Michigan Decision Leaves Employers Uncertain About Minimum Wage, Tips, and Paid Sick Leave

​On July 19, a state judge in Michigan's Court of Claims held that the state legislature violated the Michigan Constitution in 2018 when, during a lame-duck session, it overhauled revisions to Michigan's minimum wage and tip law and newly created paid sick and safe time law only months after it adopted as law two proposed ballot measures covering these topics.

The judge voided the legislature's lame-duck session version of the laws, which were in effect since March 29, 2019, and ordered that the standards as initially proposed and adopted be deemed the law. If the decision stands – because it is either not appealed or, if appealed, it is upheld by a state appeals court and/or the state Supreme Court – it will have a significant impact concerning pay and paid leave practices in Michigan.

What the Decision Says

Concerning the legislature's adopt-and-amend strategy, the judge held that the Michigan Constitution does not permit the legislature to adopt a proposed law and the same legislative session substantially amend or repeal it. Otherwise, "it would mean that anytime a simple majority of the Legislature opposed the content of an initiative, it could, by legislative sleight-of-hand, prevent the initiative from ever becoming law without ever allowing the People to vote on it."

Instead, per the judge, "the Legislature's only options for responding to a voter-initiated proposed law are to adopt the law, reject the law and send it to voters, or propose an alternative law to be placed on the ballot at the next general election, in which case the initiative and the legislative alternative appear on the ballot and, if both pass, the one with the most votes becomes the law."

If the legislature adopts a proposed initiative, as it did here, the judge held that changes to that law in the same legislative session can only occur if there is a referendum in which voters decide whether to accept or reject the legislature's action. If there is no referendum, changes cannot occur until after the end of the period of time to petition for a referendum: 90 days after the end of the legislative session at which the law was adopted.

This did not occur in this instance. Instead, the legislature took what the judge called a "fourth option" that does not exist under the Michigan Constitution—an action that the judge found to be unlawful.

As the judge observed, the at-issue changes by the legislature "substantially amended the original laws proposed by the voters."

Concerning the wage and hour changes, the amendments:

• reduced the increase on the minimum wage from $12 per hour to $10.10 per hour,
• removed the annual adjustment after 2022 based on inflation, and
• eliminated language specific to tipped employees.

Additionally, the overhauled paid leave law:

• exempted employers with fewer than 50 employees,
• lowered the minimum number of hours that could be used in a year to 40 from 72 hours, and
• repealed a section prohibiting employers from taking retaliatory personnel actions against employees.
  

Per the judge, "the process effectively thwarted the intent of the People and denied them the opportunity to vote on whether they preferred the voter-initiated proposal or the Legislature's suggested modifications."

Next Steps

Undoubtedly, employers have questions about what the decision means. Did the minimum wage increase overnight from $9.87 to $12.00 per hour? Is a company's paid sick leave policy no longer compliant? Right now, it's a bit unclear.

We are waiting to see whether the court might stay its decision while Michigan decides whether it will appeal to the Court of Appeals or directly to the Michigan Supreme Court, which was asked previously to issue an advisory opinion concerning the legislature's actions but, after receiving briefing, held on Dec. 18, 2019 that it lacked jurisdiction to do so.

Michael Chichester Jr. is an attorney with Littler in Detroit. Sebastian Chilco is an attorney with Littler in San Francisco. © 2022. All rights reserved. Reprinted with permission.