Minimum Wage Increase & Paid Sick Leave Mandate Passed by Legislature

On September 5, 2018, the Michigan House and Senate passed Initiative Proposals 3 and 4 which will respectively raise the minimum wage to $12 per hour by the year 2022, and require all employers to provide at least 5 days worth of paid sick leave per year. The measures are set to take effect around April 1, 2019.

The passage of each proposal was controversial, even by legislators and interest groups who supported the ballot proposals. Because the initiatives were passed by the legislature, the proposals will not be on the Nov. 6 general election ballot. In addition, the legislature may now amend the proposals with a simple majority vote (56 votes in the House, 20 votes in the Senate), instead of needing a supermajority (3/4 of each body) should the measure have passed at the ballot.

Earned Sick Time Background

The proposal creates the Earned Sick Time Act, requiring businesses to provide employees with a minimum of one hour of earned sick time for every 30 hours worked.

The rules for small businesses, defined as less than 10 employees working during a given week (including part-time, full-time and temporary workers), would be slightly different. Small business employees would be entitled to use at least 40 hours of earned sick time in a year unless the employer selects a higher limit. If the employee accrues more than 40 hours, the employee would be entitled to use an additional 32 hours of unpaid earned sick time.

All other employees (those working for businesses with 10 or more employees working during a given week), will be eligible to accrue up to a minimum of 72 hours of earned sick time.

In both cases, employees would be entitled to use paid leave prior to using unpaid leave.

Minimum Wage Background

In 2014, legislation was passed and signed into law that gradually raised Michigan’s minimum wage requirement to $9.25 per hour over a four-year period.

Under the proposal passed by the legislature on September 5, the state’s minimum wage would now increase to $10 an hour in 2019, $10.65 in 2020, $11.35 in 2021 and $12 in 2022. The proposal would require annual adjustments for inflation beginning in 2023.

In addition, under the proposal, the minimum wage for tipped employees would increase from $4.80 in 2019 to $6.39 in 2020, $7.94 in 2021 and $9.60 in 2022. Tipped employees’ minimum wage would be 100 percent of the minimum wage by 2024. Under current law, all tipped employees are required to make at least the minimum wage using a combination of hourly wage and tip earnings. If their tips plus the tipped employee minimum wage does not equal or exceed the regular minimum wage, the employer must pay any shortfall to the employee.

Michigan’s minimum wage already outpaces Indiana ($7.25), Illinois ($8.25), Ohio ($8.10) and Wisconsin ($7.25).

Impact on Northern Michigan

The vast majority of businesses in northern Michigan are small businesses, and the potential impact to the region would likely be more significant. Small businesses in rural areas, in general, tend to have fewer resources available to deal with and offset increased labor costs and government mandates.

Many restaurant owners and service employees alike have decried the potential impacts of changing the tipped-earners wage to equal the state’s minimum wage. Servers fear that removing the tipped-earner wage will devastate the area’s tip culture, whereby patrons would offer less in tips knowing that servers earn a higher hourly wage.

These new laws seem here to stay in concept. Even though the legislature will be able to amend by simple majority vote, it is unlikely they will totally repeal the proposals. However, businesses in our region will now be in a position to seek legislative amendments to alter the new laws in a way that will allow a business greater flexibility and ability to manage the impacts.

The Chamber Alliance plans to continue to actively participate in future discussions about these measures and will share suggestions and amendment recommendations with legislators.

Please contact Alliance Director of Government Relations Kent Wood at kentw@tcchamber.org with questions or to share impacts.