This article appeared in the March 2019 issue of MiMfg Magazine. Read the full issue and find past issues online.
Beginning on 3/29/19, Michigan employers will be required, for the first time ever, to provide certain employees with paid medical leave. This will make Michigan one of just 11 states with such a mandate. Despite the drastic change to the landscape, one fact remains; Michigan manufacturers could have had it much worse.
“What was originally called the Earned Sick Time Act would have severely restricted Michigan employers’ ability to compete with other states and in markets around the world,” said Delaney McKinley, MMA senior director of government affairs and membership. “Only 10 other states mandate paid sick leave, and all of them have provisions less stringent than the proposal offered by out-of-state interests lacking the knowledge or experience to understand the devastating impact these regulations would place on the employer-
In its original form, the Earned Sick Time Act was a ballot proposal offered for the 2018 General Election which would have become the nation’s most extreme version to date. In it, the restrictive effort would have:
- Mandated 72 hours of paid sick leave to all employees (three times the requirement of California’s law)
- Created administrative issues including timekeeping and recordkeeping nightmares and a complete inability to properly manage time off
- Opened the door to frivolous lawsuits, bureaucratic investigations and unfair penalties
While any costly mandate can be hazardous to manufacturing’s competitiveness, MMA and others in the business community recognized the changing tide of public opinion in Michigan could lead to the proposal passing. In order to mitigate the impact of the proposal, MMA successfully implemented a strategy to pass the Paid Medical Leave Act (PMLA), a revised version of the initial ballot proposal.
As McKinley asserts, “while certain Michigan employers must now provide paid sick leave to some employees, Michigan’s Paid Medical Leave Act is something that aligns with federal law, allows for flexibility, respects the employer-employee relationship and keeps Michigan employers competitive.”
What comes next is the urgent task of informing all Michigan employers of the PMLA’s 3/29/19 effective date and helping them answer serious questions impacting the future of their business, including:
- Is my business considered a covered employer?
- Which employees are entitled to paid medical leave benefits?
- How can paid medical leave hours be used and under what criteria?
- What happens if employers fail to properly abide by the PMLA?
- What’s on the horizon in 2019 and beyond?
“No manufacturer can afford to ignore what’s coming,” said McKinley. “If your business is about to be affected by the Paid Medical Leave Act, you need to understand the law inside and out to ensure you are in compliance. Be aware though that this remains an unsettled situation. Things can still change so those employers who are in the clear today can’t assume they will be in the future.”
What is a Covered Employer?
The big question every employer needs to ask is whether their business is covered by the PMLA or not.
“In the state of Michigan, virtually every employer, public or private, is going to be a covered employer, with the exception of the U.S. government, another state or political subdivision of another state, if that employer employs 50 or more individuals,” explained Kurt Sherwood, a principal with the Miller Canfield law firm.
An important distinction is Sherwood’s use of “individuals” rather than “eligible employees” as it would appear to count employees of multistate employers with fewer than 50 employees in Michigan but more than 50 overall as covered under the PMLA.
This could create a dilemma for multi-state employers as the employer must decide if it wishes to extend comparable “paid medical leave” benefits to its employees in states other than Michigan, or does the employer wish to provide arguably more generous benefits only to its Michigan employees, thereby possibly creating morale problems for its out-of-state operations.
Are Your Workers Covered?
Assuming you have identified your business as being a covered employer, subject to the requirements of the PMLA, where do you start?
“If I am an employer in the state of Michigan and I have more than 50 employees then that first eligibility criteria is do I have individuals for whom I withhold federal income taxes,” said Sherwood.
This specific focus will eliminate volunteers, unpaid interns and independent contractors as ineligible due to not qualifying for federal income tax withholding. Additionally, the PMLA specifically outlines categories of employees exempt from automatically receiving paid sick leave (see full list below) regardless of the employer’s ability to withhold their federal income taxes.
“Every covered employer needs to take a careful look at the lengthy list of employees within the Act who are not eligible,” urged Sherwood.
PMLA Exempted Employees
The Paid Medical Leave Act includes a list of 12 clearly exempted categories of employees. These are employees for whom an employer withholds federal income taxes but are not eligible for paid medical leave benefits:
- FLSA Overtime Exempt
- Private sector employee covered by Collective Bargaining Agreement
- Primary work location NOT in Michigan
- Temporary Firm worker
- Part-Time (less than 25 hours/week on average)
- Seasonal worker (25 weeks or fewer)
- Railroad worker covered by Railway Labor Act
- Railroad worker covered by Railroad Unemployment Insurance Act
- Variable Hour worker
- Flight deck or cabin crew member
- Employee of US government, another state or local government
- Minor on training wage
What PMLA Benefits are Required?
“Michigan’s PMLA requires covered employers to allow eligible employees to accrue one hour of paid medical leave for every 35 hours worked and that can be capped at one hour per week and 40 hours per benefit year,” Sherwood explained.
When looking at the accrual of hours, employers should know that employees existing within their workforce as of the PMLA’s 3/29/19 effective date would begin accruing as of that date. Employees hired after 3/29/19 would begin accruing on their hire date, though employers can require new employees to wait 90 days before being eligible to use those accrued hours.
“Manufacturers should also remember that the PMLA creates the minimum standard that an employer must provide to eligible employees,” noted McKinley. “Many employers already have paid sick leave policies that work well for their company. There is some flexibility that allows companies to exceed the 40-hour minimum benefit and recognizes the use of a ‘benefit year.’ This allows for calculating your paid medical benefits during any consecutive 12-month period which works best for you.”
Finally, an employer using the PMLA accrual method must allow for the carry-over of up to 40 hours of PML into the next “benefit” year. Alternatively, the employer can provide 40 hours of paid medical leave to each eligible employee at the beginning of each benefit year (i.e. frontload), in which case there is no carry-over of PML.
“Employers will have to choose what works best for their workplace,” McKinley explained. “If you choose the accrual option, you’ll be spreading your risk out a bit more over time but you’ll have quite a bit of recordkeeping to contend with. If you chose the front-load option, you won’t have to mess with tracking carry over but you may have an uptick in absences in the beginning of the year.”
How Can Employees Use Their Paid Medical Leave?
Covered employees may use their PML hours as they are accrued and in one-hour increments, unless the employer has a different written policy for usage (e.g. 30-minute increments). Accordingly, leave may be used for:
- Care for self or a “family member” as defined as any iteration of “child,” “parent,” “spouse” via marriage (not domestic partner), grandparent, grandchild or sibling
- Mental or physical illness, injury, health condition or treatment of same
- Preventative medical care
- Domestic violence or sexual assault
- Closure of workplace or child’s school/care facility due to public health emergency
- Exposure to communicable disease that would jeopardize the health of others (requires medical determination)
What Happens if My Business Violates the PMLA?
Manufacturers work diligently to ensure compliance but should be aware of the consequences for violating the Act. The PMLA will be enforced by the Wage & Hour Division of the Michigan Department of Licensing and Regulatory Affairs’ (LARA) Bureau of Employment Relations. An eligible employee affected by a potential violation has six months to file a claim which will be investigated in the hope of mediating a resolution. If an employer is found to have violated Michigan’s PMLA, they may be required to pay all paid medical leave improperly withheld, as well as an administrative fine of $1,000.
“I encourage all manufacturers to remain vigilant and connect with MMA regularly as there will likely be further guidance and clarifications surrounding the new Act as well as ramifications for employers found to be out of compliance,” said Sherwood.
What’s Next for Michigan’s Paid Medical Leave Act?
Despite the initial victory by MMA and our partners, efforts are being made to revert the PMLA to the more extreme provisions of the original proposal:
- The MI Time to Care committee, the proponents of the initial ballot proposal, have filed a new sick leave petition for the November 2020 ballot with the same language as in the 2018 proposal in hopes that the Whitmer Administration would veto another provisional rollback.
- Attorney General Dana Nessel is working to develop an opinion on the constitutionality of the Legislature’s actions in passing the Act.
- Legislative leaders passed MMA-supported House Resolution 25 and Senate Resolution 16 calling on the Michigan Supreme Court to also opine on the constitutionality of the Act. A supportive opinion from the Court would be a final confirmation of the Act and avoid a lengthy court process that would leave job providers in limbo about the status of their obligations to provide paid medical leave.
MMA will continue to stay on top of this developing effort and assist all manufacturers in contending with the existing law when it becomes effective on 3/29/19.
To learn more about what your business needs to know to comply with PMLA, contact MMA’s Delaney McKinley at 517-487-8530 or firstname.lastname@example.org. MMA members are also encouraged to log-in to MMA’s Online Learning Center for an in-depth webinar outlining many of the critical aspects of this new legal landscape.