Michigan Employment Law: 2025 Update

Michigan’s employment landscape is undergoing a significant transformation in 2025 due to new legislation and court rulings. These changes affect various aspects of employment, including minimum wage, tipped wages, earned sick time, unemployment benefits, and the right-to-work law. This article provides a comprehensive overview of these key changes, their implications for employers and employees, and potential challenges in their implementation. 

Minimum Wage Increases

Michigan’s minimum wage will see two increases in 2025. Effective January 1, 2025, the minimum wage will rise from $10.33 to $10.56 per hour[4]. A more significant increase will take effect on February 21, 2025, raising the minimum wage to $12.48 per hour[24]. These changes are a result of a 2018 Michigan Supreme Court ruling that reinstated the Improved Workforce Opportunity Wage Act (IWOWA)[2]. The IWOWA also includes a provision allowing employers to pay employees under 20 a training wage of $4.25 per hour for the first 90 calendar days of employment[3].

These increases also impact wages for minors and tipped employees. The table below summarizes the minimum wage increases for different categories of workers:

Changes to Tipped Wages

The IWOWA significantly impacts tipped employees by initiating a phase-out of the “tip credit” over five years, culminating in tipped employees earning the full minimum wage by 2030[2]. The tip credit allows employers to pay tipped workers a lower hourly wage, with the expectation that tips will make up the difference.

Currently, the tip credit is 38% of the minimum wage[3]. On January 1, 2025, the tipped minimum wage will increase from $3.93 to $4.01 per hour[4]. Following this, on February 21, 2025, it will rise to 48% of the adjusted minimum wage, or $5.99 per hour[34]. This percentage will steadily increase each year until it reaches 100% in 2030, effectively eliminating the tip credit[2].

For example, a server currently earning the tipped minimum wage of $3.93 per hour who works 30 hours a week would earn $117.90 per week before tips. With the changes in 2025, their base wage would increase to $4.01 per hour on January 1st and then to $5.99 per hour on February 21st. This translates to a weekly base wage of $120.30 and $179.70, respectively, before tips.

Earned Sick Time Act

Michigan’s Earned Sick Time Act (ESTA) will undergo significant changes in 2025. Starting February 21, 2025, this recently reinstated law mandates that most employers provide paid sick leave to their employees[25]. This expands upon the previous version of the ESTA, which only applied to employers with 50 or more employees[5].

Under the updated ESTA:

• Employers with 1 to 10 employees must provide up to 40 hours of paid sick time annually[5].
• Employers with 10 or more employees must provide up to 72 hours of paid sick time annually[55].
• All employees are covered, including part-time, temporary, and independent contractors[6].
• Employees accrue one hour of paid sick time for every 30 hours worked[23].
• Employees can use sick time for various reasons, including their own or a family member’s physical or mental health needs, issues related to domestic violence or sexual assault, and closures of businesses or schools due to public health emergencies[23].

Unemployment Benefits

In addition to the changes to minimum wage and earned sick time, Michigan is also increasing unemployment benefits. The maximum weekly benefit will increase from $362 to $614, and the duration of benefits will be extended from 20 to 26 weeks[2]. This change aims to provide greater financial support to individuals who have lost their jobs.

Right-to-Work Law Repeal

Another significant change in Michigan’s employment law landscape is the repeal of the state’s 2013 right-to-work law[3]. This repeal, which took effect in 2025, allows unions and employers to negotiate contracts that require all employees in a unionized workplace to pay union dues or fees, regardless of whether they are members of the union. This change has significant implications for union membership, collective bargaining power, and labor relations in Michigan.

Salary Threshold for Exempt Employees

While not a state-specific change, the new salary threshold for exempt employees under the Fair Labor Standards Act (FLSA) will also impact Michigan employers[7]. The FLSA establishes exemptions from overtime pay for certain employees, such as executive, administrative, and professional employees, if they meet specific salary and duties tests. The Department of Labor has announced changes to the salary threshold, requiring employers to adjust the minimum salary for their FLSA-exempt employees to maintain their exempt status.

Impact and Challenges

These changes to Michigan’s employment laws have far-reaching implications for both employers and employees.

For Employers:

• Increased labor costs: The higher minimum wage and paid sick leave requirements will increase labor costs for businesses. This could lead to price increases for consumers or reduced profit margins for businesses.
• Administrative burden: Employers will need to adjust payroll systems and policies to comply with the new laws. This could involve updating employee handbooks, timekeeping systems, and payroll software.
• Workforce management: Managing employee absences and tracking sick leave usage could become more complex, particularly for businesses with high employee turnover or those in industries with unpredictable scheduling needs[8].

For Employees:

• Increased earnings: Minimum wage and tipped workers will see an increase in their earnings, potentially improving their standard of living and reducing income inequality.
• Improved health and well-being: Greater access to paid sick leave will provide employees with the financial security to take time off when they are sick, leading to improved health outcomes and reduced workplace transmission of illnesses.
• Enhanced protections: The changes provide enhanced protections and benefits for all employees, regardless of their employment status, promoting fairness and equity in the workplace.

However, these changes also present potential challenges:

• Potential for increased absenteeism: Some employers are concerned that expanded sick leave could lead to increased no-call/no-shows by employees, potentially disrupting business operations and productivity[8].
• Uncertainty and interpretation: There may be uncertainty and varying interpretations of certain provisions of the ESTA, potentially leading to confusion and disputes between employers and employees[8].
• Economic impact: The increase in minimum wage could contribute to inflation, potentially offsetting some of the gains for workers and impacting businesses’ ability to hire and invest[7].
• Labor relations: The repeal of the right-to-work law could significantly impact union membership and labor relations in Michigan, potentially leading to increased unionization and changes in the balance of power between employers and unions[3].

Conclusion

The changes to Michigan’s employment laws in 2025 represent a significant shift in the state’s labor landscape. These changes aim to improve worker protections, increase wages, and strengthen collective bargaining rights. However, they also present challenges for employers in terms of compliance, cost management, and workforce management.

The long-term effects of these changes on Michigan’s economy and workforce remain to be seen. It is crucial for employers to carefully review the new laws, update their policies and practices accordingly, and engage in constructive dialogue with their employees to ensure a smooth transition and a fair and productive work environment. The coming years will be critical in observing how these changes play out and whether they achieve their intended goals of promoting worker well-being and economic prosperity in Michigan.

References

1. Michigan Legislature: Home, accessed January 3, 2025, https://www.legislature.mi.gov/
2. Here are the new Michigan laws that will take effect in 2025, accessed January 3, 2025, https://www.clickondetroit.com/news/michigan/2024/12/30/here-are-the-new-michigan-laws-that-will-take-effect-in-2025/
3. 2025 Michigan Labor and Employment Legal Updates | Dykema …, accessed January 3, 2025, https://www.laboremployment-lawblog.com/2025-michigan-labor-and-employment-legal-updates/
4. Michigan laws going into effect in 2025 | wtol.com, accessed January 3, 2025, https://www.wtol.com/article/news/local/michigan-laws-taking-effect-january-2025/512-f9bade7a-aa84-4ad4-b4af-6261f0fa1ce5
5. Changes Coming in 2025 to Michigan Minimum Wage, Tip Credit, and Earned Sick Time, accessed January 3, 2025, https://www.workforcebulletin.com/changes-coming-in-2025-to-michigan-minimum-wage-tip-credit-and-earned-sick-time
6. Michigan Employers Alert: Major Changes to Sick Leave & Minimum Wage Effective Feb 2025! – Foster Swift, accessed January 3, 2025, https://www.fosterswift.com/communications-michigan-employers-changes-sick-leave-minimum-wage.html
7. Employment Law Changes on the Horizon in Early 2025 – Michigan Credit Union League, accessed January 3, 2025, https://www.mcul.org/cu-resources/take-a-second-cu-legal-insights/employment-law-changes-on-the-horizon-in-early-2025-
8. Sick time changes coming to Michigan in 2025 – Michigan Public, accessed January 3, 2025, https://www.michiganpublic.org/health/2024-12-30/sick-time-changes-coming-to-michigan-in-2025