On July 19, 2022, in the decision, Mothering Justice et al., v. Dana Nessel et al. (Nessel), the Michigan Court of Claims (Court) held that in 2018 the Michigan Legislature unconstitutionally amended two voter-initiatives, the Earned Sick Time Act, PA 338, and the Improved Workforce Opportunity Wage Act (IWOWA), PA 337, by amending the proposals in the same legislative session that the Legislature enacted the two initiatives. The Legislature’s tactic of adopting and amending the voter initiatives subverted the constitutional protections against “legislative interference with the People’s constitutional right of initiative.” The Court’s holding nullified the amendments to the initiatives, 2018 Public Act (PA) 368 (IWOWA) and 2018 PA 369 (renamed as the Paid Medical Leave Act), and reinstated the original, more expansive terms of PA 338 and PA 337.
On July 29, 2022, Court of Claims Judge Douglas Shapiro stayed the effective date of the Court’s order until February 19, 2023, to give employers and state agencies time to implement the required changes. The judge refused to grant a stay pending appeal noting that the State is not likely to prevail on the merits. Consequently, employers are not required to immediately adjust their minimum hourly wage rate and revise their Paid Medical Leave policies to comply with terms of the original voter initiatives as described in PA 337 and PA 338. However, employers should monitor legal developments and prepare to adjust their policies by February 19, 2023, in the absence of a further stay pending appeal granted by the Michigan Court of Appeals.
Current Provisions of the Earned Sick Time Act or PA 338
PA 338 requires employers to permit employees to accrue and use earned paid sick leave for personal or family health needs, as well as for purposes related to sexual assault or domestic violence and school meetings related to a child’s disability, health issues, domestic violence or sexual assault.
Covered employers. The Act applies to entities that employ 1 or more individuals, excluding the U.S. government.
Front-loading. There is no provision in PA 338 permitting front-loading of earned or unearned sick leave. Employees are allowed to accumulate leave at least one hour of earned sick leave for every 30 hours worked.
Small employers, earned sick time, accrual of hours, and carryover. Employers are considered small employers if they employ fewer than 10 employees. Small employers may limit use and carryover of paid earned sick time to 40 hours per year, and if the employee accrues more than 40 hours of earned sick time in a calendar year, the employee must have a right to use or carryover an additional 32 hours of unpaid sick time in the year of accrual. Small employers must permit employees to use paid earned sick time before using unpaid earned sick time.
All other employers earned sick time, accrual of hours, and carryover. All other employers may limit use of paid earned sick time to minimum of 72 hours in a single year. Carryover of hours from year to year may be limited to 72 hours of paid earned sick time in a single year.
Eligibility. The definition of family members is extended to include domestic partners and “any other individual related by blood or affinity whose close association with the employee is equivalent to family.”
Damages. The Department of Licensing and Regulatory Affairs may enforce the provisions of PA 338. The law also provides a right to file a civil action for violating the law within 3 years of the violation or the date when the employee knew of the violation, whichever is later. Claimants are entitled to damages, including payment for used earned sick leave, rehiring or reinstatement to the employees previous job, back pay, benefits, liquidated damages and reasonable attorney fees. A rebuttable presumption of retaliation exists if an adverse personnel action is taken against an employee within 90 days of certain specified events. Individuals have the right to pursue remedies for violation by filing either a complaint with the Department or a civil action.
Compare to the voided Paid Medical Leave Act or PA 369. PA 369, which was voided by the Court’s opinion in Nessel, had narrowed the paid sick leave requirements by exempting employers with fewer than 50 employees from the provisions of the law. Additionally, the Paid Medical Leave Act capped the amount of sick leave at 40 hours per year. Employers were allowed to limit accrual of paid medical leave benefits to not more than 1 hour of paid medical leave in a calendar week and to limit carryover to at least 40 hours of unused accrued paid medical leave to the next benefit year. Front-loading was permitted. The Paid Medical Leave Act does not provide the right to a civil action.
Current Provisions of the IWOWA, PA 337 (the minimum wage initiative)
The 2018 IWOWA increased the state’s minimum wage each year until the minimum wage was $12.00 per hour in 2022. Thereafter, the minimum wage is annually adjusted based on changes in the cost of living, effective January 1 of each year. Annual cost of living increases are prohibited if the state unemployment rate is “8.5% or greater for the year preceding the year of the prescribed increase.” Beginning on January 1, 2022, the minimum hourly wage rate of tipped employees is 80% of the minimum hourly wage rate and increases to 90% and 100% of minimum hourly wage rate beginning on January 1, 2023 and 2024, respectively.
Compare to the voided 2018 PA 368. 2018 PA 368, nullified by the Court, increased the minimum wage to $12.05 per hour by 2030 and reinstated the tip credit wage equal to 38% of the minimum wage. The amendments repealed provisions related to yearly cost of living increases based on the rate of inflation and conditioned an increase in the minimum wage to a state unemployment rate of less than 8.5% for the calendar year before the increase.
The Constitutional Protections Explained
Michigan is one of about 24 states that give citizens the Constitutional right to participate in their state democracy by placing voter initiatives on the ballot. The Michigan Constitution provides a procedural framework for the people to submit voter initiatives, with limited exceptions, to the Legislature and to enact the voter initiatives if the Legislature refuses. Under Article 2, section 9 of the Michigan Constitution, the Legislature has 40 days from receipt of an initiative petition to: 1) reject the initiative; 2) enact the initiative; or 3) propose a countermeasure on the same subject matter as the voter-initiative and to send both measures, the Legislature’s countermeasure and the voter-initiative, to the ballot for a vote in a general election. Enactment of voter initiatives is not subject to the Governor’s veto power. No law adopted by a majority of the voters under the initiative provisions of the Constitution, can be amended or repealed except by another vote of the electorate or by a ¾ supermajority vote of the Legislature.
In the case of the 2018 PAs 337 and 338, the Legislature chose to enact both measures preventing the PAs from being submitted to the voters for approval or rejection. Approval by the voters would have meant that the PAs could be amended only by a supermajority of the Legislature. Instead, the Legislature, as described above, substantially amended PAs 337 and 338, by a simple majority in the same legislative session in which the PAs were enacted. The amendments were signed into law by the Governor.
The Court rejected the State’s argument that it’s plenary power entitled the Legislature to amend the initiative in the same legislative session as enactment. Instead, consistent with Constitutional text, case law and the spirit of the Constitution, the Court held that legislative power to amend initiatives was limited to subsequent sessions. The Legislature’s “adopt and amend” strategy thwarted 1) a popular vote on the voter initiative, and 2) the initiative from becoming law. Calling out the legislative tactic as a “slight of hand” that “destroys” the people’s right and power of initiative, the Court nullified the amendments to the voter initiated laws (PAs 368 and 369) and reinstated the original provisions of PAs 337 and 338.
What you need to know
An appeal of the Court’s decision has been filed, and the Court of Claims delayed the effective date of its order until February 19, 2023, to give employers and state agencies time to implement the required changes. Without legislative action or a reversal, PAs 337 and 338 will become effective early next year. Employers should plan ahead to ensure that non-exempt and tipped employee wages follow the provisions of minimum wage initiative, PA 337. Employers should also consider reviewing their paid leave policies to ensure that the terms of their policies are at least as favorable as the terms of PA 338.