Michigan Appeals Court “Undoes” Lower Court’s “Undoing” of What Legislature “Undid” Concerning Minimum Wage, Tip, and Paid Leave Standards

On January 26, 2023, a three-judge panel of the Michigan Court of Appeals issued a ruling regarding Michigan’s minimum wage, tip, and paid sick and safe time laws. In 2018 the Michigan state legislature overhauled revisions to Michigan’s minimum wage and tip law and its newly created paid sick and safe time law only months after it had adopted two proposed ballot measures covering these topics. In July of 2022, the Michigan Court of Claims found that the state legislature had violated the Michigan Constitution by its 2018 actions. Now, the Michigan Court of Appeals has reversed that finding by the Court of Claims.  It is possible, however, that this latest decision could be appealed to the Michigan Supreme Court.

The appellate court decision means that the versions of these laws drafted by the legislature – not ballot measure proponents – remain “the” law in Michigan. Accordingly, the minimum wage for non-exempt employees continues to be $10.10 per hour; for tipped employees, the minimum cash wage is $3.84 and the maximum tip credit is $6.26. Also, employers with 50 or more U.S. employees must still allow employees to accrue 1 hour of paid leave for every 35 hours worked, accrue up to 40 hours of paid leave per year, carry over up to 40 hours of unused paid leave into the following year, and use up to 40 hours each year for various “sick,” “safe,” or “other” reasons. Alternatively, employers could frontload 40 hours of paid leave at the beginning of each year.

During the last six months, employers were uncertain about whether, when, and how they should respond to the original July 2022 decision. Did they need to increase base pay levels for non-exempt employees? Was the tip credit going away (eventually)? What changes did they need to make to their paid sick leave policy?

Some employers may have prepared to revise their wage and paid leave policies and practices but held off on rolling out those changes pending a decision from the appellate court. Employers that did so should not fill their trash bins with all that hard work just yet, because if the decision is appealed, the state supreme court could disagree with the appellate court and revert to the laws as envisioned by the ballot measure drafters. Were that to occur, employers would have done the hard work already, so maybe only a few new discussions, and minimal further action, might be necessary to be ready to act.

Others, however, might have changed operations to align with the ballot measure version of the laws following the July 2022 decision. For these employers, things might get a bit messier, depending on how they intend to re-respond.

Employers that increased pay in anticipation of the higher hourly rate and are now considering decreasing pay in light of the new development should keep in mind that while there is no Michigan law governing this issue, in FAQs Michigan’s Department of Labor and Economic Opportunity states employers must tell employees about a pay reduction before they perform work at the lower rate, and that employers cannot reduce employees’ pay rates for hours of work they performed already. Similarly, employers might want to consider providing notice to employees before reverting to the “old” paid sick leave policy. Rather than simply turning one policy “off” and another “on,” however, employers might first want to discuss what administrative challenges might arise, such as how to address paid leave balances that exceed the accrual cap under the “old but new again” policy, and how any “old but new again” policy annual limit on paid leave use applies to an employee who already received approval to use more than that amount for an upcoming absence.

The last half-year has been a wild ride in Michigan, but, who knows, maybe this latest development is just another pit stop of a much longer, stranger journey. Only time will tell.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.