On February 21, 2025, Governor Gretchen Whitmer signed Senate Bill 8 and House Bill 4002, which, effective immediately, revise minimum wage, tip, and paid sick leave standards Michigan employers were expecting to take effect that day due to a July 2024 Michigan Supreme Court decision. Notably, the state labor department has already revised its FAQs concerning paid sick leave and its FAQs concerning minimum wage and tips.

Brief Recap of How We Got Here: In 2018, rather than sending the issue to the voters, the Michigan legislature adopted as law two proposed ballot measures concerning the minimum wage, tips, and paid sick leave. During a lame-duck session that year, however, legislators repealed both laws and replaced them with different laws with different standards. After many years of litigation, in July 2024 the Michigan Supreme Court found that the legislature acted unconstitutionally, revived the originally enacted laws, and said the standards that were originally proposed would be “the” law starting on February 21, 2025. Additionally, via a separate opinion, the court addressed how the state would adjust the minimum wage and tip credit rates that would be applicable on February 21, 2025 and in future years. A modicum of mayhem ensued, both legislative chambers proposed their own “fixes” to the laws, and on the night before the revived standards were to take effect, they compromised and sent proposals to the governor, who signed them the next day.

Minimum Wage & Tip Credit: Michigan employers were expecting the state minimum wage to change on February 21, 2025, to $12.48 per hour, and that remains the case. For future years, they had been planning for the next minimum wage increase to occur on February 21, but that will change to January 1 beginning in 2026 and continue each subsequent calendar year. Another change will be the number of years with a preset rate before the state transitions to annual adjustments based on inflation. Michigan law now requires a minimum hourly wage of $13.73 as of January 1, 2026, and $15.00 as of January 1, 2027, with annual adjustments in 2028 and future years. Moreover, the state has changed the formula for the annual minimum wage adjustments.

A major concern for employers with tipped employees was the gradual reduction, and eventual elimination, of the tip credit. The amended law does increase the minimum cash wage a tipped employee must receive from their employer, but not as dramatically as employers might have anticipated, and the amendments keep the tip credit as an option for qualified employees. More specifically, the minimum cash wage will be the following percentage of the minimum wage: 38% (Feb. 21, 2025); 40% (2026); 42% (2027); 44% (2028); 46% (2029); 48% (2030); 50% (2031 and future years). 

The amended law also now includes a fine of up to $2,500 for a tipped employee pay violation.

The updated minimum wage poster is now available in English. It lists a minimum cash wage of $4.74, and maximum tip credit of $7.74, as of February 21, 2025 (and the rates for 2026 and 2027). The state labor department notes that the Spanish and Arabic versions of the poster are “coming soon.” The department notes online that “Employers who post Public Act 337, of 2018, as amended [] will be considered in compliance with the posting requirements[].”

Paid Sick Leave: Unlike the minimum wage and tip credit changes, the amendments Michigan made to its paid sick leave standards require us to spill just a bit more ink. However, rather than describe the entire law as amended, below we limit our focus to how the standards employers were anticipating have changed.

When the Standards Will First Apply: Employers were expecting to comply with different standards on February 21, 2025. That “start” date will remain true for many employers. However, the start date for employers with 10 or fewer U.S. (per revised FAQs) employees will be later. For these “small” employers, there are two dates to consider. Generally, the amended law requires compliance beginning on October 1, 2025. However, in a separate provision the amended law states that, if a small business did not employ an employee on or before February 21, 2022 – meaning it was a sole proprietorship or other solo operation – the start date will be three years after the date it hired their first employee. That date might be before October 1, 2025, in which case they should prepare to comply on October 1. However, if three years after hiring their first employee is after October 1, 2025, the small business can use that three-year anniversary date as its “start” date.

(Non) Covered Employers & Employees: The amended law does not apply to nonprofit agencies. Additionally, the amended law excludes the following workers:

• An individual who is covered by an employer policy that 1) allows the individual to schedule their own working hours; and 2) prohibits the employer from taking an adverse personnel action against the individual if the individual does not schedule a minimum number of working hours.
• Unpaid trainee or unpaid intern (the law contains specific criteria for who qualifies as such).
• Minors under 18.

Additionally, the amended law contains a provision not seen in other mandatory paid leave laws that provides a temporary exclusion for employees who entered into a qualifying contract with their employer. Notwithstanding any provision in a contract (which excludes an employer policy signed by the employee) saying it continues after its expiration date, the law will not apply to the employee until the contract expires if all of the following requirements are met: 1) the contract was signed before December 31, 2024; 2) the contract is effective for no longer than three years; 3) the contract conflicts with the law; and 4) the employer notifies the state labor department about the contract.

Finally, note that the state labor department, in revised FAQs, continues to suggest that the law does not apply to employers and employees subject to the Railroad Unemployment Insurance Act (RUIA).

Unionized Workforces: The amended law slightly changes when the law will apply to employees subject to a collective bargaining agreement (CBA). The law will apply when the CBA expires – notwithstanding any provision in the CBA saying it continues even after expiration – if: 1) the CBA is in effect on February 21, 2025; and 2) the CBA must now “conflict” with the law. Employers should be aware, however, that in its revised FAQs the state continues to suggest that whether the temporary CBA exception applies depends on whether the CBA provides paid leave benefits – and that silence in the CBA does not give rise to a “conflict” warranting exception.

Separately, for employees with union employees that are subject to the law, the amended law provides some, but not complete, flexibility (e.g., potentially different waiting period standards) for employer-signatories to a CBA that requires contributions to an ERISA-covered multiemployer plan.

Family Members: For the most part, who qualifies as a covered family member is the same, i.e., child, grandchild, grandparent, parent, sibling, spouse or domestic partner. However, the legislature has converted “Any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship” into two types of individuals: 1) an individual related by blood to the employee; and 2) an individual whose close association with the employee is the equivalent of a family relationship.

Accrual, Carryover, and Frontloading: Employers were anticipating an accrual standard of one hour of leave for every 30 hours worked (in Michigan, per the revised FAQs), and that remains the standard. The amended law expressly states that accrual need not occur when employees use paid time off. Airline employers, however, will be surprised by a newly added (and unique to mandatory paid leave laws) accrual presumption for flight attendants and flight crew, i.e., the law assumes they work 40 hours in each workweek (30 hours if employed by a small business). This standard appears to operate differently from the accrual presumption for employees subject to the executive, administrative, professional, and/or outside sales exemptions, where the law assumes a 40-hour workweek unless the employee’s normal workweek involves fewer than 40 hours, in which case leave accrues according to their normal workweek.

Although the amended law does not contain an annual or overall accrual cap, it will allow employers to limit how much unused leave carries over into a subsequent year. More specifically, small businesses can cap carryover at 40 hours and other businesses can limit carryover to 72 hours. Note, however, that in its revised FAQs the state labor department suggests that employers using an accrual-based system to comply with the law can avoid carryover requirements if they cash out unused leave at the end of the year.

Most notably, the amended law will allow employers to avoid the carryover requirements if, at the beginning of each year, they frontload a specific amount of leave: 40 hours (small businesses) or 72 hours (other businesses). In the revised FAQs the state labor department says, alternatively, frontloading may occur “on the date that the individual becomes eligible during the benefit year on a prorated basis,” which suggests employers can both delay the timing and amount of the initial frontload for new hires should an employee be hired mid-year.

Moreover, the law expressly allows pro-rata accrual for part-time employees, a rarity with mandatory paid leave laws. An employer must, at the time of hire, provide written notice to a part-time employee concerning how many hours they are expected to work for a year, and the frontload amount must be proportional to the amount of leave the employee would accrue if they were to work all those expected hours. Employers that want to explore pro-rata frontloading should approach the issue cautiously, however, as the amended law also requires providing additional leave if a part-time employee works more hours than expected. It is hoped the state labor department provides guidance on how frequently employers must cross-check their frontload amount against hours worked, the timeframe for topping up leave, and whether, in the event of a top-up, the “extra” leave is subject to, or excluded from, carryover requirements.

Finally, it is worth noting that, in its revised FAQs, the state labor department suggests an employer can recoup frontloaded leave from departing employees if: 1) the amount exceeds what they would have earned to date; 2) the deduction does not reduce the employee’s final pay below the state minimum wage; and 3) the employee voluntarily provided written consent to the deduction previously.

Use Caps & Using Leave: Under the amended law, small businesses can limit annual use to 40 hours (rather than 40 hours of paid leave and 32 hours of unpaid leave). For other businesses, the annual use cap is the same as they expected it to be: 72 hours.

The amended law extends the permitted waiting period employers can impose on employees hired after February 21, 2025. Previously, the law said employees hired after the law’s effective date could be made to waiting until the 90^th calendar day after beginning employment before they could use leave.  Now they can be made to wait until 120 calendar days after starting employment. Importantly, the amendments now clarify that employees who were employed as of February 21, 2025, are entitled to use their leave as it is accrued regardless of their tenure with their employer.

The amended law revises language concerning the minimum increment of use. As revised, the standard is one-hour increments or “the smallest increment that the employer uses to account for absences of [sic] use of other time.” At first blush, the removal of the phrase “employer’s payroll system” might not seem important. However, this edit should make it (even more) clear that the focus of the minimum increment of use provision written this way is not on how an employer may be able to track hours worked or time paid, but on the increment of time an employer requires employees to use when employees use other types of unpaid or paid time off (e.g., vacation). How substantial the removal of the phrase “the smaller of” from the standard might be remains to be seen. As of the time of publication, the state labor department’s revised FAQs read as follows: “Does earned sick time have to be taken in 1-hour increments? Yes, Earned sick time may be used in 1-hour increments or the smallest increment that the employer uses to account for absences of [sic] use of other time.” The department no longer suggests that employers may be obligated to allow use in an increment smaller than one hour.

Requesting & Documenting Leave: The law’s standards for requesting leave for foreseeable absences is no different from what employers were anticipating, but the amended law does tweak the employee notice requirements for unforeseeable absences. More specifically, employers can require employees to give notice as soon as possible or in accordance with the employer's policy if the following two conditions are met: 1) at the time of hire, February 21, 2025, or on the date the policy takes – whichever is latest – the employer provides the employee a written copy of its policy containing notice requirements; and 2) employees can provide notice after they are aware of the need to use leave. Keep in mind, though, that if an employer does not provide employees with its written policy, or it does not provide notice of changes within five days after a policy change, it cannot deny an employee’s request for failing to comply with the policy’s unforeseeable leave notice requirement.

The law continues to restrict an employer’s ability to request documentation to support an absence until an employee uses leave on four or more consecutive days, but the amended law does change the timeframe in which an employee must supply requested documentation from “in a timely manner” to not more than 15 days after the employer requests documentation.

Rate of Pay: The default rate of pay standard remains unchanged; essentially, the default is the employee’s hourly or base wage or the state minimum wage, whichever is higher. The amended law removes the requirement that employers look to the prior pay period to determine the rate of pay for employees with varying hourly rates. Additionally, the amended law details what the rate of pay does not include: overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities.

Rehired & Transferred Employees and Successor Employers: Most mandatory paid leave laws require that employers reinstate unused leave if they rehire an employee within a particular timeframe. As amended, Michigan employers’ reinstatement obligations will exist only if an employee is rehired within two months of separation. Additionally, the amended law provides that reinstatement is not required if the employer cashed out leave when employment ended. Similarly, although the law requires transferred employees to keep their paid sick leave balance, and for successor employers to assume responsibility for acquired employees’ balances, these obligations disappear if cash-out occurs at the time of transfer or succession.

Retaliation Prohibited: Although retaliation against employees who engage in protected activity remains prohibited, the amended law removes the 90-day rebuttable presumption of retaliation.

Notice to Employees: Employers might have already provided notice to employees about their rights under the law in anticipation of the February 21, 2025 start date. However, the deadline to provide that notice, along with the notice’s contents, have been changed. As amended, the law requires notice at the time of hiring or within 30 days of February 21, 2025 (i.e., March 23, 2025, per the revised FAQs), whichever is later. This additional time will be welcome news to employers that were struggling with uncertainties surrounding whether the law requires providing a specific state-created document (such as the poster) or just the information in an employer-created document. In its revised FAQs about employer notice requirements, the state labor department says “[t]he poster may serve as notice contents,” while also noting that “[e]mployers are also required to display a poster.” The updated poster is now available in English, with the state noting that the Spanish version is “coming soon.” Note, however, that the revised poster appears to contain incorrect information, e.g., it suggests employees can file a lawsuit, which, as we explain in the next section, is not an option under the amended law. Accordingly, employers should monitor the state labor department’s ESTA webpage for further revisions to the poster.

Because the amended law does not allow employees to file a lawsuit, it removes the obligation to notify employees of that option; instead, employees must be told that they can file a complaint with the state labor department.

Enforcement: As amended, the law does not include a private right of action for alleged violations, meaning the only recourse for employees (outside of an amicable resolution with their employer) will be filing a complaint with the state labor department. Importantly, the amended law permits the state labor department to impose a civil fine of up to eight times an employee’s hourly wage for a failure to provide leave in accordance with the law.

Next Steps: With the amendments taking effect immediately, employers will be scrambling to adjust their pay practices and paid leave policies. Inevitably, some employers might need to walk back statements they made about both their pay rates and leave policies when they thought the legislature and governor could not get the amendments through in time. As noted, the state labor department has already revised its FAQs, which employers should review. Moreover, employers should monitor that webpage for additional guidance the department might issue. And, of course, when chaos infiltrates your company, contact counsel to help you make heads or tails of things.