Michigan Supreme Court Rules “Adopt and Amend” Unconstitutional

This week, we are taking a second (or two) to learn about the recent Michigan Supreme Court decision dealing with the Michigan legislature’s adopted ballot proposal language, which was subsequently amended in the same legislative session. The ballot proposals that were adopted and subsequently amended were dealing with paid sick leave and minimum wage in the state of Michigan.

The Supreme Court ruled on July 31 that these actions by the legislature were unconstitutional and therefore the original language that was adopted by the legislature prior to the amendment is what will be reinstated. Here is what you need to know about these reinstated requirements and how this ruling affects you as an employer.

What does all this mean?

The Michigan Supreme Court has reinstated the originally enacted versions of PA 337 and 338 of 2018 and the requirements for employers that were included therein. This means that credit unions, as employers, will have to adhere to the new minimum wage and paid-sick-leave standards. The Court also goes to great lengths to express that employers are not liable for relying on the legislative actions and what was required under the amended language.

What did PA 337 and 338 of 2018 require?

For our purposes, we will not discuss the changes for tipped employees that are laid out in the Court’s opinion as they are not applicable here. The original enacted text of PA 337 (the “Improved Workforce Opportunity Wage Act”) would have phased in a new hourly minimum wage rate for the state of Michigan, starting at $10.00 per hour in 2019 and incrementally increasing to $12.00 in 2022. After this, the state treasurer was required to adjust the minimum hourly wage yearly, based on inflation.

PA 338 (the “Earned Sick Time Act”) expanded the eligibility, accrual, and use of paid sick leave for employees based on employer size.

Now what?

Minimum wage. The Court specifically stated that the minimum wage will incrementally increase beginning in 2025. The state treasurer is responsible for determining what the inflation-adjusted minimum hourly wage rate will be. The new phase-in period for these increases will be from 2025 to 2028 (previously 2019 to 2022). In 2029, the state treasurer will continue to adjust the minimum hourly wage yearly based on inflation as dictated in the original text of the legislation. The state treasurer is required to post the new minimum wage by Nov. 1 of the year it is calculated. So, as of Feb. 21, 2025, the minimum hourly wage will be $10.00 plus the state treasurer’s inflation adjustment, which will use July 31, 2024 as the endpoint for that inflation calculation (date of the Court’s opinion).

Date	Amount
February 21, 2025	$10.00 per hour + Inflation Adjustment
February 21, 2026	$10.65 per hour + inflation adjustment
February 21, 2027	$11.35 per hour + inflation adjustment
February 21, 2028	$12.00 per hour + inflation adjustment
February 21, 2029	The state treasurer will calculate the inflation-adjusted minimum wage as set forth in PA 337 of 2018.

 

*Inflation adjustment is to be calculated by the state treasurer using July 31, 2024 as the end point for the calculation.

Paid sick leave. On the highest level, the “Earned Sick Time Act” requires employers with ten or more employees to allow employees to use up to 72 hours of paid sick leave on an annual basis, starting on Feb. 21, 2025. Employers with less than ten employees are required to allow employees to accrue up to 40 hours of paid sick leave annually and can provide for up to 32 hours of additional unpaid time to be accrued. Also, the law will require that employees (including those working part-time) must accrue one hour of sick leave for every 30 hours worked.

When does this take effect?

The new requirements under the law will go into effect 205 days after July 31, 2024 (the date the court issued their opinion). There will be a revised schedule that links the gradual phase-in of the minimum-wage increases to the same annual schedules as originally proposed, but set into the future, and accounting for inflation. That means that the Wage Act and the Earned Sick Time Act will go into effect on Feb. 21, 2025.

To sum it up, employers are going to need to make some significant changes as a result of this decision by the Supreme Court. Review your current paid sick time policies and make any necessary changes to come into compliance with the law by Feb. 21, 2025. Once the state treasurer has determined what the minimum wage will be (on or before Nov. 1, 2024), make any necessary changes to ensure your hourly employees are at or exceeding the required minimum amount.

There is a silver lining here, though. Because the legislature adopted the original initiatives instead of letting them go through to the ballot, future legislatures are not bound to Michigan’s ¾ supermajority vote requirement to amend “initiated laws.” As implementation proceeds, the “normal” legislative process should apply to any future attempts to address issues in the language of these statutes.

As always, this article is intended for general information only and does not constitute legal advice. If you have any questions about this topic and/or the possible implications, you should contact your attorney for advice.

Hope to see you next time when we take a second to discuss another legal topic in the financial services industry!

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