Michigan Minimum Wage Law & Earned Sick Time

Beginning February 21, 2025, most all businesses and organizations operating in Michigan will be subject to new minimum wage and paid sick leave requirements. Here you can find resources to help you navigate the Improved Workforce Opportunity Wage Act (IWOWA) and Earned Sick Time Act (ESTA).

The changes to Michigan’s wage and sick time laws stem from the ruling by the Michigan Supreme Court on July 31, 2024. The court found that the state legislature’s previous approach of adopting and then amending citizen-initiated petitions was unconstitutional. As a result, the original versions of these laws, which include a higher minimum wage and more generous paid sick time provisions, will be reinstated.

The changes to Michigan’s minimum wage law and earned sick time act adds complexity and will have several significant impacts on businesses. The following FAQ helps answer some of the questions. For more detail, download our comprehensive guide: Navigating Michigan’s Minimum Wage Law & Earned Sick Time Act

Who does this affect?

• Any business that employs one or more individuals must comply with the Michigan minimum wage and ESTA requirements.

When do the laws go into effect?

• The original versions of both laws – IWOWA (2018 PA 337) and ESTA (2018 PA 338) – will take effect on February 21, 2025.

How does this impact my business/organization?

• Increased Labor Costs: Businesses will face higher labor costs due to the increase in the minimum wage. This could particularly affect small businesses with tighter budgets.

• Paid Sick Leave Adjustments: Companies will need to adjust their policies to comply with the new paid sick leave requirements. Businesses with 10 or more employees must now provide up to 72 hours of paid sick leave annually, while those with fewer than 10 employees must offer up to 40 hours of paid leave and an additional 32 hours of unpaid leave.

• Administrative Burden: Implementing these changes will require businesses to update their payroll systems, train staff on new policies, and ensure compliance with the new regulations. This could be particularly challenging for smaller businesses with limited administrative resources.

• Potential Reduction in Workforce: Some businesses might reduce their workforce or cut back on hours to manage the increased costs associated with higher wages and additional paid leave.

• Competitive Advantage: On the positive side, businesses that adapt well to these changes might attract and retain employees more effectively, as better wages and benefits can improve job satisfaction and reduce turnover.

Are these rulings final?

• Absent a motion for reconsideration, the Michigan Supreme Court’s decision represents the final judicial word on these issues. The court’s majority opinion, however, notes that the Legislature remains at liberty to modify one or both of the laws in a “subsequent session.” The current legislative session, which runs until December 31, 2024, qualifies as a subsequent session, meaning that lawmakers could approve new legislation to amend the original IWOWA and/or the ESTA before the February 2025 effective date. Yeo & Yeo will monitor and advise on any developments.

What is the penalty if my business does not comply?

• Non-compliance with Michigan’s updated wage and sick time laws can result in several penalties for businesses:
  • Paid Sick Leave Violations: Employers who fail to provide the required paid sick leave can face an administrative fine of up to $1,000. Additionally, failing to meet the posting requirements for these laws can result in a $100 fine per violation.
  • Minimum Wage Violations: Employers who do not comply with the minimum wage requirements may be subject to civil fines of up to $2,000 per violation. Each day of non-compliance is considered a separate violation, potentially increasing the total fines significantly.
  • Wage Payment Violations: If employers fail to pay the correct wages or overtime, they may be required to pay double the owed amount as liquidated damages. They could also be responsible for the employee’s attorney fees if a lawsuit is filed.

How do I prepare my business/organization for these changes? 

• To prepare for the recent Michigan wage and sick time rulings, businesses should consider the following steps. By taking these steps, businesses can better navigate the changes and ensure compliance with the new regulations. 
  • Review and Update Policies: Ensure your current wage and sick time policies align with the requirements of the original Wage Act and Earned Sick Time Act. This includes planning for changes before the effective date and consulting with legal counsel for alternatives and exceptions.
  • Employee Notification: Provide written notice to each employee about the Earned Sick Time Act and any changes implemented. New employees should receive this notice at the time of hire.
  • Adjust Payroll Systems: Work with your payroll provider to update your systems to accommodate the new minimum wage rates and sick leave accrual methods.
  • Record Keeping: Maintain records documenting employees’ hours worked and the sick time they have accrued and taken for at least three years.
  • Accrual and Usage: Understand the accrual rates and usage limits.
  • Training and Communication: Train your HR team and managers on the new requirements. Clear communication with employees about their rights and the company’s policies will help manage expectations and ensure a smooth transition.
  • Seek Professional Advisory: Consult with your accountant, legal advisor, and payroll professional to help strategize your best options, ensure full compliance with the reinstated laws, and to address any specific concerns related to your business.