EMPLOYMENT LAW PRIMER AND TIPS

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PRIMER Topic - OCTOBER 2006:  Changes to Michigan's Minimum Wage Law

            After much debate, the Michigan Legislature amended Michigan’s minimum wage law to increase the minimum wage.  As was much reported thereafter, this created a complex set of unintended problems for Michigan’s employers.  As previously written, Michigan’s minimum wage act did not apply to an employer who is subject to the federal minimum wage law, unless the federal minimum wage is lower than the state minimum wage.  MCL 408.394.  Accordingly, when the Michigan and federal minimum wage were the same, for most employers who are subject to the FLSA, the Michigan Minimum Wage Act was mostly a nullity.  The federal Fair Labor Standards Act set forth the applicable minimum wage and overtime rules, which exclude numerous categories of employees from overtime pay.

            When Michigan minimum wage was changed to be greater than the federal minimum wage, the entire Michigan Act, including its “maximum hours,” or overtime provisions, came into play.  Michigan's law, however, did not exclude as many employees from overtime as the FLSA.  As a result of this change, large groups of employees became entitled to overtime pay, even though they were not under the federal law.

            Recognizing this as an unintended consequence of great import to Michigan employers, on August 30, 2006, new amendments to the Michigan Wage Act passed both houses of the Michigan legislature, and the amendments have since by signed by the Governor. 

            Under the new amendments, the overtime requirements, for the most part, return to what they were before the increase in the state minimum wage.  Specifically, the new amendments expressly state that the Michigan overtime and compensatory time provisions do not apply to employers if their application is solely because of the increase in the minimum wage.  The new act also provides that none of the Michigan Wage Act applies to employees who are “exempt” under the federal Fair Labor Standards Act.  Accordingly, overtime pay is again required only if required by the federal Fair Labor Standards Act.  

            The amendments, however, do have a new twist.  Overtime must be paid to employees who provide “companionship services” for individuals who because of age or infirmity are unable to care for themselves and to employees who provide child care services.  The act excludes casual baby-sitting, such as hiring the neighborhood teenager, from overtime, so long as the employee is under 18, works casually, and does not regularly baby-sit more than 20 hours per week. 

            In addition, the amendments include an exception for minors and provides for tipped employees and a training wage.  The act provides that the minimum hourly wage for employees who are less than 18 years of age is 85% of the general minimum hourly wage.  Tipped employees may be paid an hourly wage rate of $2.65 per hour, as long as they provide a signed tip statement that shows an amount that, when combined with the hourly wage, equals or exceeds the minimum wage.  A training wage of $4.25 per hour may be paid to employees 16-19 years old for the first 90 days of employment. 

            So, for the most part, except for nursing-home type workers and day care center workers, the overtime requirements are back to normal.  The new minimum wage in Michigan takes effect on October 1, 2006 and increases to $6.95 per hour.  Thereafter, the minimum wage will increase twice more: $7.15 per hour – July 1, 2007, $7.40 per hour – July 1, 2008. 

            The changes to Michigan’s minimum wage also require employers to post new posters.  The required posters are available at:   

http://www.michigan.gov/documents/cis/MWPosting.Optional_9_25_06_single_page_173925_7.pdf