labor lawAdivision of labor law center

The Michigan minimum wage will increase by 25 cents from $7.15 to $7.40 per hour on July 1, 2008. The wage for tipped workers, however, remains at $2.65 per hour.

Governor Jennifer Granholm has been the force behind the minimum wage increases, bringing the rate from $5.15 per hour in 2005 to $7.40 as of July 2008. Unfortunately, the Michigan economy has lagged since 2004, and critics are concerned that these increases are making the problem worse.

Michigan’s jobless rate is still quite high, because several manufacturers have moved their plants to Indiana where the state minimum wage is $5.85 per hour. Even when the Indiana minimum wage goes up on July 24, 2008, to $6.55, Michigan’s minimum will still be 85 cents per hour higher.

In addition, a major car manufacturer recently offered early retirement to almost every hourly worker. With those workers retired, the car company will hire new employees at around half of the salary for current workers.

When an employee is covered by both the state minimum and the federal minimum, the worker is entitled to whichever is higher. Michigan minimum wage is higher than the federal rate, so almost every employee in Michigan is entitled to the state minimum wage.

Michigan employees who earn tips haven’t seen an increase in their minimum wage for a couple of years. Currently, their minimum wage is $2.65 per hour. After July 1, 2008, tipped employees who declare at least $4.75 per hour, can be paid at the tipped rate. Otherwise, the employer must pay a high enough cash wage to equal the minimum wage, when added to tips. Overtime for tipped employees goes up to $6.35 per hour.

The state minimum wage covers each Michigan employer with 2 or more employees over the age of 16. Under both federal and state law, all workers who put in more than 40 hours per week are entitled to overtime pay at 1.5 times the usual hourly rate.

These minimum wage and overtime laws are enforced by the Michigan Wage and Hour Division of the Department of Labor and Economic Growth.

Michigan Comp Time

The Fair Labor Standards Act of 1938 (FLSA) requires companies to pay workers 1.5 time the usual hourly rate for any time worked over 40 hours in one week. Employers are specifically prohibited by FLSA from offering time off in the future (compensatory time or comp time) as a substitute for over time pay, even if the worker asks for “comp time”.

Non-profit organizations are the exception to the FLSA. They can grant comp time instead of overtime, but only if the employee agrees.

A few states, including Michigan, have enacted laws to allow companies to substitute comp time for overtime pay. The Michigan Minimum Wage Law of 1964 allows employers, in some cases, to grant comp time rather than pay overtime wages. The Michigan law applies to all employers with more than one worker over the age of 16.

Because the FLSA prohibits comp time, the Michigan law doesn’t apply to any business covered by the FLSA. Employers who want to understand their eligibility to grant comp time can consult MCL 408.384a (8) of the Michigan Compiled Laws.

Michigan companies not covered by FLSA may grant comp time instead of overtime pay, but only if the worker agrees to this practice in writing. According the Michigan Department of Labor and Economic Development, workers can not be “coerced, intimidated, or required as a condition of employment to accept compensatory time”.

Specific rules apply to granting comp time. Only employees who receive 10 paid days of leave each year are eligible for comp time. Workers who have less than 10 days paid leave must receive overtime pay.

Businesses must grant 1.5 hours of comp time for each hour of overtime, and keep detailed records of hours worked, comp time due to each worker, and when that time is used.

Employees can accrue comp time, but only up to 240 hours. Any time over that must be paid at the overtime rate. Employees may also request to be paid retroactively for overtime instead of taking comp time. The company must comply within 30 days, whether the request is verbal or written.

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