Update Applicable to:	Effective date
All employers with at least 1 employee in Michigan	ESTA – February 21, 2025   IWOWA – February 1, 2025

What happened?

On July 31, 2024, the Michigan Supreme Court stated that the Michigan Legislature’s adopt-and-amend strategy, meant to avoid putting minimum wage and paid sick time initiatives on the ballot, was unconstitutional. 

What are the details?

Quick Bites:

• The Michigan Supreme Court nullified the Legislature’s amendments, reverting to the original initiatives.
  • Paid Sick Leave Changes: Beginning on February 21, 2025, all Michigan employers must provide paid sick leave to all employees by accruing one hour of paid time for every 30 hours worked, up to 72 hours a year. Employers of 10 or more employees must allow the accrual of paid sick leave and usage of up to 72 hours annually. Employers with fewer than 10 employees can cap the accrual at 40 hours of paid sick time annually and offer the remaining 32 hours as unpaid sick time.
  • Minimum Wage Changes: The State Treasurer provided 5 different options for adjusting wages and provided the following figures last week to the Michigan Supreme Court: $12.48 an hour on Feb. 21, 2025 (estimated effective date), $13.29 in 2026,$14.16 in 2027 and $14.97 in 2028. It also includes a new tipped wage phase-out schedule. The state is expected to issue a chart with the exact new minimum wage rates in the coming weeks; however, the actual rate is expected by November 1, 2024.

• The Court ordered the reinstatement of these initiatives after a period equivalent to the time employers would have had to prepare for the new laws without the amendments. This ruling will stand unless further judicial, legislative, or voter-driven constitutional action dictates otherwise.
  • Appeals or rehearing of the Supreme Court decision are limited and discretionary.
  • A voter-driven action, like a referendum, may not be possible for the 2024 ballot due to the timing of the Court’s decision, even with sufficient support.

• When the ESTA is reinstated in February of 2025, it will replace the now-voided Paid Medical Leave Act (PMLA) and will make many changes to employer paid-leave requirements (Earned Sick Time Act (ESTA)).

• The reinstatement of the IWOWA will have a significant impact on Michigan employers (The Improved Workforce Opportunity Wage Act (“IWOWA”)).

Background:

• In 2018, two key ballot initiatives were approved for Michigan’s general election:

• The Improved Workforce Opportunity Wage Act (IWOWA) aimed to raise the minimum wage to $12 per hour by 2022, with annual inflation-tied increases and a phase-out of tip credit provisions by 2024.

• The Michigan Earned Sick Time Act (ESTA) proposed that employers should allow up to 72 hours of earned sick time per year.

• Before the election, the Michigan Legislature adopted both laws in September 2018, removing them from the ballot. However, in the same legislative session in December 2018, both laws were amended. The amendments delayed the minimum wage increase until 2030 and modified ESTA, which was renamed the Michigan Paid Medical Leave Act (PMLA). Both amended laws took effect in early 2019.

• The Michigan Legislature’s “adopt-and-amend” strategy was contested in court by plaintiffs. The Court of Claims deemed the strategy unconstitutional in July 2022, reinstating the initial ballot initiatives from February 2023. This decision was overturned by the Court of Appeals in February 2023.

The Michigan Supreme Court Decision

• The plaintiffs then appealed to the Michigan Supreme Court, which reversed the previous decision on July 31, 2024, declaring the strategy unconstitutional and reinstating the ESTA and IWOWA initiatives from February 21, 2025. The Court also clarified that the Legislature could amend these laws in a future session with a simple majority, as the initiatives were not ratified by public vote.

For a good breakdown of the IWOWA.

For a good breakdown of the ESTA.

Business Considerations

• Monitor the Michigan state ESTA webpage and the Michigan state Minimum Wage webpage for the updated model postings and notices (when available), as well as additional guidance.
• Employers should review their policies to ensure they are providing the required amount of benefits under the ESTA and IWOWA. This applies to every employer in Michigan regardless of size and should be done before February 2025.
• Although employers still have time to prepare, they should be proactive and start as soon as possible. Compliance with the new requirements will avoid significant headaches in the future.
• Employers should review their policies to ensure they are providing the minimum amount of earned sick time under the ESTA and properly paying all employees the new minimum wage amounts.
• Employers should be aware that the Legislature could amend these laws in a future session, and that further judicial, legislative, or voter-driven constitutional action could prescribe a different course, so it is recommended for them to monitor the developments.

Source References

• Mothering Justice v Attorney General
• The Improved Workforce Opportunity Wage Act – Public Act (PA) 337 of 2018
• The Earned Sick Time Act (ESTA) – PA 338 of 2018
• Michigan Supreme Court Reinstates Voter-Initiated Sick Leave Law (Faegre Drinker Biddle & Reath LLP)
• Michigan Supreme Court Reinstates Expanded Paid Sick Leave and Minimum Wage Requirements (Barnes & Thornburg LLP)
• If Pain, Yes Gain—Part 103: Blast to the Past: Michigan’s Earned Sick Time Act of 2018 To Be Reinstated in 2023 (Seyfarth Shaw LLP.)
• The Current Impacts of Michigan’s Mandatory Paid Leave, Minimum Wage Law Changes (Detroit Regional Chamber)

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