In 2018, the Michigan Legislature passed two seemingly conflicting pieces of legislation addressing future minimum wage increases. Now that 2019 is here, many employers may be confused about what the changes are and when they become effective.
The first piece of legislation is Public Act 337 of 2018, also known as the Improved Workforce Opportunity Wage Act (IWOWA). IWOWA began as a ballot measure, but the legislature adopted that proposal and passed it as a bill in September 2018. The law will increase the hourly minimum wage rate to $12.00 through a series of annual increases through 2022. The first of these increases raises the minimum wage from $9.25 to $10.00. The law states that this change becomes effective January 1, 2019. However, under the Constitution of the State of Michigan, “No Act shall take effect until the expiration of 90 days from the end of the session at which it was passed” (unless there is a two-thirds vote by the members of each house to give immediate effect to the Act, which is not the case here). As a result, IWOWA will become effective 91 days after the adjournment of the regular 2018 legislative session, which occurred at the end of December 2018 (thus causing confusion about the effective date).
The passage of a second minimum wage act, Public Act 368 of 2018, during the lame-duck session in December 2018 added further confusion to the minimum wage landscape in Michigan. This piece of legislation amends the terms of IWOWA. It includes changes to the minimum wage rate increases in the coming years, including the hourly minimum wage for 2019, which has been reduced from $10.00 to $9.45. Public Act 368, which provides for annual increases to Michigan’s minimum hourly wage rate through 2030 (ultimately raising it to $12.05 in 2030), was approved by the governor on December 14, 2018.
Under the previous minimum wage law (Public Act 138 of 2014), minimum wage increases in 2016, 2017, and 2018 took effect January 1 of each year. Public Act 368 of 2018 does not provide an exact date as to when subsequent increases will occur. Rather, it sets forth that increases in 2019 and subsequent years will take effect “[i]n calendar year [20XX], or a subsequent calendar year as described in subsection (2)” of the Act.
Another key provision impacting the effective date of subsequent minimum wage rate increases is contained in subsection (2) of Public Act 368 of 2018. Under this provision, minimum wage increases beginning in 2019 are contingent upon the state’s unemployment rate being less than 8.5 percent for the preceding year, as determined by the United States Department of Labor’s Bureau of Labor Statistics. As of November 2018, Michigan’s unemployment rate was 3.9 percent. Thus, this provision should not affect the 2019 increase.
Under the constitutional requirement set forth above, the new minimum wage requirements set forth by Public Act 368 of 2018 cannot take effect until the 91st day after the adjournment of the 2018 regular session of the Michigan legislature, which occurred on or about December 28, 2018. Thus, the amended rates set forth in Public Act 368 of 2018 will become effective on or about March 29, 2019, a date that has been confirmed by the Wage and Hour Division (WHD) of the Michigan Department of Licensing and Regulatory Affairs.
Why would the legislature enact IWOWA as written under the ballot proposal if it intended to change it so soon thereafter? By enacting the ballot proposal as written, the legislature was able to take more control over the situation. It allowed the legislature to grant employers more time to implement the increase. (If the ballot proposal had been approved by the voters, it would have taken effect 10 days after the day of the official declaration of the vote). In addition, adopting the ballot proposal prior to the vote gave the legislature the ability to amend the law with a simple majority vote (whereas overturning a ballot referendum requires a three-fourths majority by the legislature).