Michigan Supreme Court Reinstates Expanded Paid Sick Leave and Minimum Wage Requirements

Capping off a saga that began in fall 2018, the Michigan Supreme Court, in its 4-3 decision in Mothering Justice v. Attorney General, overturned the Michigan Court of Appeals and restored the originally adopted versions of the Improved Workforce Opportunity Wage Act (WOWA) and the Earned Sick Time Act (ESTA). This move repeals the adoption of the Paid Medical Leave Act (PMLA), which had been adopted in place of the latter.

This decision against the state legislature, and the remedy crafted to restore the prior laws, is not only monumental, but also shepherds in substantial new requirements for employers across the state.

Decisions of the Court of Claims and Court of Appeals

In September 2018, the Michigan Legislature adopted the WOWA and ESTA ballot initiatives, in lieu of placing them on the ballot in that year’s elections. However, in December 2018, and during the same legislative session, the legislature amended both laws, attempting to strike a balance between employee needs and the obligation of employers.

In May 2021, Mothering Justice – an advocacy group – filed a lawsuit in the Michigan Court of Claims seeking to invalidate the Michigan Legislature’s amendments to each of the two initiatives. On July 19, 2022, the Court of Claims initially ruled in Mothering Justice’s favor by holding that the Michigan Legislature could not “adopt and amend” a ballot initiative in the same legislative session because it only had three choices when presented with a ballot initiative:

• Enact them without change prior to the election
• Let the voters decide through the ballot box
• Propose an alternative prior to the election and have voters decide on the ballot initiative and the legislature’s proposed alternative

The State of Michigan appealed the Court of Claims’ ruling to the Michigan Court of Appeals. On Jan. 26, 2023, the Michigan Court of Appeals overturned the Court of Claims in an expedited ruling, restoring the amended versions of each law.

In reversing the Court of Appeals decision, the Michigan Supreme Court scrapped the amended versions of each initiative, reinstating the original versions in a manner consistent with the initial decision of the Court of Claims – holding the legislature had “three – and only three – options upon receiving a valid initiative petition.”

In ruling the legislature’s “amend and adopt” scheme to be unconstitutional, the Supreme Court’s remedy held the ballot initiatives as originally adopted are to be put back in effect, ushering in major changes for paid medical leave and the minimum wage under state law. Under the Court’s ruling, compliance is required by Feb. 21, 2025.

Restoration of the WOWA and Immediate Adjustments for Inflation

The changes to Michigan’s minimum wage included setting the general minimum hourly wage to $10 an hour, with a gradual increase over the next four years and a further adjustment after 2022 to account for inflation, as determined by the state treasurer. Additionally, the minimum wage rate for tipped employees was to be adjusted gradually to equal the general minimum wage.

The Supreme Court maintained this schedule of gradual increases, but modified the deadlines to go into effect 205 days after the publication of its decision, setting forth a schedule for adjustment for 2025 through 2028, and beginning general inflation adjustments in 2029.

Notably, however, the Supreme Court’s remedy requires immediate adjustment to account for inflation since 2019 for all wage requirements, even those set to go into effect in 2025 – meaning wage rates will be significantly higher than the original $10 an hour minimum and the current minimum of $10.33 per hour.

This is especially true for individuals working under Michigan’s special rules for tipped employees, whose wages will need to be increased to 48 percent of the new minimum wage by February 2025 and 100 percent of the minimum wage by February 2029.

Repeal of the PMLA and Return of the ESTA’s Expansive Paid Sick Leave

The invalidation of the PMLA and reinstatement of the ESTA is also substantial. Reverting to the ESTA increases the required allotment of paid sick time to 72 hours for large employers and a combination of 40 hours paid and 32 hours unpaid leave for small employers. All employees – without exemption (i.e., no small business exception) – will be entitled to paid sick leave regardless of their status (full-time, part-time, exempt, non-exempt, seasonal, etc.).

Additionally, the decision does away with most rights for employers to require leave documentation – unless more than three consecutive days will be taken off – and requires employers to foot the cost of any out-of-pocket costs associated with providing documentation, meaning employers could be on the hook for co-pays required to obtain medical certifications.

Notably, the remedies provided under ESTA are also restored, meaning any employee may bring a private right of action for any violation of the act, including reinstatement, attorneys’ fees, and doubled back pay as liquidated damages.

The ESTA, in stark contrast to the PMLA, contains no additional guidance or limitations on the use, accrual, carryover, or other aspects of an employer’s administration of paid sick leave for its employees. In addition to limiting employer and employee coverage, the PMLA also limited usage, established accrual caps, accounted for frontloading and carryover options, and dictated the methods of calculation concerning payment for leave. Such provisions are not included in the ESTA, and present open questions for employers in ensuring compliance with the law.

Key Takeaways

While the full impact of the Supreme Court’s decision is yet to be fully appreciated, one thing is clear: The restoration of the WOWA and ESTA present significant requirements and likely financial strain for employers across Michigan. While awaiting the official minimum wage requirement, dependent on the adjustments for inflation, and any potential guidance from the Department of Labor and Economic Opportunity concerning the ESTA, Michigan employers should start preparing for compliance with each law well in advance of the court’s Feb. 21, 2025, effective date. 

For more information, please contact the Barnes & Thornburg attorney with whom you work or Grant Pecor at 616-742-3911 or gpecor@btlaw.com or Aaron Vance at 317-261-7956 or aaron.vance@btlaw.com.

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