Detroit City Wire

The Michigan Supreme Court's recent decision on the state's paid leave and minimum wage laws will bring significant changes to businesses starting in February 2025. The court ruled that the Michigan legislature's adoption and amendment of a 2018 proposal was unconstitutional, leading to three major changes: adjustments to paid sick leave benefits, an increase in the regular minimum wage, and a phase-out of the tipped wage credit.

The Earned Sick Time Act (ESTA) will replace Michigan’s Paid Medical Leave Act (PMLA) on February 21, 2025. ESTA mandates that all employees, including temporary, seasonal, and casual workers, receive paid leave. Employers must ensure compliance even for services performed by external contractors like landscapers or babysitters.

Under ESTA, employees accrue one hour of paid time for every 30 hours worked, up to 72 hours per year. Smaller employers can cap accrual at 40 hours with an additional provision of 32 unpaid hours. ESTA does not allow frontloading or credits for prior service but permits immediate use of previously accrued time for those returning within six months.

Employers are required to provide notice about earned sick time policies at hiring and maintain detailed records for three years. ESTA prohibits retaliatory actions against employees exercising their rights under the act. Violations can result in fines up to $1,000 per incident.

Minimum wage rates will also see changes starting February 21, 2025:

- $10.00 plus inflation adjustment

- $10.65 plus inflation adjustment in February 2026

- $11.35 plus inflation adjustment in February 2027

- $12.00 plus inflation adjustment in February 2028

From February 2029 onwards, annual adjustments will be made based on inflation unless state unemployment exceeds 8.5%.

For minors aged 16 and 17, the special rate remains at 85% of the standard minimum wage; similarly, a training wage of $4.25 applies during the first 90 days of employment for those under age 20.

The tipped wage credit will be phased out by February 2029 according to this schedule:

- February 21, 2025: Tipped minimum wage at approximately $6

- February 2026: Tipped minimum wage at 60% of standard

- February 2027: Tipped minimum wage at 70% of standard

- February 2028: Tipped minimum wage at 80% of standard

By February 2029, tipped wages must align with regular minimum wages.

Business owners have until these dates to adjust their practices and may contact elected officials to seek amendments.