Michigan Supreme Court Reinstates Voter-Initiated Versions of State’s Paid Sick Leave and Minimum Wage Laws

Quick Hits

• On July 31, 2024, the Michigan Supreme Court, in a 4–3 decision, ruled that the Michigan Legislature violated the Michigan Constitution in 2018 by adopting voter-initiated laws and later amending the previously adopted laws in the same legislative session.
• The high court’s ruling reinstates the 2018 voter-initiated versions of the Earned Sick Time Act, which generally provides for more paid sick leave time and requires smaller employers that were previously exempted from the Act to comply with the Act, and restores an accelerated minimum hourly wage and tip credit schedule under the Improved Workforce Opportunity Wage Act.   
• The reinstated laws—both the Earned Sick Time Act and the Improved Workforce Opportunity Wage Act—will take effect on February 21, 2025.

What Happened?

The Michigan Constitution allows the legislature to “adopt” a voter-initiated law and enact the same without change or amendment instead of placing it on the ballot at the next general election. The question before the Michigan Supreme Court was whether the Michigan Legislature could “adopt” the voter-initiated law and then “amend” it later in the same legislative session.

On July 31, 2024, the Michigan Supreme Court, in Mothering Justice v. Attorney General, held that this “adopt-and-amend” approach violated the Michigan Constitution. In its 4–3 decision, the Michigan Supreme Court stated that this “adopt-and-amend” approach was unconstitutional based on the plain text of the Michigan Constitution, and that while the legislature remained free to amend the voter-initiated laws that it previously adopted in subsequent legislative sessions, the “amend” phase could not occur in the same legislative session during which the voter-initiated law was first adopted.

Here is how this “adopt-and-amend” approach played out:

In September 2018, the Michigan Legislature “adopted” the voter-initiated ballot proposals that called for earned sick time (ESTA) and a $12 minimum wage by 2022 (IWOWA). In December 2018 after the general election, and during the same legislative session, the legislature “amended” the voter-initiated portion of the IWOWA by deferring the $12-per-hour minimum wage increase to 2030 and eliminating wage increases specific to tipped employees. (2018 Public Act 368). The legislature also “amended” the voter-initiated ESTA and enacted the current version of the Michigan Paid Medical Leave Act (PMLA) (2018 Public Act 369) that has been in effect since March 2019. While requiring mandatory paid sick leave for eligible employees, the “amended” version of the ESTA, enacted as PMLA, was much narrower than the original ballot proposal. Since March 2019, Michigan employers have relied on the PMLA to implement their paid leave policies.

As a comparison, the ballot initiatives that the legislature “adopted” in September 2018 provided for the following:

• an increased minimum wage rate of $12 per hour by January 1, 2022;
• a requirement that any Michigan employer with one or more employees, including smaller employers, provide paid sick leave to its employees (thus extending the law’s applicability to most public and private employees in Michigan);
• a requirement that an employer with ten or more employees allow its employees to accrue and use up to seventy-two hours of paid sick leave each year;
• employees’ right to use paid sick leave for a wide variety of absences, including absences for illnesses/injuries, to care for themselves and family members, in connection with domestic violence or sexual assault, and for certain business and school closures;
• a prohibition on employer-imposed requirements that an employee provide documentation, including doctor’s notes, to support a leave request unless the absence was for more than three days;
• a prohibition on “front-loading” of paid sick leave allowance; and
• a requirement that employers allow employees to accrue paid sick leave as they work.

In contrast, the “amended” version (renamed Paid Medical Leave Act) significantly narrowed the original ballot initiatives. For example, the “amended” versions:

• exempted employers with fewer than fifty employees from having to provide paid sick leave;
• narrowed the definition of “eligible employees” by excepting employees who were exempt from overtime under the federal Fair Labor Standards Act (FLSA), seasonal employees, and temporary employees;
• lowered the annual paid leave entitlement to forty hours;
• eliminated a section of the voter-initiated law that gave employees the right to sue for retaliation;
• deferred the $12-per-hour minimum wage increase from 2022 to 2030, making the increase more gradual;
• removed the automatic annual increase to the minimum wage above $12 per hour (based on inflation); and
• eliminated wage increases specific to tipped employees.

With the Michigan Supreme Court’s July 31, 2024, ruling in Mothering Justice that the Michigan Constitution does not support the “adopt-and-amend” approach the legislature used during the same 2018 legislative session, employers will now have to comply with the voter-initiated laws that the legislature “adopted” in 2018, which will go into effect on February 21, 2025.

What Does the Michigan Supreme Court’s Ruling Mean for Employers?

In terms of paid sick leave, Michigan employers have until February 21, 2025, to examine their current leave policies for Michigan employees and assess any necessary modifications needed to comply with the expanded paid sick leave (and other) provisions of the original legislation (i.e., the “adopted” versions). In determining whether their leave policies for Michigan employees are compliant, employers may want to consider the following:

• Is the company a covered employer?
• What types of employees are eligible for paid sick leave?
• How does paid sick leave accrue?
• How many paid sick days may be used each year?
• What types of absences are covered by the sick leave policies?

In considering these factors, the following provisions of the restored ESTA may be helpful:

Covered Employers and Employees

Except for the federal government and its employees, the ESTA requires most public and private employers in Michigan to provide paid sick leave for their employees.

No Small Employer Exemption

The ESTA applies to ALL Michigan employers with at least one employee, except the federal government. This includes small businesses, which are defined as employers with fewer than ten employees. Under the ESTA, small businesses must provide employees up to forty hours of paid sick leave and an additional thirty-two hours of unpaid sick leave time per year.

Increased Paid Sick Leave for “Large” Employers

Under the ESTA, employers with ten or more employees are considered “large” employers, and their employees are entitled to accrue and use up to seventy-two hours of paid sick leave per year, which is a considerable increase from the PMLA’s forty-hour requirement.

Broader Scope of Sick Leave Usage

In addition to the sick leave usage authorized under the PMLA, the ESTA defines “family member” to include someone related by “affinity.” The ESTA, however, does not define this term.

Limitations on Requirement to Provide Supporting Documents

Under the ESTA, an employer may not request documentation supporting the qualified need for paid sick leave unless an employee is absent for more than three days. Even then, the documentation that must be provided need not be detailed. For example, documentation signed by a healthcare professional simply indicating that earned sick time is necessary is reasonable documentation for purpose of a medically related need for leave. The employer is also responsible for the out-of-pocket costs of the employee obtaining any requested documentation.

Front-Loading Not Allowed

Unlike the PMLA, the ESTA does not allow employers to front-load an employee’s paid sick leave allowance. Instead, employers must allow employees to accrue paid sick leave as they work.

Greater Enforcement Mechanisms

Under the ESTA, employees have a private cause of action for violations of the act, with a three-year statute of limitations. There is no administrative exhaustion requirement, so employees can proceed directly to court and forgo filing a complaint with the state enforcement agency (Michigan’s Department of Licensing and Regulatory Affairs) altogether. A violation of the act could entitle the employee to reinstatement, back wages, liquidated damages (double damages), costs, and attorneys’ fees. A rebuttable presumption of retaliation arises if adverse action is taken against an employee within ninety days of the employee’s use of paid sick leave. In contrast, the PMLA did not recognize a private cause of action.

What Does the Restored, Voter-Initiated Provision of the Improved Workforce Opportunity Wage Act Mean for Employers?

In terms of the minimum wage provision, the court’s July 31, 2024, opinion (in footnote 23) provided the following minimum hourly wage schedule and tip credit under the restored original minimum wage proposal, adjusted for the passage of time between 2018 when the ballot proposal was first “adopted” and now.

• February 21, 2025: The minimum hourly wage will be $10.00 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 48 percent of the minimum wage.

• February 21, 2026: 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 percent of the minimum wage.

• February 21, 2027: 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 percent of the minimum wage.

• February 21, 2028: 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 percent of the minimum wage.

• February 21, 2029: 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.

Ogletree Deakins’ Detroit (Metro) office will continue to monitor developments with respect to Michigan’s now-restored Improved Workforce Opportunity Wage Act and Earned Sick Time Act and provide updates on the firm’s Leaves of Absence, Michigan, and Wage and Hour blogs as additional information becomes available, including any actions that may be taken by the Michigan Legislature prior to the restored laws’ effective date of February 21, 2025.

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