Since 2019, employers and employees in Michigan have been waiting to learn the fate of two ballot initiatives that, respectively, increased the minimum wage and required all Michigan employers — regardless of size — to provide paid sick leave to their employees. After the legislature adopted both petitions in 2018 (the “Wage Act” and the “Earned Sick Time Act”) without change, the legislature then took the unprecedented action of amending these two acts, essentially adopting a watered-down version of both. The constitutionality of the legislature’s actions has been winding its way through the Michigan court system since then.

On July 31, 2024, the Michigan Supreme Court issued a decision reinstating the ballot initiative that governs employers’ payment of minimum wage and provision of paid sick leave to its employees. The effect of this ruling is to increase the minimum wage in Michigan and increase employers’ obligations to provide paid sick leave to their employees. The original ballot measures, originally adopted in 2018, will go into effect on Feb. 21, 2025, unless the legislature makes changes that are approved by the Governor.

General Background

In September 2018, the Michigan legislature received ballot initiative petitions, after the groups who sponsored them had obtained the required number of signatures to them. One petition related to minimum wage (the “Wage Act”) called for the increase of the state’s minimum wage to $12.00 per hour by 2022 and provided annual increases thereafter tied to inflation. The Wage Act also phased out the state’s existing tip credit provisions by 2024. The second petition related to paid sick leave, requiring Michigan employers to accrue paid sick time for employees and allow them to use up to 72 hours per year of earned sick time (the “Earned Sick Time Act”). The Earned Sick Leave Act required the first 40 hours per year to be paid. Whether the remaining 32 hours were paid depended on the size of the employer. Smaller employers having less than 10 employees still had to provide sick leave but were not required to pay for those additional 32 hours.

After receiving the petitions, the legislature adopted both the Wage Act and the Earned Sick Time Act into law without changes. Accordingly, neither of the proposals appeared on the ballot in 2018. Then, in December 2018, during the same legislative session, the legislature voted to amend both the Wage Act and the Earned Sick Leave Act with a simple majority vote, which was later signed by Governor Snyder. This action was then coined an “adopt and amend” process. Employers in Michigan have been following the dictates of both the Amended Wage Act and the Amended Earned Sick Leave Act (called the “Paid Medical Leave Act”) as they relate to the issues of overtime and paid sick leave since their effective date of March 29, 2019.

Lengthy litigation ensued. Specifically, the constitutionality of the legislature’s adopt and amend strategy has been the subject of a legal challenge for the last six years. The challengers argued that the legislature could not adopt and amend an initiative proposal in the same legislative session, and the legislature’s act in doing so was an unconstitutional infringement on the people’s initiative power granted to them under the Michigan State Constitution.

On July 31, 2024, the Michigan Supreme Court ultimately agreed with the challengers, holding that the legislature’s adoption of the petitions and then amending them in the same legislative session was unconstitutional. Accordingly, the Amended Wage Act and Amended Earned Sick Time Act (Paid Medical Leave Act) are void ab initio. While the legislature acted unconstitutionally when it enacted the two amended acts, it did not act unconstitutionally when it adopted the original petitions without change. As such, the Michigan Supreme Court allowed the originally enacted laws to stand while accounting for the passage of time.

Since the initiatives provided employers with 205 days between the laws’ enactment and their effective dates, the Michigan Supreme Court held that the Wage Act and the Earned Sick Time Act, as originally adopted, will be effective 205 days after the Supreme Court’s publication date—or by Feb. 21, 2025. The Michigan Supreme Court fashioned its remedy, accounting for the passage of time.

Employers must now prepare for the following changes to minimum wage increases and the provision of paid sick time for all employees:

Minimum Wage

The Wage Act proposed significant changes in Michigan’s minimum wage — currently $10.33 per hour — and overtime laws.[1] Under the original ballot initiatives, in 2019, the minimum wage would have increased to $10.00 per hour and then increased to the following levels: $10.65 in 2020, $11.35 in 2021, and $12.00 in 2022. After 2022, the state treasurer was tasked with increasing the minimum wage by the rate of inflation based on a formula set forth in the statute.

The Wage Act also proposed significant changes to the minimum wage for employees who receive gratuities in the course of employment, such as servers, which is currently $3.93 per hour — or 38% of the state’s minimum wage. Under the Wage Act, the minimum hourly rate for a “tipped” employee would have been raised incrementally each year — 48% of the regular minimum wage in 2019, 60% in 2020, 70% in 2021, 80% in 2022, and 90% in 2023. Beginning Jan. 1, 2024, and thereafter, the minimum hourly wage rate for tipped employees would be the same for all employees.

The dates for the gradual increases set forth in the Wage Act have since passed. Fortunately, the court did not order that the minimum wage increase instantly to what it would have been had the initiative remained intact. To fashion an appropriate remedy that reflects the original initiative’s purpose, the court held that a gradual phase-in mirroring the structure of the original Wage Act is most consistent with its intent. As such, the court adopted a remedy that links wage increases to the same annual schedule as originally proposed in 2018, but set into the future, starting on the effective date of its opinion.

Because six years passed since the legislature adopted the Wage Act, the state treasurer must use the opinion’s publication date to calculate the inflation-adjusted rates for the minimum-hourly wage prescriptions provided in the Wage Act. Thereafter, the state treasurer will calculate the inflation-adjusted minimum wage as described. Since the minimum wage increase will go into effect in 2025, the years 2019 through 2022 will be treated as the years 2025 to 2028, plus the necessary inflation adjustment. The inflation-adjusted minimum wage will commence in 2029 (originally set for 2023).

This results in the following minimum wages:

Effective Date	Minimum Hourly Rate*	Minimum Tipped Wage
Feb. 21, 2025	$10.00 per hour + adjustment.	48% of the minimum wage.
Feb. 21, 2026	$10.65 per hour + adjustment.	60% of the minimum wage.
Feb. 21, 2027	$11.35 per hour + adjustment.	70% of the minimum wage.
Feb. 21, 2028	$12.00 per hour + adjustment.	80% of the minimum wage.
Feb. 21, 2029	Inflation-adjusted minimum wage calculated by state treasurer as set forth in the statute.	Same as minimum wage.

*All the minimum hourly rates are subject to the state treasurer’s inflation adjustment.

The state treasurer is to publish those amounts by Nov. 1 of the year it is calculated, to be effective on the dates identified above.

Paid Sick Leave

Since 2019, employers have been operating under the Paid Medical Leave Act, which did provide for paid medical leave for certain large employers (having 50+ employees). However, under the original 2018 Earned Sick Leave Act, the requirements would have been much broader and far reaching, impacting all employers regardless of size. Thus, smaller employers, which were previously not subject to the statute, will no longer be exempt from the paid sick leave law. Further, the amount of sick time will increase when the original Earned Sick Leave Act becomes effective.

A comparison of the two laws is helpful for employers to understand the impending changes:

 

	Voided Law	Original/Applicable Law on Feb. 21, 2025
Name	Paid Medical Leave Act.	Earned Sick Time Act.
Covered employers	Those who employ 50 or more individuals.	All employers with at least one employee.
Eligible employees	Non-exempt, full-time employees, subject to some additional statutory exceptions.	All employees, except for those working for the U.S. government, including part-time, temporary, exempt, and non-exempt employees.
Accrual rate	One hour of paid medical leave for every 35 hours worked. Can limit accrual to one hour per calendar week. Front loading of 40 hours allowed.	One hour of paid sick leave for every 30 hours worked. The statute does allow for accrual at a faster rate, which implicitly may permit front loading.
Accrual cap	Can limit accrual to 40 hours of paid medical leave per benefit year.	– Can limit accrual to 72 hours of earned sick time per year. – For large employers (those with more than 10 employees), all 72 hours must be paid. For small employers with less than 10 employees, only 40 hours must be paid, but the remaining 32 hours can be taken unpaid.
Roll-over requirement	Must allow employee to carry over up to 40 hours of unused paid medical leave into the next benefit year unless employer “front loads” the full 40 hours at the beginning of a benefit year.	All earned sick time rolls over to the next year, subject to the usage cap, which may not be lower than 72 hours.
Use requirement	Used in one hour increments, unless different increments exist in handbook or other policy document.	The smaller of hourly increments or the smallest increment used by employer’s payroll system for absences or use of other time.
Documentation	Employee obligated to comply with employer usual and customary notices, procedural, and documentation requirements.	For earned sick time of more than three consecutive days, an employer may require reasonable documentation that the earned sick time has been used for an appropriate purpose.
Enforcement	By department.	By department and by private right of action within three years of the alleged violation.
Payout Upon Termination of Relationship	Not required. Rehired employees are not entitled to retain any previously accrued but unused paid medical leave.	Not required. Employees rehired within six months are entitled to the bank of accrued earned sick time at the time of termination.

The Earned Sick Time Act also creates a “rebuttable presumption” of retaliation if adverse action is taken against an employee within 90 days of various “protected activity,” including if an employee informs anyone of their rights under the Earned Sick Time Act.

Takeaway for Employers

While the court’s ruling reinstates the original Wage Act and the Earned Sick Time Act initiatives effective Feb. 21, 2025, the court clarified that the legislature is free to amend the laws “as it sees fit” at a later session. As the initiatives were not adopted by the people at the polls, the legislature would only need a simple majority to amend these changes. Taft will continue to monitor any additional developments in this area.

In the 205 days before the original laws become effective, all employers need to be aware of what is required, regardless of industry, employee count, or benefits offered today. Employers should ensure minimum wage compliance and update paid sick leave policies to ensure compliance. Posters and notices will need to be updated, and employers must provide a notice of rights to new hires and current employees.

Taft employment attorneys are available to assist companies in evaluating the impact of this decision on their business and whether changes are necessary.

 

[1] The legislature’s amendments to the Wage Act delayed the increase in the minimum wage until 2030. The minimum wage was not set to exceed $12.00 per hour until 2030.