The Senate Committee on Health, Education, Labor, and Pensions (HELP) on Tuesday, February 27, 2024, narrowly advanced the nomination of Acting Secretary of Labor Julie Su to serve as permanent Secretary of Labor. The Committee voted 11-10 to advance her nomination to the full Senate floor, according to media reports.

The HELP Committee held a markup on Su’s renomination in a closed-door meeting Tuesday. Sen. Bernie Sanders (I-Vt.), HELP Committee Chair, issued a statement of support. “She has been an excellent Deputy Secretary of Labor, an excellent Acting Secretary of Labor, and I believe that she will make an excellent Secretary of Labor. Her strong pro-worker track record and tireless dedication to working families across this country shows beyond a shadow of a doubt that she is the right person for the job. I urge my colleagues to support her nomination.”

The Senate HELP Committee previously voted to advance Su’s nomination to Labor Secretary in April of 2023 but it has stalled since.

President Joe Biden first nominated Su last spring to replace former DOL Secretary Marty Walsh, who departed in February 2023. Her nomination was returned to the White House last December after failing to garner sufficient support to clear a path to confirmation by the full Senate. In January 2024, President Biden promptly renominated Su for the post. She continues to face staunch opposition, however, and her nomination is not expected to be approved by the full Senate.

Su has served as Acting Secretary of Labor since March 2023. During this time, the DOL has engaged in significant rulemaking, including releasing a final independent contractor rule, a sweeping revamp of the Davis-Bacon regulations, and a proposed rule revising the minimum salary requirements for application of the DOL’s “white-collar” exemptions. Prior to that, she served as Deputy Labor Secretary, a post for which she was confirmed by the full Senate to in July of 2021.

Also this week, business groups registered their continuing opposition to Su’s nomination.

In a letter Tuesday to HELP Committee members, Jeff Brabant, National Federation of Independent Business (NFIB) Vice President of Federal Government Relations, wrote, “As Acting Secretary, Julie Su’s Department of Labor has consistently demonstrated a lack of interest in complying with the Regulatory Flexibility Act, which requires the Department to consider the impacts its regulations will have on small businesses.”

“No matter how many times she’s renominated, Julie Su’s record remains a huge red flag for our industry and any senator concerned about radical policies from California becoming federal law,” American Trucking Association President and CEO Chris Spear said Tuesday.”

President Joe Biden on Monday, January 8, 2024, sent to the Senate the nomination of Acting Secretary of Labor Julie Su to serve as permanent DOL Secretary. President Biden previously had signaled his intent to send the nomination back to the Senate after it failed in the last session.

Biden first nominated Su last spring to replace former DOL Secretary Marty Walsh, who departed in February 2023. However, her nomination was returned to the White House in December after her nomination failed to garner sufficient support to clear a path to confirmation by the full Senate.

Su has been confirmed to serve as DOL’s Deputy Labor Secretary, but her nomination to the agency’s top post has faced stiff resistance by Senate Republicans, who had urged the President not to renominate the embattled Su and to put forward a different nominee.

The nomination of Acting Secretary of Labor Julie Su to serve as permanent DOL Secretary has been returned to the White House after failing to garner sufficient support to clear a path to confirmation by the full Senate, according to media reports.

President Biden nominated Su last spring to replace former DOL Secretary Marty Walsh, who left the agency in February 2023. Republican members of the Senate Committee on Health, Education, Labor, and Pensions (HELP) have opposed the nomination from the start, in part due to her tenure as head of California’s Labor & Workforce Development Agency (LWDA) and, prior to that, as California Labor Commissioner. In that role, Su implemented use of the controversial “ABC” test for determining whether a worker is an employee or independent contractor.

Republicans on the HELP Committee had sought assurances that Su would not attempt to implement the ABC test at the federal level, and also that the DOL would not undertake rulemaking on a joint employer test. In its last semiannual agenda, the DOL offered no indication that a joint employer rule was in the works. An independent contractor proposed rule, issued in 2022, would return to the multi-factor analysis used by the DOL for decades and which, in some variation or another, has been used by the federal courts throughout that time. The rule has yet to be finalized. An independent contractor final rule was slated for an October 2023 release date, but it is currently pending review at the White House. Under Su, the DOL also issued a proposed rule that would sharply increase the minimum salary floor to satisfy the white-collar exemptions from the Fair Labor Standards Act’s overtime and minimum-wage requirements. The DOL has targeted an April 2024 release of the final rule.

President Joe Biden reportedly plans to renominate the embattled Su for the post.

The U.S. Department of Labor (DOL) unveiled its semi-annual regulatory agenda on December 6, 2023, which sets an April 2024 date for release of the agency’s anticipated final rule amending the regulations defining the “white collar” exemptions from the overtime and minimum wage requirements of the Fair Labor Standards Act (FLSA).

The DOL released its proposed rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional Outside Sales and Computer Employees on September 8, 2023. As proposed, the rule sharply increases the minimum salary requirements for the executive, administrative, and professional (EAP) exemptions to apply. The salary threshold would increase from the current $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year)—a 55% increase from the current level. The minimum salary for application of the highly compensated employee (HCE) exemption would jump by 34%, from $107,432 per year to $143,988 per year. However, the DOL has indicated the actual salary threshold will be based on earnings data as of the date the final rule takes effect — which means the salary floor may be even higher than the projected $55,068. That could lift the operative threshold to more than $60,000 annually. (For more on the proposed rule, see DOL Releases Proposed White-Collar Exemption Rule, Sets Minimum Salary at $55,068.)

Whether the DOL will meet its April 2024 target date remains to be seen. The agency will have to review more than 33,000 comments received in response to its notice of proposed rulemaking, and to address substantive comments in the final rulemaking. It’s also uncertain how closely the final rule will conform to the rule as proposed, and when the final rule, once published, will take effect. The DOL’s proposed rule did state the rule would become effective 60 days after publication of a final rule (the minimum timeframe mandated for “major” rules under the Congressional Review Act). The DOL specifically sought comments on the proposed effective date and on whether to apply different effective dates to different provisions of the proposed rule. (Past rulemaking is not a useful predictor: the DOL’s Obama-era white-collar rule revision took effect more than 6 months after the final rule was issued; the Trump DOL’s final rule took effect 3 months after publication.)

Complicating matters further for employers as they seek to evaluate their options for compliance with the rule change is the possibility of a legal challenge (and possible injunctive relief barring enforcement pending the challenge).

Independent Contractor Rule

The other significant rulemaking in the formal agenda by the DOL’s Wage and Hour Division is the “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” which is in the final rule stage. The DOL had indicated that its independent contractor final rule would be published in October 2023 (five months later than it had previously asserted), but the agency failed to meet this deadline. On September 28, 2023, the final rule was sent to the White House Office of Information and Regulatory Affairs (OIRA), the final stage of the rule review process.

A notice of proposed rulemaking for the new Independent Contractor rule was issued in October 2022. The proposed rule would formally adopt the “economic realities” test for determining whether a worker is an employee or independent contractor under the FLSA. (For a full discussion of the NPRM and the history of the independent contractor analysis under the FLSA, see our article, What’s Old is New Again: Labor Department Flip-Flops on Independent Contractor Analysis.)

Joint Employer Rule

Absent from the DOL’s semi-annual agenda is reference to a joint employer rule. Talk of whether the DOL would engage in such rulemaking has resurfaced, particularly in light of the final rule issued by the National Labor Relations Board in October 2023 (and now set to take effect February 26, 2024). However, DOL leadership has indicated such a rule is not currently in the works, and the latest rulemaking agenda confirms there is no agency action at this time.

House Republicans are seeking assurances, however. In a December 7 letter, Rep. Virginia Foxx, House Education and the Workforce Committee Chair, asked Acting Secretary of Labor Julie A. Su to commit that the DOL will not issue a joint employer rule during Su’s tenure at the agency. Foxx was troubled by Su’s failure to expressly rule out a joint employer rule when she spoke at a Congressional hearing last June.

DOL joint employer rulemaking has been in limbo since July 2021, when the agency rescinded an employer-friendly final rule on “Joint Employer Status Under the Fair Labor Standards Act” issued during the final year of the Trump administration. In its formal rule rescinding the Trump-era joint employer rule, the agency did not propose a replacement rule, instead stating that “the Department will continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or subregulatory guidance is appropriate.”

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Please contact a Jackson Lewis attorney if you have questions about the status of DOL rulemaking.

County firefighters and law enforcement officers who opt out of employer- or union-provided health insurance coverage receive a monetary credit each pay period, minus an “opt-out fee” that goes toward the costs of maintaining the insurance plans. Although the final credit received in their pay is part of their regular rate of pay for purposes of calculating overtime compensation under the Fair Labor Standards Act (FLSA), the employer did not include in the regular rate of pay the amount withheld as an opt-out fee. The Ninth Circuit held this was proper as the opt-out fees were correctly excluded under a statutory exception for health plan contributions. Sanders v. County of Ventura, No. 22-55663, 2023 U.S. App. LEXIS 31641 (Nov. 30, 2023).

“When an employer, as here, decides to allow employees to retain some portion of an unused health insurance credit, it can permissibly structure the program to prop up the employee health plans without treating the full amount of the health credit as part of the FLSA regular rate of pay,” the appeals court wrote and affirmed a district court’s grant of summary judgment in favor of the county employer in an FLSA overtime collective action.

The Ninth Circuit has jurisdiction over federal courts in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington state.

Opt-Out Fees

Ventura County firefighters and law enforcement officers receive a flexible benefit allowance every pay period, which they can use toward premiums for the county-sponsored health plan or union-sponsored plan. Those who opt out of coverage are also entitled to this monetary “flex credit” each pay period; however, a portion of this credit is deducted as a fee that the employer uses to fund the health plans.

The flex credit appears on employees’ pay stubs as “earnings,” and the opt-out fee appears as a “before tax deduction.” After the county subtracts the opt-out fee from the flex credit, it pays the balance to employees in cash. The opt-out fee (and, thus, the residual cash payment to employees who opt out) varies from year to year. The county treated the net cash payment to opt-out employees as part of their regular rate of pay when calculating their overtime compensation; however, the county did not include the value of the opt-out fee in the regular rate calculation.

A federal court in California held that the opt-out fee was excluded correctly under 29 U.S.C. § 207(e)(4), which excludes from the regular rate “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing health insurance.” The Ninth Circuit agreed.

Not a Cash-in-Lieu Payment

The plaintiffs cited Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016) for the contention that the regular rate should include the opt-out fee. However, Flores distinguished between cash-in-lieu payments (which were to be included in the regular rate) and contributions to employees’ benefits (which may be included in the regular rate, depending on whether the program in question is a “bona fide plan” under Section 207(e)(4)). The plaintiffs argued that the opt-out fee is equivalent to a cash-in-lieu payment, but the appeals court said this reflects a misunderstanding of the nature of the opt-out fee. The opt-out fee does not function like the cash payment in Flores; instead, it is allocated to fund the health plans. The net cash payment does function like the cash payment in Flores, and the county treats it as such.

Paystub Description is Irrelevant

The plaintiffs pointed to the fact that the flex credits are displayed as “earnings” subject to a “before-tax deduction” (the opt-out fee). This was of no consequence, said the appeals court, because the paystubs reflect the requirements of the Internal Revenue Code, not the FLSA—and not the practical reality of the transactions. When determining the nature of the payment in question, what matters is what actually happens under the operative contract. Here, employees who opt out receive in cash only the amount left after the opt-out fee is subtracted.

Contributions Were “For Employees”

According to the plaintiffs, the exception outlined in § 207(e)(4) did not apply because they had opted out of the health insurance offerings — so the opt-out fee was not used to support their health care. The appeals court also rejected this argument, explaining that the statutory provision does not require that contributions be made for a particular employee’s benefits but “for employees” generally. And the opt-out fees, in this case, were used for employees who chose to participate in one of the available health plans.

No Deference Due on 20-Percent Cap

Finally, the plaintiffs asserted that the flexible benefits program was not a “bona fide” plan within the meaning of Sec 207(e)(4) because the flex credit exceeded 20 percent of the county’s total contributions for plan participants. In Flores, the appeals court had rejected a 20-percent ceiling requirement. In so doing, it declined to give deference to a U.S. Department of Labor (DOL) 2003 opinion letter supporting a 20-percent cap because the DOL had offered no rationale for adopting the ceiling.

In this case, the plaintiffs cited a (post-Flores) DOL 2019 Final Rule provision reaffirming the 20-percent cash contribution limit. The Ninth Circuit, however, found the Rule also was “undeserving of deference” as it was premised solely on the rejected 2003 opinion letter. Moreover, the decades-old opinion letter relied on the outdated, unduly narrow construction of FLSA exemptions that the U.S. Supreme Court expressly disapproved in its 2018 decision in Encino Motorcars, LLC v. Navarro.

At any rate, the appeals court found, the 20-percent cap applies to cash payments—not to the opt-out fees at issue here. The appeals court found that the net cash payments were under the 20% cap anyway.

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Please contact a Jackson Lewis attorney if you have questions about the types of payments that must be included within the regular rate of pay for purposes of calculating overtime pay due under the FLSA.

The U.S. Department of Labor (DOL) has issued its long-anticipated proposed rule to increase the minimum salary requirements for the “white collar” exemptions (executive, administrative, and professional) from minimum wage and overtime pay requirements under the Fair Labor Standards Act (FLSA).

Under the proposed rule, the salary level for the white-collar exemptions to apply will increase from the current $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year). That would be a 55% increase from the current level that became effective in January 2020 during the Trump Administration. The annual compensation level for highly compensated employees also will increase, by 34%, from the current $107,432 per year to $143,988 per year.

However, the DOL has indicated the actual salary threshold will be based on earnings data as of the date the final rule takes effect — which means that the salary floor may be even higher than the projected $55,068. That could lift the operative threshold to more than $60,000 annually.

For more on the proposed rule and anticipated legal challenges, click here.

A federal district court in Arizona held this week that courts are not required – or even authorized – to grant judicial approval of settlement agreements resolving individual claims brought under the Fair Labor Standards Act (FLSA), joining a growing number of courts calling into question the notion that private FLSA settlements require review and approval by either a court or the U.S. Department of Labor (DOL). Evans v. Centurion Managed Care of Ariz. LLC, 2023 U.S. Dist. LEXIS 139126 (D. Ariz. Aug. 9, 2023).

Background

Under Section 216(b) of the FLSA, an employee may bring a private lawsuit in an appropriate state or federal court, either on an individual or collective (class) basis, and may recover both actual and liquidated damages, as well as attorney’s fees and costs. Alternatively, under Section 216(c), “[t]he [DOL] is authorized to supervise the payment of the unpaid minimum wages or the unpaid overtime compensation owing to any employee or employees … and the agreement of any employee to accept such payment shall upon payment in full constitute a waiver by such employee of any right he may have under [Section 216(b)] of this section to such unpaid minimum wages or unpaid overtime compensation and an additional equal amount as liquidated damages.”

Following the holding of Lynn’s Food Stores, Inc. v. U.S., 679 F.2d 1350 (11th Cir. 1982), for more than 40 years the majority of federal courts, including some other courts of appeal, have concluded that FLSA claims may be settled only through approval by either the DOL or after a court of competent jurisdiction reviews and approves the settlement for fairness. See, e.g. Samake v. Thunder Lube, Inc., 24 F.4th 804 (2d Cir. 2022).

More recently, however, an increasing number of federal courts are questioning whether such judicial or DOL approval is required, or even allowed.

The Tide Appears To Be Turning

More recently, however, an increasing number of federal courts are questioning whether such judicial or DOL approval is required, or even allowed. The court in Martinez v. Bohls Bearing Equipment Co., 361 F. Supp. 2d 608 (W.D. Tex. 2005), was one of the first to hold that, because the case involved a bona fide dispute as to overtime pay due, court approval of the agreement was unnecessary. The Fifth Circuit subsequently adopted this rationale in Martin v. Spring Break ’83 Prods., LLC, 688 F.3d 247 (5th Cir. 2012), concluding that the private settlement agreement of an FLSA dispute was binding and enforceable without court approval, when “predicated on a bona fide dispute about time worked and not as a compromise of guaranteed FLSA substantive rights themselves.”

A significant number of district courts have since concurred that judicial or DOL approval is not required for bona fide disputes of individual FLSA claims. See, e.g. Walker v. Marathon Petroleum Corp., 2023 U.S. Dist. LEXIS 130671 (W.D. Pa. July 28, 2023); Jackson v. Dovenmuehle Mortg., Inc., 2023 U.S. Dist. LEXIS 113086 (E.D. Wisc. June 30, 2023); Martinez v. Back Bone Bullies Ltd., 2022 U.S. Dist. LEXIS 45870 (D. Col. Mar. 15, 2022); Alcantara v. Duran Landscaping, Inc., 2022 U.S. Dist. LEXIS 122552 (E.D. Pa. July 12, 2022); Saari v. Subzero Eng’g, 2021 U.S. Dist. LEXIS 179054 (D. Utah Sept. 17, 2021).

The Evans Decision

Evans is the most recent opinion to cast doubt on this judge-made requirement, explaining that “although the Court has previously engaged in the process of approving settlements in individual FLSA actions, it now joins the growing number of courts that have concluded that judicial approval is neither authorized nor necessary in this circumstance.” As the court observed, the text of the FLSA “strongly suggests” that Congress did not intend for a judicial approval requirement. Moreover, the court rejected policy reasons cited by some courts in favor of requiring settlement approval, finding, if anything, that policy considerations weigh against imposing a judicial hurdle to resolving an FLSA dispute. The requirement merely “slows the resolution of FLSA settlements and, by extension, the payment of wages to plaintiffs,” noted the court.

The Takeaway

Unless and until the U.S. Supreme Court weighs in, or the federal courts of appeal come to a consensus, judicial or DOL approval of individual FLSA settlements will remain a requirement in some jurisdictions. However, in some jurisdictions that is no longer the case and neither the parties nor the courts will have to undertake the time and expense of obtaining approval for settling such disputes. As the court in Evans noted, the case involved an individual settlement. The court did not hold that judicial approval was unauthorized with respect to class/collective action settlements, which still generally require court approval.

For a more in-depth look at the changing legal landscape of judicial approval of FLSA settlements, see our Special Report, Has Lynn’s Food Grown Stale? Courts Increasingly Question Obligation to Review FLSA Settlements.

If you have any questions about the Evans case, the settlement of FLSA disputes in general, or any other wage and hour question, please consult a Jackson Lewis attorney.

Recently enacted Oregon Senate Bill (SB) 184 soon will require employers to include independent contractors in their child support reporting requirements to the Oregon Division of Child Support of the Department of Justice. Currently, the reporting requirements apply only to an employer’s employees but, for all new engagements or re-engagements entered into on or after on January 1, 2024, must include any independent contractor hired by the employer as well. The new reporting requirements will apply if the employer has employees or independent contractors working only in Oregon, or is a multi-state employer and has designated to the United States Secretary of Health and Human Services that Oregon is the employer’s reporting state.

Not every independent contractor engagement or re-engagement will require reporting. For the purposes of SB 184, an independent contractor is someone who must file a federal form W-9 under the Internal Revenue Code and who is anticipated to be performing services for more than 20 days for the hiring entity. Re-engagement is defined as engaging an independent contractor that previously performed services as an independent contractor, with at least a 60-day gap between the periods during which services were performed.

The remainder of Oregon’s child support reporting requirements, set forth in ORS 25.790, are unchanged by SB 184. Employers are required to submit the report for employees (and soon for independent contractors) by mail upon hire or electronically on a monthly basis. Employers may choose to report individually or cumulatively during the reporting period and must include the employer’s name, address, and federal tax identification number, and the employee’s or independent contractor’s name, address, and social security number.

If you have any questions about Oregon’s child support reporting requirements or any other Oregon wage and hour law issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Reviving a security guard’s claim for overtime pay, the Eleventh Circuit Court of Appeals recently reiterated that employers may not pay employees an artificially low regular rate of pay to avoid paying the proper amount of overtime. Thompson v. Regions Sec. Servs., Inc., 67 F.4th 1301 (11th Cir. 2023). The Eleventh Circuit oversees the federal courts in Alabama, Georgia, and Florida.

Background

Plaintiff David Thompson worked as a security guard for Regions Security Services, Inc. (“Regions”). At the beginning of his employment, Thompson typically worked 40 hours per week at a rate of $13.00 per hour. However, beginning in early 2019, Regions began scheduling him for about 20 additional hours per week. For the first six to seven months of this new schedule, Regions continued to pay his regular rate of $13.00 per hour which, for the additional hours beyond 40 per week, corresponded to an overtime rate of $19.50, as required under the Fair Labor Standards Act (FLSA) (i.e., 1.5 times the regular rate for each hour worked beyond forty in a workweek).

However, in mid-July 2019, Regions inexplicably reduced Thompson’s regular hourly rate to $11.15, with a corresponding hourly overtime rate of $16.73. For the next eleven or so months, Thompson worked between 55 and 75 hours a week at this reduced hourly rate. Regions then returned him to a 40-hour per week schedule and increased his regular rate to its original $13.00 per hour.

Thompson subsequently filed suit against Regions, alleging that the reduction in his hourly rate was an attempt to avoid paying him the full amount of overtime he was due during the majority of the time his overtime hours were significantly increased, in violation of the FLSA. On motion by Regions, the district court dismissed Thompson’s lawsuit on the pleadings.

The Eleventh Circuit Decision

Thompson appealed and the Eleventh Circuit reversed. First, the Court of Appeals noted that the outcome turned on the meaning of the term “regular rate” which, under the FLSA, is the hourly rate for all non-excludable compensation that an employee receives for a 40-hour workweek. Here, arguably, Thompson had two different hourly rates – $13.00 and $11.15 – that could qualify as his regular rate.

The Eleventh Circuit then turned to the Department of Labor (DOL)’s FLSA regulations for further guidance. Most pertinently, Section 778.500 provides that an employee’s regular rate cannot “vary from week to week inversely with the length of the workweek.” Citing to an opinion from a sister circuit court, the Court of Appeals noted that an “‘agreement, practice, or device that lowers the hourly rate during statutory  overtime hours or weeks when statutory overtime is worked is expressly prohibited under’ the Department’s interpretive regulations” (quoting Brunozzi v. Cable Commns, Inc., 851 F.3d 990, 997 (9th Cir. 2017)). The Eleventh Circuit added that this prohibition prevents an employer from indiscriminately manipulating an employee’s hours and pay rate to effectively avoid paying time-and-a-half for overtime.

Here, it appeared that Thompson’s regular rate consistently remained at $13.00 per hour until, several months after he began working substantial overtime hours, the Company suddenly reduced his hourly rate with no obvious explanation. Although Regions asserted that it changed Thompson’s regular rate to accommodate his requested scheduling modifications, Thompson plausibly had suggested that instead the Company did so to avoid paying as much overtime during the eleven-month period when he worked significant overtime hours. Because a district court, when reviewing a motion for judgment on the pleadings, must accept the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff, an issue of material fact remained as to the real reason for the reduction in Thompson’s hourly rate. Thus, the grant of dismissal was reversed and the case remanded.

The Takeaway

As the Eleventh Circuit’s decision highlights, an employer may not artificially manipulate an employee’s regular rate in an effort to reduce or eliminate overtime pay, without running afoul of the FLSA (or comparable state law).

If you have any questions about this decision or any other wage and hour questions, please contact a Jackson Lewis attorney.

In 2018, the Michigan legislature adopted, and then within the same legislative session amended, two voter-approved ballot initiatives, one to significantly raised Michigan’s minimum wage and the other to expand employer obligations to provide paid sick leave. In 2022, the Michigan Court of Claims held that the legislature’s actions violated the Michigan Constitution and ordered reinstatement of the ballot initiatives as originally presented.

However, in January 2023, prior to the ordered reinstatement date, the Michigan Court of Appeals reversed that decision, concluding that the legislature did in fact possess such authority. The Michigan Supreme Court has now agreed to hear the matter and decide which version of the law is valid and, in doing so, whether the legislature has the authority under the Michigan Constitution to adopt and amend voter-approved ballot initiatives within the same legislative session. Mothering Justice et al. v. Attorney General and State of Michigan, Appeal No. 165325 (Mich. June 21, 2023).

Background

In the summer of 2018, the Michigan legislature was presented with two ballot initiatives, one to increase the minimum wage and the other to require employers to provide paid sick leave to their employees. Under the Michigan Constitution as interpreted and applied for many decades prior, the legislature had three options for each initiative:

(1) Reject the initiative, in which case it would be placed on the November 2018 ballot for the voters to either approve or disapprove;

(2) Adopt and enact it without any modifications; or

(3) Propose an alternative, which would then be placed on the ballot alongside the initiative, with the option receiving the most votes becoming law.

Instead, the legislature enacted both initiatives and then immediately amended them, revising key provisions in the process. In so doing, the legislature eliminated the ability of the voters to decide on either the original ballot initiatives or the amended versions passed by the legislature. In July 2022, the court of claims held that the legislature’s actions violated the Michigan Constitution. As result, the court voided the amended laws adopted by the legislature and ordered reinstatement of the ballot initiatives as originally presented. (For further details on the events leading to the court of claims decision and the decision itself, see our articles, Michigan Court Voids State’s Minimum Wage and Paid Medical Leave Acts, Creating Compliance LimboOrder Issuing Changes to Michigan Minimum Wage and Paid Sick Leave Law Stayed Until February 2023; and Michigan Minimum Wage and Paid Leave Update: Agency Guidance and the Mothering Justice Appeal.)

In anticipation of an appeal, the court of claims issued a temporary stay of the reinstatement. In January 2023, prior to the expiration of the stay, the Michigan Court of Appeals reversed the decision of the court of claims, holding that the legislature was within its authority to amend the 2018 ballot initiatives. (For further details of that decision, see our article, (Mothering) Justice Denied: Legislative Amendments to Minimum Wage and Paid Sick Leave Upheld).

The Michigan Supreme Court has now granted plaintiff Mothering Justice’s application for leave to appeal the decision of the Court of Appeals. The Supreme Court’s grant orders the parties to address (1) whether the legislature violated Article 2, Section 9 of the Michigan Constitution when it enacted the voter initiatives into law and then amended those laws in the same legislative session, and (2) if so, whether the voter initiatives remain in effect. A number of third parties already have filed amicus briefs and the Supreme Court’s order allows for additional parties to request filing of such briefs.

The Takeaway

As long as Michigan employers are in compliance with the current versions of Michigan’s minimum wage laws and Paid Medical Leave Act (PMLA), no further action is required unless and until the Michigan Supreme Court rules otherwise. Thus, for now the minimum wage remains at $10.10 per hour and the tipped employee minimum wage remains at $3.84 per hour. Similarly, under the current paid sick leave law, employers with more than fifty (50) employees must provide eligible employees with a maximum of 40 hours of paid sick time, with such employees accruing one hour of sick leave for every 35 hours worked.

Jackson Lewis attorneys will continue to monitor and report on related developments. In the meantime, please contact a Jackson Lewis attorney if you have any questions.