Small Business Briefing: Understanding New Paid Sick Leave and Minimum Wage Requirements

August 2, 2024 

The Michigan Supreme Court decided on July 31, 2024 that the 2018 Minimum Wage and Paid Sick Leave law changes were not constitutional. This ruling now means there are three big changes on the horizon:

• A series of increases in the regular minimum wage (currently $10.33/hour)
• A phase out of the tipped wage credit (currently 38% of minimum wage)
• A specific and complex Paid Sick Leave benefit

Minimum Wage & Tipped Wage

The new minimum wage and tipped wage schedule beginning February 21, 2025, is as follows:

• The minimum wage will increase to $12 per hour.
• Tipped wages will begin to phase out, with an initial increase by at least $2 per hour in February to be adjusted for inflation.
• The minimum wage will continue to increase after 2025 and is estimated to reach $15 per hour by 2028.

February 21, 2025: The minimum hourly wage will be $10.00 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 48% of minimum wage. We estimate that this will be around $12.50. 

February 21, 2026: The minimum hourly wage will be $10.65 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 60% of minimum wage.

February 21, 2027: The minimum hourly wage will be $11.35 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 70% of minimum wage.

February 21, 2028: The minimum hourly wage will be $12.00 plus the state treasurer’s inflation adjustment, using July 31, 2024, as the endpoint for that calculation. The tip credit will be 80% of minimum wage. 

February 21, 2029 (originally 2023 and after): The state treasurer shall calculate the inflation-adjusted minimum wage as set forth in 2018 PA 337, § 4(2). The tip credit will no longer exist.

Paid Sick Leave Requirements

Businesses with 10 or more employees must provide at least 72 hours of paid sick leave each year, while businesses with fewer than 10 employees must provide at least 40 hours.

• Applicable to all employees, including seasonal, part-time, and full-time.
• Immediate eligibility for accrued benefit; waiting periods are unlawful.
• Accrual rates differ based on company size.
• Benefit must carry over year to year.
• Front end loading appears to be disallowed.
• Paid benefit rate must match the average hourly rate of the previous pay period.

The Supreme Court’s decision means that employers:

• May not require documentation for leave of 3 days or less.
• May require documentation for leave beyond 3 days, but cannot limit it beyond a ‘health care professional’.
• Must pay for the out-of-pocket cost of getting the documentation if required.
• Must track hours to show compliance with statutory minimums for up to 3 years.

On August 1, 2024, SBAM President & CEO Brian Calley hosted a special edition of our Small Business Briefing outlining the ruling and implications, and answered member questions. Watch below.

If this ruling will negatively impact your business, take SBAM’s Call to Action and tell your legislators.