Michigan Supreme Court Reinstates Voter Initiatives on Paid Sick Leave and Mininum Wage

By Masud Labor Law

August 1, 2024

On July 31, 2024, the Michigan Supreme Court held that the Michigan Legislature violated the Michigan Constitution by “adopting and amending” two ballot initiatives from 2018; the Earned Sick Time Act (“ETSA”) and the Improved Workforce Opportunity and Wage Act (“IWOWA”).  The ETSA sought to provide employees of businesses with 10 or more employees with 72 hours of paid sick leave per year, and employees of business with 1 to 9 employees with 40 hours of paid sick leave per year.  The IWOWA sought to raise the minimum wage.  

Based on the number of signatures they received, the ETSA and the IWOWA were certified and submitted to the Legislature.  The Legislature then “adopted and amended” both initiatives.  Through amendment, the ETSA became the Paid Medical Leave Act (“PMLA”), requiring employers with 50 or more employees to provide certain employees with 40 hours of paid sick leave per year.  The IWOWA retained its name, but the Legislature amended the IWOWA to slow down the rate at which the minimum wage would increase.  Both the PMLA and the IWOWA, as “adopted and amended” by the Legislature, have been in effect since 2019.  

In its July 31 opinion, the Michigan Supreme Court held that the Legislature actions violated the Michigan Constitution.  Specifically, the Supreme Court held that the Constitution prohibited the Legislature from adopting and amending a ballot initiative in the same legislative session.  Accordingly, the Supreme Court ordered both the ETSA and the IWOWA to take effect as they originally appeared on their respective ballot initiatives.  

Pursuant to the Supreme Court’s decision, both the ETSA and the unamended IWOWA will take effect on February 21, 2025.  As of that date, the ETSA, among other things, will:

•    Require employers with 1 to 9 employees to allow employees to take up to 40 hours of accrued paid sick time per year, and up to an additional 32 hours of unpaid sick time per year.

•    Require Employers with 10 or more employees to allow employees to take up to 72 hours of accrued paid sick time per year.

•    Require that employees accrue earned sick time at a rate of not less than 1 hour for every 30 hours worked (as opposed to 1 hour for every 35 hours worked under the PMLA).  It is unclear as to whether the ETSA allows employers to “front-load” paid sick time, as is expressly allowed by the PMLA.  

•    Prohibit employers from asking for documentation from an employee to support a covered absence until the employee is absent for at least 3 consecutive days.

•    Make practically all employees eligible for paid sick leave, including part-time employees and FLSA-exempt employees (the PMLA excluded from coverage part-time, exempt, and variable employees, among others).

•    Require that all accrued earned sick time be allowed to carry over from year to year (although employers are not required to pay employees out for unused accrued sick time).

•    Permit an employee to bring a private cause of action for a violation of the ETSA (the PMLA does not allow private causes of action).  

The unamended IWOWA will also take effect on February 21, 2025.  As of that date, the state minimum wage will be $10.00 per hour plus a not yet calculated inflation adjustment made by the state treasurer.  The minimum wage will then increase annually, reaching $12.00 per hour on February 21, 2028, plus the state treasurer’s adjustment for inflation.  Thereafter, the minimum wage will be calculated annually by the state treasurer.  The tip credit will be 48% of minimum wage effective February 21, 2025, gradually increasing until it is entirely phased out on February 21, 2029.  

You are encouraged to contact one of the attorneys at Masud Labor Law Group to discuss your own circumstances, and to revise your pay structures and paid leave policies to meet the requirements of unamended IWOWA and the ETSA, both of which go into effect on February 21, 2025.  In the meantime, we will continue to monitor developments in this area and provide updates as warranted.  

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