Ruling on Minimum Wage and Paid Medical Leave

The Michigan Supreme Court has issued a ruling that settles the dispute that has been ongoing for two years. The ruling indicates that the Michigan Legislature improperly amended two ballot initiatives that were passed in 2018. This affects two laws which impact almost every Michigan employer: the Minimum Wage and the Michigan Paid Medical Leave Acts.

The court has indicated the changes to both laws will be effective February 21, 2025.

The following are the changes that will take place regarding the minimum wage and tipped minimum wage (NOTE: “inflation adjustment” amount referred to below is unknown at this time):

CurrentEffective 2/21/2025Effective 2/21/2026Effective 2/21/2027Effective 2/21/2028Effective 2/21/2029
Minimum Wage$10.33/hr$10/hr plus inflation adjustment$10.65/hr plus inflation adjustment$11.35/hr plus inflation adjustment$12/hr plus inflation adjustmentMinimum wage increase will be calculated annually by the state treasurer
Tipped Minimum Wage$3.93/hrTipped wage will be 48% of minimum wageTipped wage will be 60% of minimum wageTipped wage will be 70% of minimum wageTipped wage will be 80% of minimum wageEqual to the state minimum wage (tip credit no longer permitted)

In addition to the minimum wage changes, the following changes will occur with the Michigan Paid Sick Leave law:

CurrentEffective 2/21/2025
Employers Required to provide paid sick leaveEmployers with 50 or more employeesAll employers (1 or more employees) except Federal Government. 
Employees excluded from paid sick leave requirementSalaried, seasonal, casual, and temporary employees.  Part-time employees working less than 25 hours/week.  Employees covered under a collective bargaining agreement.No one is excluded – all employees (including seasonal and temporary) must be able to accrue paid sick leave
Accrual1 hour paid sick leave for every 35 hours worked   Employers can cap accruals to 1 hour per week and 40 hours per year1 hour of paid sick leave for every 30 hours worked   No weekly or annual cap on paid sick leave accrual (leave use is capped, however)
Leave UseUsed in 1 hour increments or other amount if employer has a written policyEmployers must allow use of sick leave in increments of no greater than 1 hour or the smallest time amount tracked in their payroll system (whichever is less).
Alternatives to AccrualMay provide 40 hours of paid sick leave at the beginning of the year instead of accruing (prorated for new hires)No “front loading” of leave.  Employers must accrue 1 hour for every 30 hours worked. 
Cap on Paid Sick Leave UseLimited to 40 hours/yearEmployers with 10 or more employees must allow employees to use up to 72 hrs of paid sick leave per year.   Employers with less than 10 employees must accrue up to 40 hours of paid sick leave and 32 unpaid hours of unpaid sick leave.
Carry-Over of Paid Sick LeaveEmployees can carry over paid sick leave, but employers not required to allow use of more than 40 hours of paid sick leave per yearEmployees must be allowed to carry over any unused paid sick leave from prior years 
Family Members Covered for Whom Employees Can Use Paid Sick LeaveSpouse, Child, Parents, Grandparents, Grandchildren, Siblings, and anyone who acted as a parent (in loco parentis) when employee was a minorAdds to the current list: domestic partners or others who are related by blood or “affinity” in a way equivalent to being a family member
Reasons for taking Paid Medical LeaveIllness of employee or employee’s family memberMedical diagnosis, care, or treatment of the employee or employee’s family member (including preventive care visits)Closure of employee’s workplace due to public health emergencyCare for child whose school or daycare has been closed due to public health emergencyAbsences related to domestic violence or sexual assaultAdds one more qualifying reason:  meetings at a child’s school or place of care related to the child’s health, disability, or effects of domestic violence or sexual assault on the child.
DocumentationEmployers may request documentation to support paying paid sick leaveEmployer may only request documentation if the employee is absent more than three days.  Employer must pay for any out-of-pocket expenses incurred to obtain the documentation.
TerminationEmployers are not required to pay out unused PML upon termination of employment.Employers are still not required to pay out unused PML upon termination.  However, if an employee is rehired within 6 months of termination, their unused PML at termination must be reinstated.
RetaliationNo retaliation provisionsRetaliation against employee for exercising their rights under this law is prohibited. Allows for civil action for violations of the Act.
Required Postings or NoticesPoster requiredPoster required and written notice at hire.
Record Retention1 year3 years.  If employers fail to maintain adequate records, the DOL will assume that employer violated the Act.

What should employers do?

What steps can employers take to prepare for this change?

  • Contact payroll vendors: Discuss with vendors how new accruals can be implemented. Special consideration should be given to how accruals will be applied to people not paid on an hourly basis (those paid salary, based on mileage, commission only, etc.). 
  • For those without a payroll system: Develop a process for tracking worked hours and paid sick leave accruals.
  • Examine handbooks, orientation materials, offer letters, and other employer communications: Handbooks and any materials provided to employees or applicants (including on websites) will likely need to be revised. Revise any attendance policies that require documentation that contradicts the new requirements (shown above). Draft changes for your attorney’s approval.
  • Examine compensation: Examine pay for all employees.  Determine which employees (if any) will need adjustments to the new minimum wage. Additionally, consider how pay may need to be adjusted for current employees to maintain pay equity across the organization.
  • New poster: There will be a new poster (required) issued by the Michigan Wage and Hour Division. That poster has not yet been published.

If you have questions or need further clarification, please reach out to an OVD advisor.

The information and suggestions contained in this material have been developed from sources believed to be reliable. However, OVD Insurance Agency accepts no legal responsibility for correctness or completeness of this material, or its application to specific factual situations.