New Obligations for Employers in 2019: Laws mandate paid medical leave, minimum wage increases

The Paid Medical Leave Act (PMLA) and Improved Workforce Opportunity Wage Act (IWOWA) were signed into law by Gov. Snyder last month. Both laws will become effective 91 days after the last day of the legislative session, or around April 1, 2019.

The PMLA mandates that employers with 50 or more employees will provide 40 hours of paid medical leave (PML) to eligible employees each year, which also covers paid leave for employees dealing with issues related to domestic violence and sexual assault. The IWOWA provides for mandatory minimum wage increases for employees each year, with an increase from $9.25 to $9.45 per hour in 2019, increasing incrementally to $12.05 per hour by 2030.

All Michigan employers who employ hourly workers will be affected by these laws – and employers have just three months to prepare.

New Laws Began as Ballot Initiatives

The PMLA and IWOWA were not enacted in the traditional way; they began as ballot initiatives on the November 2018 ballot. The Michigan Constitution provides that all qualifying ballot proposals are subject to legislative review. During such review, the state legislature may adopt the initiative as written, reject the initiative and let the voters decide, or propose a revised version of the initiative.

The Michigan legislature opted to adopt both ballot initiatives, as written, in September, with the intent to later amend them during the lame-duck session. If the legislature had not adopted the ballot initiatives and they were approved by voters in the mid-term election, any attempt to later amend the laws would have required a three-fourths legislative majority. During the lame-duck session, the legislature substantively amended both acts, making them less onerous to employers.

The Paid Medical Leave Act (Before Amendment)

The PMLA (which was known as the Earned Sick Time Act when adopted by the legislature) included many provisions that the legislature and business advocacy groups found overly burdensome to employers. For example, the law as adopted was not limited to larger employers. Small employers, defined as having less than 10 employees, were required to provide 40 hours of paid time off and 32 hours of unpaid time off per year to employees. Employers with 10 or more employees were required to provide 72 hours of paid time off per year. The law also allowed for carryover from year to year of accrued paid time off without providing a cap on accrual amounts.

The Michigan Chamber of Commerce and other business advocacy groups supported legislative amendment of the law, citing the chilling effect it would have on businesses, making Michigan less competitive for new jobs compared with other states. Employee advocacy groups argued against legislative amendment, citing that more than 380,000 citizens had signed petitions to put it on the ballot, and that the law would improve the health and well-being of employees, increase productivity of  the workforce, and benefit the economy.

The Paid Medical Leave Act (After Amendment)

The PMLA, as amended, represents a balance of the above interests.  An “employer” under the act is any person, firm, business, educational institution, nonprofit agency, corporation, limited liability company, government entity (other than the U.S. or other state governments), or other entity that employs 50 or more individuals. An “eligible employee” is an individual engaged in service to an employer in its business from whom the employer is required to withhold federal income tax, excluding employees who are exempt status, whose primary work location is in another state, employees who are minors, and employees who work 25 weeks or less per year.

The act requires that employers allow employees: (i) to accrue PML at a rate of one hour for every 35 hours worked (employees working over 35 hours per week will not accrue more than one hour); (ii) to accrue up to 40 hours PML per year; (iii) to use up to 40 hours of PML in a year; (iv) to carry over up to 40 hours of unused, accrued PML into the next year; and (v) to use PML for their own or a family member’s mental or physical illness, for reasons related to issues of domestic violence or sexual assault when the employee or the employee’s family member is a victim of domestic violence or sexual assault, or for issues related to public health emergencies.

Employees will begin to accrue PML on the effective date of the law or upon their hire date, whichever is later, however, employers may require employees to wait 90 days before they can begin to accrue PML. Employers have the option of allowing employees to use PML as it is accrued, or to “frontload” the 40 hours (or a prorated amount for new hires) at the beginning of the benefit year.  Employers who opt for frontloading are not required to allow employees to carry over PML into the next benefit year. Also, the law does not require employers to provide financial reimbursement for unused PML.

There is a rebuttable presumption that an employer is in compliance with the PMLA if it provides at least 40 hours PML to an eligible employee each year. Employers who are found to be in violation of the act will face a penalty of up to $1,000 and payment of all PML improperly withheld. Employers are also required to display a poster in their business (available through LARA at no cost) notifying employees of their rights under the PMLA.

The Improved Workforce Opportunity Wage Act

The mandatory minimum wage increases required by the IWOWA through 2030, as discussed above, will not take effect if the unemployment rate for the state is 8.5 percent or more in the preceding year. The legislature substantially slowed the increases called for in the ballot initiative, which would have reached $12 by 2022, instead of by 2030. The act also dramatically slowed the rise of the minimum wage for tipped employees from $12 by 2024 to $4.58 by 2030.

Employers Must Prepare for Paid Medical Leave

When budgeting for PML, employers should consider taking a conservative approach by assuming that all employees will use their 40 hours of PML. Employers will also need to decide whether to frontload the 40 hours for the year or allow for the standard accrual of up to one hour per week, and determine whether they will require new hires to wait 90 days to begin accrual of PML. Additionally, employers should review their current policies to determine what modifications will be necessary to accommodate the PMLA, make those changes to their employee handbooks, and train their management team on the new law, including the use of PML by employees for purposes related to domestic violence and sexual assault.

Janis L. Adams is an attorney at Danbrook Adams Raymond PLC in Traverse City. She specializes in employment and labor law, representing employers in all aspects of employment-related matters and litigation. Contact her at (231) 714-0162 or jadams@darlawyers.com.

 

 

 

 

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