Court of Appeals keeps Michigan Paid Leave Act and minimum wage in place

Since last summer, the uncertain status of the Michigan Paid Medical Leave Act and the state’s minimum wage rate has left many Michigan employers on pins and needles. Their concerns stemmed from a July 2022 Michigan Court of Claims decision finding that the legislative process used to adopt provisions on paid sick leave and the minimum wage rate was unconstitutional. Employers can now breathe a major sigh of relief with the Michigan Court of Appeals ruling on January 26, 2023, that the process is constitutional and the paid sick leave and minimum wage laws can remain in effect “as is.”

Background

In 2018, a citizen-led initiative sought to allow voters to decide whether employers should be required to provide employees up to 72 hours of paid sick time and whether to raise Michigan's minimum wage well above the federal requirements for regular and tipped hourly rates. While it appeared that the initiatives would gain popular support, significant concerns existed over the impact on employers and Michigan’s business environment.  

As a result, using a procedure referred to as “adopt and amend,” the Michigan Legislature passed the referendum on the original proposed terms. However, the Republican-led legislature then amended the new laws during the same legislative session to include terms that were considered less onerous on Michigan employers.  As amended, the sick time law became the Michigan Paid Medical Leave Act (PMLA), which requires employers of 50 or more employees to allow hourly employees to accrue up to 40 hours of paid sick leave a year. The minimum wage law amendments provided for more gradual increases to the state’s minimum wage rate.

Legal Challenges

Challenges to the “adopt and amend” procedure have continued since then-Gov. Rick Snyder signed the modified laws in December 2018. Most recently, in July 2022, the Court of Claims held that the Michigan Legislature lacked the constitutional authority to amend the initiatives in the same legislative session in which they were adopted. As a result, the original initiatives with more employee-friendly provisions were ordered reinstated. The Court of Claims later issued a stay delaying reinstatement of the original terms until February 19, 2023 – in part to allow businesses time to prepare and also to allow time for an appeal to proceed.

As expected, the Court of Claims decision was promptly appealed to the Michigan Court of Appeals, which heard arguments on the case in December 2022.  With the end of the stay period approaching, anxious employers have contemplated their policy options and how to manage the increased costs in an already tough economic environment.

The Court of Appeals Decision

Employers breathed a collective sigh of relief on January 26, 2023, when the Michigan Court of Appeals issued an opinion overruling the July 2022 Court of Claims decision. The Court of Appeals held that the “adopt and amend” process meets state constitutional requirements and is, in fact permissible.  

This means that the current requirements of the Michigan Paid Leave Act providing up to 40 hours of paid sick time per year and the current Michigan minimum wage, at $10.10/hour and $3.84/hour for tipped employees as of January 1, 2023, will remain in effect and unchanged.

While the Court of Appeals decision settles this matter for the time being, employers should anticipate that this is not the end of the story for these laws. An appeal to the Michigan Supreme Court is expected.

Takeaways for Employers

With this decision, Michigan employers should remain mindful of their obligations under the PMLA.  Among other provisions, the law requires employers of 50 or more employees to:

• Allow accrual of paid medical leave at a rate of 1 hour for every 35 actual hours worked; limited to one hour per week and max of 40 hours in a benefit year or provide a lump sum of 40 hours at the beginning of a designated benefit years.
• Allow use of paid sick time for various reasons, including:
  • The employee’s or a family members’ illness, condition, treatment, or preventive care
  • A workplace closure due to a public health emergency
  • Care for child whose school or place of care has been closed by order of a public official due to a public health emergency
  • Domestic violence and sexual assault situations
• Allow employees to use the paid sick time in at least 1 hour increments and provide up to 3 days to produce medical documentation

Michigan employers should also keep an eye out for possible legislative activity related to time off benefits. The now Democrat-led Michigan legislature may be contemplating other changes that more broadly impact paid family leave benefits, such as those proliferating in other states.  

For now, however, Michigan employers can breathe a bit easier.

An employer in need of assistance in complying with state or federal leave or time off requirements, should contact a member of the McDonald Hopkins Labor & Employment Law Team.