Michigan Supreme Court decision shakes up pay and paid leave requirements

On July 31, 2024, in a much-anticipated decision in the case of Mothering Justice v. Nessel, the Michigan Supreme Court restored laws that will increase Michigan’s minimum wage, eventually eliminate tip credit, and expand mandatory paid sick leave.

In 2018, two ballot proposals received sufficient signatures to allow Michigan voters the opportunity to weigh in on laws related to the state’s minimum wage and mandatory paid sick leave. The ballot proposals would have raised Michigan minimum wage to $12 per hour by 2022 and required paid sick leave for most employees in Michigan. However, instead of letting voters consider the two ballot proposals, Michigan’s state legislature utilized a strategy called “adopt and amend,” through which the legislature voted the proposals into law prior to the election and amended them shortly after the election, but in the same legislative session. This “adopt and amend” approach slowed the increase in minimum wage to  $12.05 per hour by 2030 .

A number of groups and individuals sought court intervention related the legislature’s actions and pursued litigation against the Michigan Attorney General’s Office and the state of Michigan. The case first went to the Court of Claims, then the Court of Appeals, and finally, the Michigan Supreme Court.

On July 31, 2024, the Michigan Supreme Court held that the legislature’s “adopt and amend” strategy violated the Michigan Constitution. Because of this decision, both ballot proposals will be reinstated as originally adopted.  As a result,  three main changes are on Michigan’s horizon beginning on February 21, 2025:

Minimum Wage: The minimum wage in Michigan will increase to $10.00 per hour on February 21, 2025 and increase in 2026, 2027, and 2028 to $10.65, $11.35, and $12.00, respectively. Beginning in 2029, the minimum wage will be calculated annually based on inflation.

Tip Credits: In 2025, tipped workers must be paid at least 48% of the minimum wage. This percentage will increase annually to at least 60% in 2026, 70% in 2027, and 80% in 2028. Starting in 2029, Michigan will no longer have a tipped credit and tipped workers will receive at least minimum wage with tips as additional income.

Mandatory Paid Sick Leave: The Earned Sick Time Act will require employers in Michigan with 10 or more employees to provide employees 72 hours of paid sick leave annually and all employees, even part-time, seasonal, or temporary, will receive one hour of paid medical leave for every 30 hours worked. Employers with less than 10 employees must provide up to 40 hours of paid sick leave and are permitted to provide the remaining 32 hours of sick leave on an unpaid basis.

The laws, as originally drafted, will go into effect 205 days after the Court’s decision, which provides for a February 21, 2025 effective date.  While the Michigan Supreme Court’s decision is not subject to appeal, the state legislature could now take action to amend the laws as it is well beyond the original session in which they were adopted. This means potentially more uncertainty for Michigan employers as they wait to see if the legislature will take any action.

Employers that implemented wage and paid sick time policies to meet the legislature’s modified  requirements in 2018 will now need to re-visit those policies to align them with the original, broader benefit terms of the ballot proposals.   The employment lawyers at McDonald Hopkins are available to discuss these impending changes, to assist employers in developing compliance strategies, and to review and modify wage and tip payment policies as well as sick leave policies.

Please reach out to your McDonald Hopkins lawyer for assistance.