Michigan Court Voids State’s Minimum Wage Act

By Jana Bjorklund, GovDocs Senior Counsel and Director, Employment Law and Compliance
Published Aug. 1, 2022

Minimum Wage Michigan Court Decision

The original ballot initiative did not have any limitation on Michigan minimum wage increases.

Michigan minimum wage has been impacted by a recent court decision.

The state’s minimum wage law under the Improved Workforce Opportunity Wage Act (IWOWA) was originally introduced through a ballot initiative in 2018.

Before voters could weigh in on the measure, the Michigan Legislature voted to approve the ballot initiative. And then subsequently amended the requirements of the law.

As a result, the Michigan voters were prevented from deciding on the original ballot initiative or the amended version passed by the Michigan Legislature.

Paid leave in Michigan was also impacted.

UPDATE: AUG. 2, 2022

State officials have released a statement about the court of claims ruling.

On July 19, 2022, the Michigan Court of Claims issued a decision that voided the as amended versions of the Michigan Improved Workforce Opportunity Wage Act, MCL 408.931 et seq. and the Michigan Paid Medical Leave Act MCL 408.961 et seq. (the amended version changed the name in the 2018 initiative from Earned Sick Time Act).

This decision as it stands would increase the current minimum wage in Michigan as well as expand the eligibility, accrual, and use of paid sick leave, among other benefits for Michigan’s working people. This will mean changes for businesses, and they will need to determine how to comply.

On July 29, 2022, the Court of Claims entered an order staying the effect of this decision until February 19, 2023, to give employers and the relevant state agencies time to accommodate the changes required by the ruling.

We understand residents want clarity on these issues, but this litigation is fluid, and we will update this webpage accordingly as the situation continues to develop.

Michigan Minimum Wage Legislative Action Challenged

This decision by the Michigan legislature was challenged in litigation by the original petitioners of the ballot measure. On July 19, 2022, the Michigan Court of Claims, in Mothering Justice v. Nessel, held that the Michigan Legislature’s actions violated the state constitution.

The legislature and the State of Michigan have appealed the Court of Claims decision to the Michigan Court of Appeals and requested an immediate stay.

A hearing is scheduled for Aug. 2, 2022. If the stay is granted, it would prevent the original ballot measures from going into effect. Any changes would then be dependent on the final decision from the Court of Appeals.

If the stay is not granted, it may be possible that compliance with the original ballot initiative may be required as early as Aug. 9, 2022.

Impact to Michigan Minimum Wage in Michigan

Michigan’s minimum wage may increase to $12 per hour (from its current $9.87 per hour) and the minimum wage would increase annually to account for inflation (a provision which doesn’t currently exist under IWOWA).

Under IWOWA, the increase to $12 per hour wasn’t scheduled to occur until at least 2031.

The original ballot initiative did not have any limitation on minimum wage increases. However, under IWOWA, there is a provision that no minimum wage increase will occur if the unemployment rate exceeds 8.5 percent in the prior year.

The original ballot initiative also eliminates the tip credit by Jan. 1, 2024.

What Next?

GovDocs will be watching the decision from the hearing scheduled on Aug. 2, 2022. Unless the stay is granted, the original ballot initiative provisions are valid and may be implemented effective Aug. 9, 2022, unless there is further intervention on any potential changes because of the pending court appeal.

Employers should review their current pay practices for Michigan and have a plan in place to make any necessary changes in the event the increased minimum wage rates under the original ballot initiative become effective.

This Employment Law News blog is intended for market awareness only, it is not to be used for legal advice or counsel.

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