Michigan Court of Claims rules in favor of DLEO: Collective bargaining agreements "silent" on earned sick time do not "conflict" with ESTA

As a result of the Court of Claim’s Written Opinion on July 17 in Michigan Chapter, National Electrical Contractors Association (“NECA”) v. Department of Labor and Economic Opportunity (“DLEO”), contractors should review their existing Collective Bargaining Agreements (“CBA”) to ensure they are compliant with the newly enacted Earned Sick Time Act (“ESTA” or “Act”), MCL 408.961 et seq., especially when CBAs are silent on earned sick time.

Background

Effective on Feb. 21, Michigan’s ESTA mandates most employees earn one hour of sick leave for every 30 hours worked (40 hours for small business employers), although usage may be capped at 72 hours annually. Earned sick time is time off from work that is provided by an employer to an employee, whether paid or unpaid, that can be used for the purposes described in MCL § 408.964, such as illness of the employee or their family, among others. When the Act applies, the employer is responsible for providing written notice to each employee at the time of hiring, or not later than March 23, whichever is later, including but not limited to:

• The amount of earned sick time required under the Act
• The employer’s choice of how to calculate a year as that term
• The terms under which earned sick time may be used
• That retaliatory personnel action taken by the employer against an employee for requesting or using earned sick time for which the employee is eligible is prohibited
• The employee’s right to file a complaint with the department for any violation of the Act, and
• A poster containing the above information must also be posted at the employer’s business in a conspicuous location.

ESTA Conflict Language

The main focus of the Court of Claims opinion involves MCL 408.972 of the Act, which states in pertinent part:

“If an employer’s employees are covered by a [CBA] in effect on the effective date of this [A]ct and the [CBA] conflicts with this [A]ct, this [A]ct applies beginning on the stated expiration date in the [CBA], notwithstanding any statement in the [CBA] that it continues in force until a future date or event or the execution of a new [CBA].”

This portion of the Act has caused much uncertainty in the workforce, resulting in NECA filing a lawsuit against the DLEO, seeking a declaratory judgment regarding the proper interpretation of ESTA and an injunction against applying the ESTA provisions related to employees covered by CBAs that are silent on the issue of earned sick time.

Interpretation by the Court of Claims

This issue was brought before the Court of Claims for hearing held on June 25, ​after NECA and DLEO filed competing motions for summary disposition. After oral argument and based on the linked opinion, DLEO’s motion for summary disposition was granted, while NECA’s motion was denied and its complaint dismissed with prejudice.

The main issue decided was whether preexisting CBAs, that are silent on the issue of earned sick time, were in “direct” conflict with the recently enacted ESTA. NECA argued that the earned sick time benefit term was negotiated even if the CBA did not expressly address the issue.  NECA also argued that the parties to the CBA agreed to exclude such benefits as part of the overall benefits package. Therefore, by not listing sick time as a provided benefit, the parties intentionally excluded such benefit. Under NECA’s argument, if the parties to the CBA intentionally excluded such benefit, then adding such benefit under the Act would “conflict” with the CBA. The judge did not agree with NECA’s interpretation of silence as a direct conflict and ultimately found that ESTA will take immediate effect for those employers and employees with a CBA lacking inclusion of earned sick time. Presumably, had the CBA expressly stated it was not providing earned sick time, then the Judge may have found it conflicted with ESTA.

Additionally, the judge found that DLEO’s interpretation minimally impairs the parties’ right to contract which is outweighed by the benefit of protecting Michigan workers, the legislature had a rational and reasonable basis to allow conflicting CBA’s to continue through expiration, and minimum protection for laborers in Michigan have been affirmed in several other instances (i.e., child labor, minimum wages, and laws regarding breaks) to survive a federal preemption challenge.

Ramifications

Under the Act, DLEO may impose penalties and grant a current or former employee all appropriate relief, including but not limited to, payment of all earned sick time improperly withheld, all damages incurred by the complaint as the result of violation of the Act, back pay, and reinstatement in the case of job loss because of a complaint. An employer that takes retaliatory personnel action against an employee or former employee is also subject to a civil fine of not more than $1,000.00 for each violation. Additionally, an employer that fails to provide earned sick time to an employee in violation of this act is subject to a civil fine of not more than eight times the employee’s normal hourly wage, and $100.00 for each violation of the posting requirements.

Given the potential liability for violating the Act, if earned sick time benefits are not explicitly mentioned in existing CBAs, based on the above ruling and during any pendency of appeal (if any), it will be paramount for contractors to fully weigh the risks of not providing benefits under ESTA when the CBA is silent on earned sick time. Overall, proper guidance from a knowledgeable professional can help owners, general contractors, and subcontractors reduce their risks and protect their interests when it comes to earned sick time benefits. If you have any questions regarding the applicability of ESTA to your project, consult your attorney or anyone in Clark Hill’s Construction or Labor and Employment Practice Groups.

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