court of Appeals not reversed the Court of Claims’ order, the non-tipped minimum wage would have gone up to $13.03 per hour on February 19. Also, the tipped minimum wage would have gone up to 90% of the minimum wage in 2023 and to 100% in 2024, completely phasing out the “tip credit” used for tipped employees. Now, the minimum wage increases will remain as follows:

Michigan’s Paid Medical Leave Act

If the Court of Claims’ decision had gone into effect, significant changes to the paid sick leave laws would have occurred.  This included requiring all employers, regardless of how many employees they employ, to provide paid sick time leave at the accrual rate of 1 hour of paid sick leave per 30 hours worked. Employers with more than 10 employees were to provide employees with 72 hours of paid earned sick time per year for employees who worked at least 20 calendar workweeks in a year. Employers with less than 10 employees were to provide employees who worked at least 20 workweeks in a year with 40 hours paid and 32 hours unpaid leave.  As a result of the Court of Appeals decision on January 26, paid sick leave obligations will continue to apply to only employers with 50 or more employees and paid sick leave will remain capped at 40 hours per year.

The Michigan Court of Appeals decision will undoubtedly be appealed to the Michigan Supreme Court. We will continue to monitor the situation, but for now, employers can stay any policy changes they were making in preparation for February 19, 2023.

If you have any questions about these developments, please contact one of Honigman’s Labor and Employment attorneys. Please subscribe here to receive future alerts.