As predicted, recently enacted legislation slows down an increase to Michigan's minimum wage (SB 1171) and increases the threshold at which employers are required to provide paid sick leave to employees, while lowering the number of hours of sick leave required per year (SB 1175).

As we previously reported, on September 5, 2018, the Michigan legislature passed paid sick leave and minimum wage increase initiatives into law, effectively taking the initiatives off the November 6, 2018 ballot. The Michigan constitution provides that state legislators have 40 days following the certification of a ballot initiative to either pass the provisions of the initiative or reject the initiative and allow it to be placed on the ballot for voter approval. (EY Payroll NewsFlash Vol. 19, #150, 9-21-2018.)

In his news release, Governor Snyder said: "The two bills I signed today strike a good balance between the initial proposals and the original legislation as drafted. They address a number of difficulties for job providers while still ensuring paid medical leave benefits and increased minimum-wage incomes for many Michiganders."

Paid sick leave

Under SB 1175 (PA 369), employers of 50 or more employees must allow eligible hourly employees to accrue one hour of paid sick leave for every 35 hours worked, up to a maximum of 40 hours per year, and allow the employee to carry over up to 40 hours of accrued sick leave to the next year. Eligible employees exclude employees who worked an average of less than 25 hours per week during the previous calendar year and temporary employees hired for work that lasts 25 weeks or less. The bill is effective 91 days following the end of the 2018 legislative session. Current employees can immediately began accruing and using paid medical leave upon the effective date of the act, while new employees must wait 90 days to begin accruing.

The paid sick leave initiative that would have gone to voters had it not been taken off the ballot would have, if approved, required employers of 10 or more employees to allow employees to accrue one hour of paid sick leave per 30 hours worked up to a limit of 72 hours per year. Employers of fewer than 10 employees would have been required to allow employees to accrue up to 40 hours of paid, and 32 hours of unpaid, sick leave each year.

Minimum wage increase

Under SB 1171 (PA 368), Michigan's state minimum wage will increase from the current $9.25 per hour to $9.45 per hour effective 91 days following the end of the 2018 legislative session. As long as the state unemployment rate does not equal 8.5% or greater for the calendar year preceding the calendar year of the next yearly increase, the state minimum wage will increase to: $9.65 for 2020; $9.87 for 2021; $10.10 for 2022; $10.33 for 2023; $10.56 for 2024; $10.80 for 2025; $11.04 for 2026; $11.29 for 2027; $11.54 for 2028; $11.79 for 2029; and $12.05 for 2030.

Employers of tipped employees must continue to pay at a minimum wage of at least 38% of the minimum wage in effect for the year. Tips plus the lower tipped-employee minimum wage must bring the employee's wage up to at least the full minimum wage per hour.

The minimum wage increase initiative that would have gone to voters had it not been taken off the ballot would have, if approved, required the state minimum wage to be increased from the current $9.25 per hour to: $10 per hour effective January 1, 2019; $10.65 effective January 1, 2020; $11.35 per hour effective January 1, 2021; and $12.00 per hour effective January 1, 2022. Each year thereafter the minimum wage would have been calculated based on the state's cost of living index. The initiative would have also incrementally eliminated the tip credit from the law by 2024, requiring that tipped employees be paid at the same minimum wage as other employees.

Ernst & Young LLP insights

News sources are reporting that these changes to the paid sick leave and minimum wage law could face legal challenges and ballot initiatives in the future. (Crains Detroit Business; US News.)

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