Publication date: August 16, 2024

 

What’s changing?

On July 31, 2024, the Michigan Supreme Court issued a ruling that settled a 2-year long dispute. This ruling voids the state’s current minimum wage law and the Michigan Paid Medical Leave Act and reinstates the Improved Workforce Opportunity Wage Act (the Wage Act) and Earned Sick Time Act (ESTA), which were originally adopted by the Michigan Legislature in 2018. In other words, big changes are coming to Michigan’s minimum wage, tip credit, and paid sick time effective February 21, 2025. (These changes are NOT retroactive).

While there are still a lot of unknowns, below is what you need to know TODAY about the changes to come and when to expect them. We are cautiously optimistic that LARA (the Michigan agency that is tasked with enforcement) will issue regulatory guidance prior to 2/24/25 to address many gaps and uncertainties that exist today.

Minimum Wage and Tip Credit

Timeline	Minimum Wage	Tipped Minimum Wage
Current	$10.33/hr.	$3.93/hr.
Feb. 21, 2025	$10.00/hr. + inflation adjustment (TBD)	48% of the minimum wage
Feb. 21, 2026	$10.65/hr. + inflation adjustment (TBD)	60% of the minimum wage
Feb. 21, 2027	$11.35/hr. + inflation adjustment (TBD)	70% of the minimum wage
Feb. 21, 2028	$12.00/hr. + inflation adjustment (TBD)	80% of the minimum wage
Feb. 21, 2029	Calculated annually by the state treasurer	Same as regular minimum wage (tip credit will no longer be permitted)

Earned Sick Leave

Element	Current - PMLA	Future - ESTA Feb. 21, 2025
Covered Employers	Only employers with 50 or more employees.	All private employers with 1 or more employees.
Employees excluded from paid sick leave requirement	Salaried employees Seasonal employees Temporary employees Independent contractors Employees working less than 25 hours/week Employees covered under a collective bargaining agreement	No type of employee “in this state” or even independent contractor is explicitly excluded.
Accrual rate	1 hour paid sick leave for every 35 hours of work.	1 hour paid sick leave for every 30 hours worked (actual time worked so things like holiday pay are excluded)
Accrual caps	Employers can cap accruals to 1 hour per week and 40 hours per year.	No weekly or annual cap on paid sick leave accrual. Caps only exist on use.
Leave use	Used in 1 hour increments or other amount if the employer has a written policy.	Employers must allow use of sick leave increments no greater than 1 hour or the smallest time amount tracked in their payroll system, whichever is less.
Rate of pay	Greater of their regular hourly wage or base wage, or the minimum wage, excluding OT, holiday, bonus, commission, piece-rate or gratuity pay.	“Normal hourly wage”. For those with varying rates of pay, employers should refer to the pay period immediately before the employee uses paid sick leave.
Waiting periods	Employees may use paid medical leave as it is accrued, but employers may require employees to wait until 90 days after employment before using accrued paid medical leave.	Employees may use paid sick leave as it is accrued, but employers may require employees to wait until 90 days after employment before using accrued paid sick leave.
Alternatives to accrual	Employers may provide 40 hours of paid sick leave at the beginning of the year instead of accruing. New hires have a prorated amount.	Frontloading is likely (but not explicitly) permitted. Regardless, employers still need to track hours worked in case employees earn in excess of what was frontloaded.
Intersection with PTO	If an employer offers 40 hours of paid leave, there is a presumption of compliance.	If an employer offers paid leave (ie. PTO, vacation, personal days, or PTO) that complies with the law (i.e., same amounts, same purposes, same conditions and accrued at a rate equal to or greater than what law requires), there is a presumption of compliance
Advance Notice	Employees should follow the employers request processes.	Foreseeable Absence: An employer may require an employee to provide advance notice, not to exceed 7 days before the date leave will begin. Unforeseeable Absence: An employer may require an employee to give notice as soon as practicable. Employees are required to follow employers procedures for call-ins.
Paid sick leave usage cap	Limited to 40 hours/year	Employers with less than 10 employees (counting to 10 may include owners, temps and others) Employees can use up to 40 hours of paid sick leave and 32 unpaid hours of unpaid sick leave per leave year Employers with more than 10 employees: Must allow employees to use up to 72 hours of paid sick leave per leave year
Carryover of paid sick leave	Employees can carry over paid sick leave; however, employers are not required to allow the use of more than 40 hours of paid sick leave per year.	Must allow employees to carry over any unused paid sick leave from prior years. There is no cap on carryover, only use.
Individuals covered for whom employees can use paid sick leave	Spouse, child, parents, grandparents, siblings, and anyone who acted as a parent when the employee was a minor.	← In addition to this list, also includes Domestic partners Others who are related by blood “Affinity” in a way equivalent to being a family member.
Reasons for taking paid sick leave	Illness of employee or employee’s family member Medical diagnosis, care, or treatment of the employee or employee’s family member (including preventative care services) Closure of employee’s workplace due to public health emergency Care for child whose school or daycare has been closed due to public health emergency Absences related to domestic violence or sexual assault	← In addition to this list, also includes Meetings at a child’s school or place of care related to the child’s health, disability, or effects of domestic violence or sexual assault on the child Mental or physical health care or services
Documentation	Employers may request documentation to support paying paid sick leave.	Employers may only request documentation if the employee is absent more than 3 consecutive days. Employers must pay for any out-of-pocket expenses incurred to obtain the documentation. Employers may not require that the documentation explains the nature of the illness or details of violence. Documentation can be provided by any healthcare provider or can be any type of documentation that seems to support the reason for the leave including police reports.
Termination	Employers are not required to pay out unused paid sick leave upon termination of employment.	Employers are not required to pay out unused paid sick leave upon termination of employment.
Rehire	Employers are not required to reinstate unused paid sick leave upon rehire.	Employers are required to reinstate unused paid sick leave upon rehire if an employee is rehired within 6 months of termination, without requiring another 90 day waiting period.
Retaliation	No retaliation provisions.	Retaliation against employees for exercising their rights under this statute is strictly prohibited. And the burden of proof falls onto the employer. As with other retaliation charges, there is a 3 year statute of limitations. In short, if an employee complains that a violation of this statute occurred and the employer takes an adverse action (ex. discipline) against that employee within 90-days of the complaint, it will be presumed to be retaliation and the employer has the responsibility to prove it was NOT. The complaint can be made to either an internal (ex. HR) or external (ex. DOL) party. Additionally, employers cannot penalize use of this protected time off under their attendance policies. For example, “No fault” policies that apply points regardless of whether or not the time is excused.
Required postings or notices	Poster required.	Posters and a written notice (in English, Spanish, and any language that is the first language spoken by at least 10% of the employer’s workforce) to new hires and current employees are required. LARA should provide the poster.
Record retention	1 year	3 years. If employers fail to maintain adequate records, the DOl will assume that the employers violated the Act.
Penalties for non-compliance	“If the employer violates this act, payment of the paid medical leave improperly withheld will be requested and penalties may be imposed. An employer who fails to provide paid medical leave is subject to a fine of not more than a $1,000.00.”	Payment for sick time Back pay and benefits Reinstatement/front pay and benefits Liquidated damages (2x actual) Attorney fees (both sides)

All of this information can feel, understandably, overwhelming. Our team at Cooper People Group is right there in the trenches with you and are navigating these changes. Here is where we recommend starting out to ensure your business will be in compliance by February 21, 2025.

What to do NOW

• Pause, Learn & Listen | Don’t panic. Nothing is changing today. And things could still change once the legislature is back in session and when LARA publishes additional guidance so taking immediate steps today could be counterproductive. The best thing to do now is to read and understand the key provisions.
• Prep | Determine what applies to your organization and what doesn’t. Then start a list of possible ideas to address each impact. Focus areas may include:
  • • Financial impact
    • Integration with other employee benefits
    • Cultural/Employee experience
    • Policy/handbook updates
    • Technology
    • Reporting and recordkeeping
    • Communications
• Post your questions here, subscribe to our new blog series by signing up to receive our notices and newsletters and follow us on LinkedIn and Facebook to learn the answer! (Don’t worry, we’ll post our Q & A’s anonymously).

What to do SOON

• Define Timing | Consider the best timeframe for implementing changes in your organization (e.g., calendar year, benefit year, or specific dates like February 21, 2025).
• Understand Your Tools and Tech | Know what you have today; explore options (with or without payroll/HRIS vendors) to consider how new accruals and tracking could work.
• Coordinate | Consider how this will intersect with other policies and benefits like PTO, FMLA, short-term disability, etc. in your organization.

What to do LATER

• Update policies and procedures | Updating policies, tracking tools, pay rates, offer letters, etc. come later, after we provide the legislators time to work through the details. Don’t be in a rush to implement too much, too soon..
• Communicate | Once the legislation is fully defined, you can develop and execute a clear change management and internal communications plan. Bring your managers in early before rolling the changes in policies and practices out to the rest of the team. They will need to be well-trained in advance as they are often the first enforcers of the ESTA.

How CPG can help

Navigating the complexities of Michigan’s The Improved Workforce Opportunity Wage Act and Earned Sick Time Act changes will be challenging for many Michigan employers. We understand the difficulties you face as you strive to comply with new regulations while maintaining a positive and productive work environment. We’re right there with you, providing guidance every step of the way.

From reviewing and adjusting your wage scales and time off policies, to developing and launching communications, to navigating the intersection of other benefit and leave programs, to training your front line leaders how to comply, our team will be there to walk alongside you through the implementation of these changes. Together, we can navigate the ever-changing world of work and turn these challenges into opportunities for growth and improvement.