A recent ruling will result in increases to Michigan’s minimum wage and tipped minimum next year. The Michigan Supreme Court elected to reinstate two ballot initiatives, both previously adopted by the state legislature and subsequently watered down. The Michigan Paid Sick Leave Initiative and the Michigan Minimum Wage Increase Initiative were adopted by the Republican-controlled legislature in 2018. The court ruled the state Legislature lacked the authority to adopt and amend petition language for a pair of ballot initiatives in 2018 that aimed to increase the state’s minimum wage scale and expand earned sick time for workers. Justices said the “adopt and amend” tactic is unconstitutional since the Legislature circumvented the petition initiative process back in 2018. Under the opinion, increases to Michigan’s standard minimum wage, tipped minimum wage and an expansion of the state’s earned sick time laws are scheduled to take effect Feb. 21, 2025, 205 days after the ruling.

Michigan’s minimum wage is currently $10.33 an hour. In the ruling, a new minimum wage scale will take effect next year. Below is the tentative schedule:

That figure considers the Federal Bureau of Labor Statistics inflation figures. The final amount may be adjusted, based on calculations done by the state treasurer. In 2029 and after, the state treasurer will be tasked with determining an inflation-adjusted minimum wage and the tip credit will no longer exist.

The sick leave initiative will require businesses with fewer than 10 employees to allow their workers to accrue up to 40 hours of paid sick leave, at least one hour of leave for every 30 hours of work. It will also require employers with 10 or more employees to accrue up to 72 hours of paid sick time per year.

Employer Considerations

Employers will need to prepare for the potential impacts of this ruling. Below are some key considerations:

• Financial Planning: Employers should anticipate and budget for increased labor costs if the minimum wage rises. This includes revisiting pricing strategies, reviewing workforce hours, or even delaying planned expansions or hires to manage costs.
• Policy Adjustments: The potential expansion of paid sick leave will require overhauling current leave policies and employee handbooks. Employers will need to ensure compliance with new accrual rates, usage rules and record-keeping requirements.
• Employee Communication: Clear and proactive communication with employees about changes to wages and leave policies will be essential. Transparent discussions can help manage expectations and maintain workforce morale during transitions.
• Operational Changes: Businesses may need to adjust operational practices to accommodate higher labor costs and increased leave usage. This could include investing in automation, revising job roles and enhancing efficiency in other areas.

Here to Help

By preparing for these changes and considering their implications carefully, businesses can better navigate the transition and continue to thrive in a changing regulatory landscape. If you need further clarification on the legislation or have questions on how this may impact your business, our payroll advisors stand ready to assist you – contact us today to learn more.