On July 31, 2024, the Michigan Supreme Court overturned legislative amendments to the minimum wage and paid sick leave laws. In a 4-3 decision, the court ruled that the legislature had unconstitutionally altered voter-approved initiatives.

The decision will restore the original versions of the minimum wage and paid sick leave laws, which were passed through ballot initiatives in 2018. These laws included provisions for increasing the minimum wage, eliminating the tip credit, and expanding paid sick leave benefits for workers.

This article outlines what the Supreme Court ruling will mean for Michigan employers and workers over the next five years.

A Higher Minimum Wage

Michigan hourly workers will see a boost to their hourly pay. The reinstated minimum wage will increase faster than previously mandated, reaching a level substantially higher than the current rate.

Background: In 2018, the minimum wage in Michigan was $9.25 per hour. This wage was scheduled to be adjusted for inflation on January 1, 2019 (unless the unemployment rate was 8.5% or higher) before the legislative amendments to the minimum wage and paid sick leave laws were passed. Now that those laws have been overturned, the minimum wage increases are back on track.

New Rate: On February 21, 2025, the Michigan hourly minimum wage will be $10 plus an inflation adjustment. The state will consider the $10 rate four-and-a-half years outdated since the increase was supposed to occur on January 1, 2019. So they will adjust for inflation through July 31, 2024, and that will become the new minimum wage.

By comparison, the minimum wage rate would be $10.56 an hour if the legislative amendments had not been overturned. The new rate will likely exceed this. 

Looking Ahead: On February 1, 2026, the minimum wage will be $10.65 plus the court-ordered adjustment for inflation through July 31, 2025. One year later, on February 1, 2027, it will be $11.35 plus the court-ordered adjustment for inflation through July 31, 2025.

On February 1, 2028, the wage will rise to $12.00, plus the court-ordered adjustment for inflation through July 31, 2025. Lastly, on February 1, 2029, the minimum wage will be whatever was established as the wage effective February 1, 2028, adjusted for inflation.

Expanded Paid Sick Leave

On February 25, 2025, the Paid Medical Leave Act (PMLA) will be voided and Earned Sick Time (ESTA) will be revived. There are several differences between the two acts. 

Coverage: ESTA covers a broader range of employees than PMLA. With limited exceptions, it will apply to all Michigan employers with at least one employee. This means that even the smallest businesses will be required to provide paid sick time.  

In contrast, the PMLA has a more limited scope, excluding certain types of employees, such as those covered by collective bargaining agreements and federal workers. Fewer employees are eligible for paid sick time under the PMLA.

Accrual rate: ESTA will provide a higher accrual sick time rate than PMLA. The ESTA has a standard accrual rate of one hour of paid sick time for every 30 hours worked. This means that employees can accumulate sick time relatively quickly.

The PMLA, on the other hand, allows for a slower accrual rate, potentially reducing the amount of paid sick time available to employees.

Carryover: ESTA has more flexible carryover provisions for unused sick time. Generally, the ESTA will allow for the carryover of unused sick time to the following year, with some limitations. 

The PMLA imposes stricter limits on the carryover of unused sick time.

Changes for Tipped Workers

Elimination of the Tip Credit: The tip credit elimination means that tipped workers will receive the full minimum wage beginning February 1, 2029. On February 1, 2026, the minimum cash wage will become 60% of the minimum wage. This will go up to 70% on the same date in 2027 and 80% on February 1, 2028.

Other Highlights of the Revived Law: Tips and service charges are employee earnings, not employer income. Employers cannot claim tips as part of the minimum wage and must provide clear notice about service charge distribution. Accurate tip and service charge records are mandatory for at least three years.

Implications for Businesses

The decision will have a significant impact on Michigan businesses. Employers will need to adjust their payroll systems to comply with the new minimum wage and paid sick leave requirements. Some companies may face increased labor costs, which could lead to changes in pricing or operations.

Businesses must stay informed about the specific implementation timeline and consult with legal counsel to understand their obligations under the reinstated laws.

For questions regarding Michigan’s minimum wage and paid sick leave laws, please contact Adrienne LaMilza Hayes.