As a result of numerous legal challenges to the Improved Workforce Opportunity Act and the Paid Medical Leave Act, Michigan minimum wage, paid leave, and overtime protocols are in a temporary state of “limbo.” Although a stay order issued by the Michigan Court of Claims has delayed the activation of state amendments that raise the minimum wage and mandate paid sick leave for nearly all Michigan employees, these new policies will take effect on February 20, 2023.
In this article, we’ll explore the practical steps Michigan businesses can take to ensure full compliance with state minimum wage and overtime laws in 2023 and beyond. We’ll also discuss the HR & payroll adaptations that can help your business sustainably adapt to these new policies.
What Michigan Employers Should Expect
Assuming no further action is taken by the Michigan Supreme Court, Michigan Court of Appeals, or state legislature, raises to minimum wage and the implementation of paid sick leave for all employees will take effect on February 20, 2023.
Standard Minimum Wage + Tipped Minimum Wage
In February 2023, Michigan’s current standard minimum wage of $9.87/hr. will be increased to at least $12.00/hr. Due to an inflation-based provision in the initiative, this hourly rate could be increased even further. Additionally, another provision within the initiative could create a transitional rate of $10.10/hr., which would last from January 1, 2023, to February 19, 2023. This transitional rate will only be enacted if the state unemployment rate reaches or exceeds 8.5% in late 2022.
Among tipped employees, the minimum wage rate increase is even more significant: from $3.75/hr. to between $9.60 and $10.80/hr. This rate increase is part of the initiative’s plan to eliminate standard and tipped minimum wage discrepancies by 2024 (ramping tipped minimum wage up from 80% of standard minimum wage in 2022 to 100% by 2024).
Since inflation is a major and shifting concern at both national and state levels, Michigan employers must wait for directives from the Wage and Hour Division of the Michigan Department of Labor and Economic Opportunity to guide their final adjustments to standard and tipped minimum wage rates. These announcements are likely to be made in late 2022.
Next Tuesday, September 27th, we will be holding a webinar with James Reid from Disnmore Legal to discuss this latest court ruling regarding Michigan minimum wage and paid sick leave laws.
Come and learn what you should be doing now to prepare, and the potential outcome of the pending appeal. We'll also discuss what else is coming down the pipeline that you should be aware of as we head into the fall season of employment.
Workforce PayHub & Dinsmore Legal Update
Tuesday, September 27, 2022
3:00 PM EST
Paid Sick Leave and Overtime
One of the ballot initiatives that will take effect in February 2023 is the Earned Sick Time Act, which requires that almost all Michigan employers must offer 72 hours of annual sick leave. Small employers are only required to offer 40 hours of paid sick leave, with 32 hours of unpaid sick leave, whereas large employers with ten or more employees must offer fully paid sick leave for all 72 hours.
Regarding overtime, Michigan employers with two or more employees must pay all non-exempt employees 1.5x their standard hourly pay for any work that exceeds 40 hours in a week. The current overtime pay rate of $14.81 will increase in tandem with the standard and tipped minimum wage changes that will take effect on February 20, 2023. Unique to Michigan, employers can offer overtime compensation in the form of 1.5x paid time off (PTO) for each hour of overtime work, assuming a written agreement is in place. To learn more about overtime eligibility standards and other compliance concerns, please read our related article on Michigan Overtime Laws.
Stay a Step Ahead with Workforce PayHub
Employers in Michigan should prepare for the moderate and significant increases to standard minimum wage, tipped minimum wage, overtime pay rates, as well as paid sick leave requirements to ensure they are financially and logistically sound well before the February 2023 “start date.” Our expert staff can help your business understand the ins and outs of Michigan state legal compliance and align your payroll practices with those protocols to ensure a streamlined transition. We’re here to provide you with the comprehensive payroll, HR, time & labor, and benefits services you need to focus on your mission and your core business operations.
Ready to get a step ahead on legal compliance, payroll, and HR for the year ahead? Contact us today to start our collaboration.
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