In late January 2023, The Michigan Court of Appeals blocked the reinstatement of the 2018 Earned Sick Time Act (ESTA) and the Improved Workforce Opportunity Act (IWOWA), halting the adoption of a $13.03 hourly minimum wage rate ($11.73 tipped minimum wage) in Michigan. This decision, which overturns a July 2022 Court of Claims ruling, also keeps the Paid Medical Leave Act (PMLA) intact, requiring only 40 hours of paid leave among employers with 50 or more employees. In contrast, the 2018 version of the ESTA would require all employers with more than 10 employees to provide 72 hours of paid leave and employers with less than 10 employees to provide 72 total hours of leave (40 paid).
Although reinstatement of the 2018 ESTA and IWOWA is now in legal limbo, it is extremely likely that the Court of Appeals decision will be appealed and heard by the Michigan Supreme Court in 2023. Employers in Michigan should be proactive in understanding potential changes in the event that the appeal is successful with the Michigan Supreme Court. It’s also possible that the Michigan Legislature could introduce a new paid sick leave law that includes some of the same provisions of the 2018 ESTA before the Michigan Supreme Court rules on the expected appeal in 2023 or 2024.
In this article, we’ll outline the steps that employers in Michigan should take to prepare for these potential regulatory changes and which paid leave and minimum wage updates could be required state-wide.
How State Minimum Wage Would be Affected
Assuming the Michigan Supreme Court overturns the Court of Appeals decision and reinstates 2018 ESTA and IWOWA standards, hourly minimum wage will increase by nearly three dollars to $13.03, with an even more significant jump for tipped minimum wage to $11.73. It’s possible that the tipped minimum wage could be even higher if the Michigan Supreme Court ruling is issued in 2024, when a single, state-wide minimum wage is set to be adopted across industries (according to 2018 IWOWA regulations).
Although employers can (for now) still pay their tipped employees $3.81 hourly if tips raise their overall income to the state’s $10.10 hourly minimum, a successful Supreme Court appeal could permanently change this tip credit policy and significantly impact the restaurant, hospitality and food service industries.
How Paid Leave and Sick Day Policies Would Be Affected
In the event of a successful Michigan Supreme Court appeal, paid leave and sick leave requirements in Michigan would be noticeably transformed. Whether a ruling occurs in 2023 or 2024, reinstated ESTA and IWOWA regulations from 2018 would mean all of the following for Michigan employers:
- Paid sick leave would be required for all businesses (even those with less than ten employees) – a departure from PMLA, which only requires paid sick leave for employers with 50 or more employees.
- Paid leaves of absence would be a required benefit for all employees, whether they are full-time, part-time, temporary, or exempt.
- Employees would accrue 1 hour of sick time for every 30 hours of work (an adjustment from the current PMLA policy of 1 hour for every 35 hours worked).
- Employers with more than 10 employees would be obligated to provide a minimum of 72 hours of paid sick leave to all employees. Employers with less than 10 employees would be obligated to offer a minimum of 40 hours of paid sick leave, plus an additional 32 hours of unpaid leave to meet the state-wide 72-hour leave minimum.
- Employers could not limit employee accrual or carryover of earned sick time.
- A number of definitions and guidelines would be altered regarding sanctioned use of leave time, family member designations, anti-retaliation provisions, employee notice standards, and employee rights to file a civil suit in the event of IWOWA or ESTA violations.
Preparing for Potential Changes
As the situation evolves in the Michigan Supreme Court or Michigan Legislature, we will continue to provide regular updates and share best practices for adjusting to possible IWOWA and ESTA changes in 2023 or 2024. To begin this process, employers should consider taking some or all of the following steps:
- Speak to your organization’s HR and managerial staff about possible changes to minimum wage and paid leave, and provide regular updates. In addition to Cello HR, the Michigan DOL website is a valuable resource.
- Work with HR experts to formulate (in advance) ESTA- and IWOWA-compliant policies to manage sick leave and minimum wage requirements in the event of a successful Michigan Supreme Court appeal. In preparation for the possible reinstatement of the 2018 version of the ESTA, fine-tune policies regarding year-to-year carryover of unused leave, as well as sick leave request protocols.
- Employers with 50 or more employees nationwide should ensure all nonexempt employees (as defined by FLSA) who work 25+ hours weekly are granted 40+ hours of annual paid leave. This is a requirement of PMLA.
Optimize HR Strategy and Legal Compliance with Cello HR
The reinstatement of 2018 ESTA and IWOWA regulations is just one of many possible labor law changes that could impact your organization. Staying adaptive to local, state, and federal laws means remaining informed, proactive, and having the right support in your corner. That’s why Cello HR offers comprehensive HR consulting and expertise to help you develop thoughtful, legally compliant policies for your organization while benefitting from integrated HCM technology that makes hiring, onboarding, payroll, benefits administration, and timekeeping an intuitive process.
Ready to stay a step ahead with HR strategy, compliance, and HCM software that supports your business’ growth? Contact us today to let us know how we can support you.