Compliance Questions Linger After Michigan Voids State’s Minimum Wage and Paid Medical Leave Act

On July 19, 2022, the Court of Claims ordered that the current Improved Workforce Opportunity Wage Act (minimum wage) and Michigan Paid Medical Leave Act (paid leave) are void and reinstated the original ballot initiatives. However, employers do not need to overhaul their policies just yet because the ruling is stayed until February 19, 2023. Pending the outcome of appeal, these changes may not go into effect at all.

Regardless, it is important to note the significant differences between what the law was and what it could become. At this juncture, we recommend a wait-and-see approach prior to re-drafting policies or adjusting pay scales. We are always happy to assist employers that want to start evaluating or making changes that may be required. Especially in light of employees potentially having the expectation of receiving the subsequent benefits.

Since the ruling is retroactive, it is important to ensure compliance in the termination process in the event the ruling is affirmed. Taking an adverse action against an employee who may soon be covered under the stayed laws, could result in liability. For example, if an employee has exhausted sick leave under the prior paid leave law but not under the stayed ballot initiative, you should consult legal counsel prior to taking any adverse action.

Improved Workforce Opportunity Wage Act “IWOWA”

Employers who employ two (2) or more employees at any one (1) time within a calendar year are subject to the Improved Workforce Opportunity Wage Act.

The minimum hourly wage rate is $12.00 for 2022. Every October beginning in October 2022, the state treasurer shall calculate an adjusted minimum wage rate. The adjustment shall increase the minimum wage by the rate of inflation.

In order for the reduced wage rate of employees receiving gratuities to apply, employers must give employees written notice at or before the time of hire and obtain written consent from the employee subject to the agreement.

The minimum hourly wage for employees receiving gratuities:

• Beginning January 1, 2022, it shall be $9.60;
• Beginning January 1, 2023, it shall be 90% of the minimum hourly wage rate; and
• Beginning January 1, 2024, and thereafter, it shall equal the minimum hourly wage rate, effectively eliminating the reduced wages.

Gratuities should only be shared between employees that are “directly or indirectly part of the chain of service and whose duties are not primarily managerial or supervisory.”

Earned Sick Time Act “ESTA” previously, Paid Medical Leave Act “PMLA”

Definitions

An employer that employs one (1) or more individuals is subject to the Earned Sick Time Act. Sick leave previously only applied to employers with fifty (50) or more employees.  The definition of employee previously included several exemptions, such as exempt employees. There is now only one exception to the definition of employee, an employee of the United States government. The definition of a family member is expanded to include any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.

Accrual

Small Business Employers with 1 but less than 10 employees (full-time, part-time, and temporary - including through a staffing agency). Employees are entitled to accrue a minimum of one hour of earned sick time for every 30 hours worked, up to a maximum of 40 hours of paid and 32 hours of unpaid earned sick time in a year. Employers are required to pay earned sick time before unpaid sick time.

Employers with 10 or more Employees on its payroll during any 20 or more calendar workweeks in either the current or the preceding calendar year. Employees shall accrue a minimum of one hour of paid earned sick time for every 30 hours worked, up to a maximum of 72 hours of paid earned sick time per year.

Earned sick time shall carry over from year to year. There is a presumption of compliance if the employer provides the annual maximum required leave. An employer cannot require an employee to search for or secure a replacement worker as a condition for using earned sick time.

General Requirements

Additional reasons for use of earned sick time includes: meetings at a child’s school or place of care related to the child’s health or disability, or the effects of domestic violence or sexual assault on the child.

Employers are required to reinstate accrued sick leave benefits if an employee is rehired within six (6) months.

In Michigan, employers are required to maintain payroll records of the total daily hours worked by an employee, computed to the nearest tenth of an hour or other finer measure (Mich Admin Code, R 408.702(e)). Earned sick time must be recorded in the smallest increment that the employer’s payroll system uses to account for absences or use of other time.

The statute of limitations is extended from six (6) months to three (3) years. Employers must also maintain records for three (3) years.

Employees may file a civil action. Employees do not have a file an action with the Department in order to bring a civil action.

Notice Requirements

Employers must provide the following written notice to each employee at the time of hiring:

(a) The amount of earned sick time required to be provided to an employee under the Earned Sick Time Act.

(b) The employer’s choice of how to calculate a “year."

(c) The terms under which earned sick time may be used.

(d) That retaliatory personnel action by the employer against an employee for requesting or using earned sick time for which the employee is eligible is prohibited.

(e) The employee’s right to bring a civil action or file a complaint with the department for any violation of this act.

The required notice must be in English, Spanish, and any language that is the first language spoken by at least 10% of the employer’s workforce, as long as the department has translated the notice into such language.

If the need for leave is foreseeable, the employee is only required to give a maximum of seven (7) days' notice. If the need for leave is not foreseeable, employees are only required to provide leave as soon as practicable and do not have to follow the employer’s customary notice procedure.

Documentation

Documentation of absences can only be required for absences of three (3) or more consecutive days.

For purposes of domestic violence or sexual assault, an employer shall not require that the documentation explain the nature of the illness or the details of the violence. If an employer chooses to require documentation for earned sick time, the employer is responsible for paying all out-of-pocket expenses the employee incurs in obtaining the documentation. If the employee does have health insurance, the employer is responsible for paying any costs charged to the employee by the health care provider for providing the specific documentation required by the employer.