Today, in a unanimous ruling, the Michigan Court of Appeals reversed the decision of the Michigan Court of Claims that would have required a minimum wage increase and expanded paid leave in February 2023. As a result, Michigan employers will not be required to change their sick leave policies or increase the minimum wage.
Diversity, equity and inclusion (DEI) compliance is at the forefront of employers’ minds. Concerns surrounding employment and hiring processes are under the microscope like never before. While many might believe they already have appropriate policies and practices in place, there are serious legal consequences for businesses found to be in violation of civil rights laws.
In 2018, groups sponsoring two ballot initiatives, the Earned Sick Time Act (“ESTA”) and the Improved Workforce Opportunity Wage Act (“IWOWA”), collected enough signatures to place the initiatives on the November 2018 ballot. The ETSA provided for mandatory paid sick leave and the IWOWA provided for incremental increases to the minimum wage. However, in September 2018, and before either initiative could be voted on, the Michigan Legislature enacted both initiatives and then immediately amended them. This has been referred to as an “adopt and amend strategy.” The two ballot initiatives were substantially modified, and key provisions were revised, after they were adopted by the Legislature.
As a result, in March 2019, the Michigan minimum wage increased to $9.45/hour, and the ETSA, which had been renamed as the Michigan Paid Medical Leave Act (“PMLA”), went into effect.
In May 2021, Mothering Justice, an advocacy group for mothers, along with others, filed a lawsuit in the Michigan Court of Claims, seeking to invalidate the PMLA and the amended IWOWA.
On July 19, 2022, the Court of Claims, in the case captioned Mothering Justice v. Nessel, held that the Michigan Legislature violated the Michigan Constitution with its adopt and amend strategy. Importantly, this ruling voided the minimum wage law and the PMLA (which had gone into effect in 2019), and reinstated the original versions of the two laws that had been placed on the ballot in 2018.
On July 20, 2022, the State of Michigan appealed the decision of the Court of Claims to the Michigan Court of Appeals.
On July 29, 2022, the Court of Claims entered an order staying the effect of its July 19, 2022 decision until Feb. 19, 2023.
On December 13, 2022, the Michigan Court of Appeals heard oral arguments. No decision was issued at that time. The parties requested an expedited opinion by February 1, 2023.
Therefore, as of now, and because of the stay entered by the Court of Claims, nothing has changed, and the status of the laws remains in a holding pattern presumably through February 19, 2023, unless a decision by the Michigan Court of Appeals is issued before that date.
It is expected, however, that the decision of the Michigan Court of Appeals, when issued, will be appealed to the Michigan Supreme Court, which means the litigation will continue. It is also anticipated that another stay will be requested, pending the ruling of the Michigan Supreme Court.
If the Court of Claims’ decision is not overturned and there is no appeal, the following will become effective on February, 20, 2023, per the ETSA:
Employees will accrue 1 hour of earned sick time for every 30 hours worked;
Employees can carry over unused sick leave from year to year;
Employers with 10 or more employees must permit employees to use up to 72 hours of paid sick time per year;
Employers with less than 10 employees must allow employees to use up to 40 hours of paid sick time per year and, if the employee accrues more than 40 hours of earned sick time in a year, up to an additional 32 hours of unpaid sick time per year;
All employees, including exempt, part-time and temporary employees, will be eligible for earned sick time, as well as employees covered by collective bargaining agreements;
Earned sick time may be used in the smaller of hourly increments or the smallest increment that the employer’s payroll system uses to account for absences;
Employers may ask for documentation supporting an employee’s need for paid sick leave only after the employee has been absent for three consecutive days. Employers would be responsible for any expenses incurred by the employee in obtaining the requested documentation;
The definition of “family member” will be significantly broader under the ETSA than the definition under the PMLA; and
Employees will have a private cause of action under the ETSA, and there is no administrative exhaustion requirement.
As to the minimum wage, under the original initiative, and per the Michigan Department of Labor and Economic Opportunity, the following would occur:
Michigan minimum wage would increase to $13.03;
The 85% rate for minors aged 16 and 17 would increase to $11.08; and
Tipped employees would be eligible for 90% of the full minimum wage, or $11.73.
Therefore, while the current laws remain in effect, employers should be aware of the changes that may become effective February 20, 2023, consider what steps they will need to take to be in compliance with the original ballot initiatives, and be prepared to implement same.
Kotz Sangster continues to monitor this situation and will provide updates as additional information becomes available.