By Steve Thorpe
Legal News
Michigan’s Senate and House voted recently to gradually raise the state’s minimum wage to $12 an hour by 2022 and require paid sick leave for employees. With passage by both chambers, the measures need no signature from the governor and are now law, going into effect in March. The legislature plans to amend them before its session ends in December. Robert A. Boonin, a member in Dykema’s Detroit and Ann Arbor offices, concentrates his practice on labor and employment litigation. Boonin has represented public and private sector clients across the country in more than thirty jurisdictions.
Thorpe: Can you give us some background on this issue?
Boonin: Michigan can enact laws via the legislative process or by voter initiative. Petitions to change the minimum wage law and enact a paid sick leave law supported those issues to appear on the November ballot if the initiatives were not adopted by the legislature beforehand. Both of these initiatives were adopted by the Republican controlled legislature per party lines, and therefore they will not appear on the ballot. Political maneuvering was at play by both parties during this process. Key to the analysis is that laws passed by voter adopted initiatives require a 2/3 legislative majority for them to be amended or repealed, while legislation passed by the legislature only requires majority support.
Putting the merits of the initiatives aside, the Democrats were pushing for the issue to remain on the ballot for two reasons: 1) these types of ballot proposals typically result in a large Democrat turnout to the polls; and 2) they were anxious to limit the ability of future legislatures to water-down the law if the initiatives were adopted by the voters. The Republicans, on the other hand, appeared motivated by the political flip side of the issues. They appeared to be motivated to limit the changes of a large Democrat turnout for the midterm elections, and they also wanted the license to amend the laws after the election, by a simple majority, if they choose that course during the lame duck session.
Thorpe: The business community generally opposed both proposals, saying that they would end up costing taxpayers money because businesses would have to raise prices on the goods and services. Yet it was the usually pro-business Republicans that pushed the bills through. Can you explain?
Boonin: Each side took the flip side of what one would normally expect them to take, and they did so for the above political reasons. The conventional wisdom is that the Republican support was substantively motivated by a desire to for the legislature to retain the ability to amend the laws by a simple legislative majority, and the writing is on the wall that they will seriously consider doing so during the post-election lame duck session. That is not to say that they will totally undo what they’ve passed. For instance, they may opt to slow down the schedule for how each law will ramp up, eliminate the indexing for automatic increases to the minimum wage once it reaches $12, or retain part of the tip credit that the new law is slated to totally disappear over the next few years.
Thorpe: Discussions of the measures frequently mentioned “tipped workers.” How will they be affected?
Boonin: Right now, and as it is in most states, tipped employees may be paid a lower minimum wage so long as their tips at least make-up the difference between the regular minimum wage and the tipped employee minimum wage. In Michigan, the current tipped employee minimum wage is $3.52, while the regular minimum wage is $9.25. Under the new law, by 2024 this differential will be eliminated. As a result, these workers will be paid by their employers the full regular minimum wage plus their tips. This will be a significant pay increase for most tipped employees.
Thorpe: How would the sick time provision work?
Boonin: All employers will have to allow all employees to accrued paid sick time. The pace for the accrual is slightly faster for employers with at least 10 employees, versus smaller employers. Employees will be able to use this accrued paid time for reasons related to illness or medical care relating to the employee or the employee’s family member, for dealing with certain issues related to domestic violence victims, for time needed to attend a child’s school-related meetings, and for time off needed due the closure of a business or school because of a public health concern. While unused earned sick time can carry over from year to year, depending the on the employer’s size, employee use of this time may be capped at 72 hours per year or 32 hours per year. The law also does not require that time earned but not used be cashed out upon the termination of employment. Employees may be required to prior notice of their need to use this leave, if feasible.
Thorpe: What should employers do to prepare for the changes?
Boonin: As for the minimum wage increases, employers should prepare to do two things. First, they should budget for the payroll costs the increases will have with respect to any employees who will be subject to an increase by virtue of the higher minimums. This may be a challenge since those changes were not budgeted for when the fiscal years for many employers began. Secondly, they may need to adjust their overall pay scales. If they don’t do so, there may be undue pay compression among their current employees, and they may also need to make adjustments to compete for employees to be paid at or near the new minimum wages.
As for the Earned Sick Time Act, most employers already allow employees to earn paid time off for reasons of illness, particularly with respect to full-time or near full-time employees. The new law will require all other employees to accrue for paid time off, and that may impact costs over the course of the year. Most employers will have to modify their policies to make sure that they allow the time taken – even time already allowed – to be used for all of the reasons required by the statute, to conform to the law’s record keeping requirements, and otherwise tailor their policies and practices to conform to the Act overall.
The Act includes some harsh penalties for non-compliance, so the sooner employers address these issues, the better. It would also be prudent to include counsel in that process to avoid details and liability that could have otherwise been avoided.
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