New Requirements in Store for Michigan Employers in 2019
On September 5, 2018, the Michigan legislature adopted both the Improved Opportunity Wage Act (the “Wage Act”) and Earned Sick Time Act in response to two separate ballot initiatives that had been presented to the legislature for consideration (collectively referred to as the “Initiatives”). Both resulting Acts contained provisions that would significantly change employers’ obligations to employees. There were many that believed that the Initiatives were adopted for the reason that public acts adopted by the legislature are easier to amend than public acts that are adopted by ballot initiatives (which is what would have happened if the legislature did not approve the Initiatives). As such, over the past couple of months, Michigan employers have been left in limbo regarding their obligations to employees related to the minimum wage and paid sick time. This was all finally resolved when, on December 13, 2018, Governor Snyder signed Senate Bill No. 1171 and Senate Bill 1175 which made some significant changes to the Initiatives. This blog briefly discusses the requirements of each these amended acts.
A. Wage Act
In totality, the Wage Act, as amended, does not make any significant changes to Michigan’s already existing minimum wage law. In fact, the amended Wage Act changed or eliminated many of the significant changes made by the Initiatives. Pursuant to the Wage Act, minimum wage will increase to $9.45 beginning in 2019 and increase to a certain rate every year thereafter until it reaches its maximum amount of $12.05 in 2030. This is significantly different from the Initiatives which would have resulted in the minimum wage being increased to $12.20 by 2022 and increases every year thereafter at the rate of inflation. Interestingly, the amended Wage Act omitted a provision capping the increase per year in minimum wage but does dictate that minimum wage cannot increase if unemployment in Michigan is greater than 8.5%.
The amended Wage Act also keeps the minimum wage for tipped employees relatively low, unlike the Initiatives, which would have increased the tipped minimum wage to $12.00 per hour by 2022. The Initiatives also required written notice of the law, that all gratuities received by an employee be retained by that employee or shared voluntarily, and eliminated the tip credit¹. In the end, the amended Wage Act does not require any written notice of the law, reinstates the tip credit, and allows for mandatory tip sharing schemes. Essentially, the only change for tipped employees under the amended Wage Act is that the minimum wage will increase to $4.58 by 2030.
B. Paid Medical Leave Act
The amendments to the Earned Sick Time Act included changing the name of the Act to the Paid Medical Leave Act (“PMLA”). The most notable change under the PMLA is that the Act only applies to any person or business that employs fifty (50) or more individuals.
For those employers that are covered by the PMLA, the Act provides an employee one hour of paid medical leave for every thirty-five (35) hours worked, never to exceed one (1) hour of accrued paid medical leave in one week. Employers must allow eligible employees to accrue, and use, forty (40) hours of paid medical leave each year, and an employee may carry over a maximum of forty (40) hours of paid medical leave each year. The accrual of paid medical leave begins upon commencement of the employee’s employment and can be used as it accrues, except that the employer may require that the employee wait until the 19th calendar day of employment prior to using paid medical leave. An employer can eliminate the carry over provision in the PMLA by allocating forty (40) hours of paid medical leave at the beginning of the year.
The rate of pay under the PMLA is the greater of either the employee’s normal hourly rate, the minimum wage established under the Wage Law, or the employee’s “base pay.” When paying paid medical leave, the employer does not have to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, or gratuities in the calculation of the eligible employee’s normal hourly wage or base wage. The aforementioned is important because it results in tipped employees only being paid the tipped minimum wage if they use paid medical leave.
In order to use paid medical leave, the employee must comply with the employer’s usual and customary notice, procedural, and documentation requirement for exercising sick time, which presumably means that the employer can require proof of a sickness. Additionally, an employer can require an employee to search for a replacement under the PMLA. Importantly, under the PMLA, an employee can be fired for failing to exercise paid medical leave properly.
An employer has no obligation to reinstate accrued paid medical leave if an employee leaves employment and is then rehired by the same employer, but the employer must allow the employee to retain all accrued paid medical leave if the employee is transferred to a different division, entity, or location within the same employer. Paid medical leave can be used in a minimum increment of an hour, unless otherwise stated in the employee handbook.
Paid medical leave can be used to address an employee’s or employee’s family member’s mental or physical illness, injury or health condition, which includes diagnosis, care, treatment, and preventative measures related to the employee’s or employee’s family member’s mental or physical health. There are additional, specific, allowances permitted under the statute, which should also be reviewed, as well as the exact definition of family member.
Eligible employees are defined as individuals engaged in service to an employer and to whom the employer is required to withhold for federal income tax purposes. Importantly, an employee exempt from overtime requirements under the Fair Labor Standards Act (“FLSA”); an employee under the age of twenty (20) and receiving training; an employee under the age of eighteen (18); an employee scheduled to be employed by the employer for twenty-five (25) or less weeks per year; an employee who worked, on average, fewer than twenty-five (25) hours per week during the immediately preceding calendar year; an employee covered by a collective bargaining agreement; an employee of the state or federal government; or an employee of a temporary staffing agency are not covered by the PMLA.
Both of the above described amendments are affective on the 91st day after the last day of the 2018 legislative session, which was December 21, 2018. As such, effected employees will be required to comply with the amended Acts beginning March 22, 2019.
This blog is a broad overview of the Acts and is not intended to be a guide to employer’s actions and conduct. Additionally, much like any other newly enacted law, there are sure to be further amendments, changes, and interpretations that change the requirements or validity of the law. In addition, the groups who initially proposed the Initiatives have vowed to challenge the above described amendments in Court to require the Acts be put back to the original version of the Initiatives and/or to present the Initiatives once again for voter approval in 2020. If you have any questions on your obligations or requirements under either act, please contact our Sturgis office at 269-651-3281 or our Coldwater office at 517-278-4410 for further assistance.
By Zack Stempien
 The “tip credit” refers to the ability of the employer to make up the difference between tips received plus the tipped minimum wage and the general minimum wage to avoid paying the entire amount of the general minimum wage to the employee.