Michigan Scales Back Minimum Wage Increase and Paid Leave Requirement

Overview: The Michigan Legislature has adopted two pieces of legislation (Senate Bill 1171 and Senate Bill 1175) that will scale back increases to the minimum wage and require certain employers to provide paid sick leave (and now call it paid medical leave).

Effective Date: Senate Bill 1171 and Senate Bill 1175 take effect 90 days after adjournment of the legislature. The predicted effective date is current between March 20, 2019 and April 1, 2019.

Details:

Background: A proposed minimum wage increase and paid sick leave requirement were set to be part of the voter ballot in the general election in November. However, the Michigan legislature stepped in to adopt both measures in September, removing them from the ballot. Because many in the legislature opposed the ballot measures, the passage of the laws was seen as a strategic maneuver to give the legislature a better opportunity to try to amend the laws, which the legislature has now done with Senate Bill 1171 and Senate Bill 1175.

Senate Bill 1171: Scales back the schedule of increases to the minimum wage that were approved in September. Under Senate Bill 1171, the minimum wage will increase to $9.45 in 2019 and then increase each subsequent year until it reaches $12.05 in 2030. However, a scheduled increase won't take effect if Michigan's unemployment rate is 8.5 percent or higher for the year preceding the scheduled increase.

Below is the schedule for the increases to the minimum wage:

Senate Bill 1171 also eliminates inflation-adjustment provisions in the legislation approved in September. Therefore, the minimum wage won't be adjusted for inflation.

Tipped Employees: Senate Bill 1171 also significantly scales back changes to the rules for tipped employees. The measure approved in September would have eventually required employers to pay the full minimum wage to tipped employees. Instead, Senate Bill 1171 provides that the minimum cash wage employers must pay tipped employees will be 38 percent of the applicable minimum wage. If the employee's direct cash wage and tips fail to meet or exceed the applicable minimum wage, the employer must make up the difference.

The law also removes a few other tipped-employee provisions that were in the measure approved in September, including one that would have required employers to provide employees a written notice of their plan to distribute service charges.

Senate Bill 1175: Significantly amends Michigan's Earned Sick Time Act, the other measure approved by the legislature in September. Among other things, Senate Bill 1175:

·      Renames the law the Paid Medical Leave Act.

·      Includes greater restrictions on who is eligible.

·      Changes the accrual rate and decreases the number of hours that can be accrued.

·      Limits the reasons for which employees may take leave.

·      Narrows the definition of covered family members.

·      Revises rules regarding pay during leave.

·      Amends employer and employee notice requirements.

·      Removes a provision related to rules about finding replacement workers.

·      Eases recordkeeping requirements.

Employee Eligibility: Under the amended law, to be eligible for paid medical leave, employees must work, on average, 25 or more hours during the previous calendar year for an employer with 50 or more employees.

Certain types of employees aren't eligible for paid medical leave, including but not limited to:

·      Employees who are classified as exempt from overtime.

·      A "variable hour employee" as defined by the Affordable Care Act.

·      Individuals employed for 25 weeks or fewer in a calendar year for a job scheduled for 25 weeks or fewer.

By contrast, the measure approved in September would have generally applied to all employers and employees who work in the state.

Accrual and Carryover: Under Senate Bill 1175, eligible employees are entitled to accrue one hour of paid medical leave for every 35 hours worked, up to a maximum of 40 hours of paid medical leave per benefit year (under the measure approved in September, the accrual rate would have been one hour for every 30 hours worked, up to a maximum of 72 hours). Employers may limit accrual to one hour of paid medical leave in a calendar week. Employees are entitled to begin accruing paid medical leave on their date of hire or the effective date of the law, whichever is later.

Employees are generally entitled to carryover up to 40 hours of unused paid medical leave to the following benefit year. However, if an employer provides at least 40 hours to an eligible employee at the beginning of the benefit year, no carryover is required. For employees hired during the benefit year, Senate Bill 1175 allows employers to prorate the amount of leave provided.

Use: Employers may make employees wait until they have been employed for 90 days before they can use accrued paid medical leave. Employers may limit use to 40 hours of paid medical leave per benefit year. Employees are entitled to use paid medical leave for:

·      The employee's or a family member's mental or physical illness, injury, or health condition;

·      The employee's or a family member's medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition, or preventive medical care;

·      For medical care, counseling, obtaining legal services, or participating in a civil or criminal proceeding when the employee or a family member is a victim of domestic violence or sexual assault; and

·      The closure of the employee's primary workplace due to a public health emergency, the closure of their child's school or place of care due to a public health emergency, or when a health care provider has determined that the employee's or a family member's presence in the community would jeopardize the health of others.

Senate Bill 1175 removes a provision that would have allowed eligible employees to use such leave to attend meetings at their child's school.

As amended, the law defines a family member as:

A child, stepchild, legal ward, or a child to whom the employee stands in place of a parent;

·      Grandchild;

·      Grandparent;

·      Parent or spouse's parent;

·      Sibling; and

·      Spouse.

Senate Bill 1175 removes from the definition references to domestic partners and individuals related by blood or affinity.

Pay During Leave: During the leave, employers must pay eligible employees a rate at least equal to the greater of either their normal hourly or base wage or the applicable minimum wage. For the purposes of paid medical leave, employers are permitted to exclude overtime, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, and gratuities from the calculation of an eligible employee's normal hourly wage or base wage.

Replacement Workers: Senate Bill 1175 removes a provision that would have expressly prohibited employers from requiring an employee to find a replacement worker as a condition for using the leave.

Employee Notice and Documentation: Under Senate Bill 1175, employees requesting paid medical leave must comply with their employer's usual and customary notice, procedural, and documentation requirements for requesting leave. Employers must give employees at least three days to provide documentation.

Note: The law has specific rules for requesting documentation when the leave is related to domestic violence and sexual assault.

Employer Notice: Senate Bill 1175 retains a requirement for employers to display a poster about the law, but it removes a requirement for employers to give employees written notice by April 1, 2019. Senate Bill 1175 also removes a requirement that the notice be given in Spanish and other languages.

Recordkeeping: Employers must keep records documenting the hours of work and paid medical leave taken by employees for at least one year (instead of the three years that would have been required under the measure approved in September).

Relationship to Other Leave Policies: Senate Bill 1175 establishes that there is a "rebuttable presumption" that an employer is in compliance with the law if the employer provides at least 40 hours of paid leave (such as paid vacation) to eligible employees each benefit year.

Action Required: Employers with employees working in Michigan should review their policies, forms, and practices to prepare for these changes.

As always, please be sure to contact your HR Business Partner if you have any questions.

This content provides practical information concerning the subject matter covered and is provided with the understanding that ADP is not rendering legal advice.