US Regional Employment 2022 Comparisons

The COVID-19 pandemic has changed, and likely will continue to change, workplaces in Michigan permanently. The highly contagious nature of COVID-19 and new variants has significantly affected Michigan employers, employees, their workplaces, and their families.

Regulatory Measures in Michigan

The Michigan Occupational Safety and Health Administration (the "Michigan OSHA") has adopted the federal OSHA emergency COVID-19 rule applicable to healthcare workers and applies existing rules and the general duty clause to address COVID-19 workplace enforcement. Michigan previously adopted a COVID-19 anti-retaliation statute prohibiting employers from discharging, disciplining, or retaliating against employees who elect to stay home if they or their close contacts have COVID-19 or symptoms of it, but that statute was later limited to claims arising before July 1, 2022.

COVID-19 Causes Permanent Changes for Employers

Due to the COVID-19 pandemic, many Michigan employers faced downturns, closures and reductions in the workforce. As the pandemic has subsided and changed, some reductions have become permanent, while some employers have struggled to keep up with consumer demand or to overcome worker shortages. Employers also continue to deal with uncertainty, and rising costs due to inflation and rising wages due to worker shortages.

COVID-19 caused many employers to accept a temporarily remote workforce, and many businesses continue to use or adopt semi-permanent remote work or hybrid work models, while other employers have transitioned away from such models. Employers utilizing remote work will find they still need to define and enforce reasonable limits on work hours, performance expectations, and “workplace” safety rules, as well as ensure remote employees remain subject to company policies.

The impact of the COVID-19 pandemic is likely to have long-term implications on safety and health.

For instance, employees with protected disabilities are more often requesting remote work as a reasonable accommodation, requiring employers to engage the required interactive process and, if supportable, justify why in-person work is required.

Finally, many employers had to determine whether COVID-19 vaccine incentives or an alternative mandate, as permitted by the Equal Employment Opportunity Commission (EEOC), were appropriate for their workplaces. Developments in this area continue, dependent upon the effectiveness of the vaccine, vaccination rates, and emerging COVID-19 variants.

Global entities, including those operating in Michigan, continue to take a hard look at anti-discrimination and anti-harassment policies, as well as commitment to social justice and diversity, as a result of increased pressure caused by socially conscious investors and corresponding environmental, social and (corporate) governance (ESG) initiatives.

Emphasizing this trend, during the height of the pandemic, Michigan’s governor issued an executive order recognising racial inequality as a public health crisis, and executive directives mandating implicit bias training for all healthcare workers and state employees. Global employers that do not make it clear that their organizations actively oppose discrimination, racism and sexism risk diminishing their reputations and may seriously damage their ability to recruit, hire and maintain a diverse workforce.

By choice or necessity, many “gig” workers have gravitated toward and remained in short-term work relationships. Without a traditional work arrangement with a single employer, many gig workers do not receive employee-sponsored benefits (such as health and retirement benefits). Other workers engage in gig employment to supplement their traditional employment.

Within the gig framework, many workers consider themselves as self-employed, able to set their own schedule and choose their work assignments.

Technological platforms (particularly mobile phone and computer applications) facilitate connections between gig workers and those seeking their services. 

Employers must understand the challenges and risks of contracting for services and promoting contracted services. While the economy has drastically changed, applicable US law has not.

Employers (or entities contracting for services or personnel) must consider the costs, savings, and potential risks related to particular choices in this framework. Misclassifying workers as "independent contractors" who should be classified as "employees" leads to potential legal issues in the following areas: collective bargaining, taxes, wage and hour compliance, benefits, and anti-discrimination laws.

Independent contractors typically have no such protection in these areas under federal and most state employment laws. The question regarding whether a worker or group of workers is properly classified can easily lead to disputes before administrative agencies, and state and federal courts. See more detailed information on the independent contractor relationship in 2.1 Defining and Understanding the Relationship.

In 2022, there continues to be a national uptick in unionization efforts since the COVID-19 pandemic, and after the change in the presidential administration, which is now dramatically more favorable to unions. In fact, halfway through 2022, union election petitions filed with the National Labor Relations Board (NLRB or the "Board") are up over 56% relative to the year prior.

Most companies prefer to operate union-free for reasons such as avoiding limitations on dealing directly with their employees, general workplace flexibility, and minimizing the risk of work stoppages. Union membership has significantly declined in the United States for decades, with private sector union membership hovering around 6.3%. Unions remain strongest on the coasts (eg, New York, California). The South historically has the lowest unionization rate, and many states in the Midwest have seen union numbers dwindle increasingly in recent years. In contrast, the rate of unionization in Michigan has increased from 13.6% in 2019 to 15.2% in 2020 as a percentage of overall employment in Michigan. This increase in Michigan’s unionization rate in 2020, however, was due to a decline in overall employment in Michigan, mostly in non-union jobs, and not necessarily due to successful union-organizing campaigns.

Michigan is a "right-to-work" state. As such, it is unlawful for a collective bargaining agreement in Michigan to require employees to pay union dues.

The NLRB is vested with enforcing the National Labor Relations Act (NLRA), which provides workers with certain rights with respect to unionizing and discussing, protesting, etc, their terms and conditions of employment. The NLRB governs private-sector labor relations in the United States, and its regulations and administrative decisions apply to all 50 states. Consisting of five members appointed by the president, their views can change from administration to administration. Because the law is national in scope, no specific region, generally speaking, has a “leg up” on another when it comes to US labor law.

In August 2021, President Biden was able to get a majority of pro-union members appointed to the NLRB. He also appointed a very union-friendly NLRB general counsel. While the NLRB has yet to issue any significant decisions, the general counsel has already made an impact by seeking expanded remedies against employers for labor law violations (eg, emotional distress damages, damages for loss of reputation, etc) and made settlement of charges more onerous (eg, accepting nothing less than full backpay in discharge cases). It is expected that the NLRB will start issuing significant decisions that will impact employers in the latter half of 2022, including decisions that make it easier for unions to organize workforces and that will invalidate many company personnel policies (eg, confidentiality policies, workplace civility policies, etc).

The “Great Resignation” is a national phenomenon and Michigan has not been immune from its impacts.

During and following the COVID-19 pandemic the unemployment rate in the United States soared to 14.7%, the highest rate since the Great Depression. Michigan was not immune, experiencing an unemployment rate topping 37.9%. While the unemployment rate nationally and in Michigan has diminished considerably, it appears the pandemic has resulted in a secondary major disruption to the labor market now commonly referred to as the “Great Resignation”.

The Great Resignation is a phenomenon describing the unprecedented numbers of workers that have apparently left the workforce. It is now evident that there has been, and continues to be, a major realignment of the workforce. Record numbers of Americans have quit and continue to quit their jobs. In September 2022, although the national unemployment rate is 3.6% there remain 10.7 million job openings in the United States, a major mismatch and disconnect for the labor market as a whole. In Michigan, the unemployment rate is slightly higher at 4.3%, but again the demand for workers far exceeds the number of available workers. Despite Michigan’s relatively low unemployment rate, based on the last reported figures, there remain in excess of 330,000 job openings, a 55.7% increase.

With such a strong demand for workers in Michigan, competition among employers for the limited pool of workers is creating other reverberations and issues, the full effects of which may not be understood for years. The impacts of the Great Resignation and how Michigan employers are responding is addressed in further detail in the Michigan Trends & Developments report associated with this guide.

It is important that the parties agree on the terms and conditions at the outset of their relationship, and ensure that the agreement reached is consistent with applicable law.

Employment

The default service relationship in the US is that of employer and employee. Most states, including Michigan, are “at-will” employment jurisdictions, meaning either party (the employer or the employee) can terminate the relationship at any time and without having to provide a reason – provided, of course, that the termination decision is not otherwise prohibited by law (ie, due to discrimination or retaliation). Although Michigan is an employment-at-will jurisdiction, an employer can forfeit its at-will right to terminate an employee by promising employment for a fixed period or stating (including verbally) that employment will only be terminated under certain circumstances, such as for “good cause or reason”. An additional exception to the prevailing at-will employment status is termination of employment for reasons against public policy; namely for exercising a right conferred by well-established legislative enactment and for failing or refusing to violate the law. A carefully drafted disclaimer can help avoid these pitfalls.

Employees may also have contracts specifying the terms and conditions of their employment. Such contracts are not required in the United States, but may be warranted depending on the type of employee in question (ie, an executive). Barring a formal written contract, terms defining the relationship are typically relegated to documents such as offer letters, job descriptions, employment policies, or employment handbooks. Even if an employer defaults to the presumptive at-will employment status, individual employment agreements often address confidentiality, intellectual property, plus non-competition and non-solicitation covenants that are enforceable if reasonable in scope and duration – see 4.1 Restrictive Covenants.

Joint Employment

Joint employment is not the norm and applies only in limited circumstances, usually in a legal proceeding as a mechanism by which an employee attempts to recover damages against a third party. For a third party to be joint employer, the third party must have exerted significant control over the employee. Factors to consider in determining joint-employer status are:

• supervision of the employee’s day-to-day activities;
• authority to hire or fire the employee;
• promulgation of work rules and conditions of employment;
• issuance of work assignments; and
• issuance of operating instructions.

Under the NLRA, the NLRB currently may find two or more entities are joint employers if they are both employers within the meaning of the common law and if they share or codetermine matters governing the essential terms and conditions of employment. The NLRB has changed the standard it uses in this context several times over the years and in December 2021, announced its intention to engage in rulemaking over the standard used in determining whether two employers are joint employers. Indeed, it appears the Board intends to issue a rule expanding joint employer status to entities possessing the ability to control terms and conditions of employment indirectly. Given this development, it is important to check the applicable standard going forward.

Most recently, the Biden administration rejected a Trump administration Department of Labor (DOL) rule that would have been more favourable to employers.

Independent Contractors

The importance of control in a relationship extends to the determination of whether a worker is an independent contractor versus an employee. Contracting is very popular in the USA; the number of contractors as a percentage of the workforce has doubled since the 1990s (see GAO-15-168R Contingent Workforce). As contracting has grown in popularity, it has attracted more scrutiny from the courts, lawmakers and administrative agencies. Accordingly, simply describing a worker as an "independent contractor" is not sufficient. The law in this area is rapidly evolving and there are no rigid rules for determining whether a person is an independent contractor. Various jurisdictions and administrative agencies in the USA have adopted different tests to determine whether an individual is an independent contractor.

Most of the enforcement activity is at the federal level. The US government will seek unpaid income taxes, unemployment taxes, and overtime, as examples. Misclassified independent contractors can also seek benefits (health insurance and retirement) under the federal Employee Retirement Income Security Act. The federal government generally applies a common-law control test, exemplified by the six factors used by the DOL:

• the degree of control that the putative employer has over the manner in which work is performed;
• the worker’s opportunities for profit or loss dependent on this managerial skill;
• the worker’s investment in equipment or material, or their employment of other workers;
• the degree of skill required for the work;
• the permanence of the working relationship; and
• the degree to which the services rendered are an integral part of the putative employer’s business.

At the state level, potential misclassification liabilities include income tax, unemployment and workers’ compensation. In Michigan, an "economic reality test" has traditionally been applied to determine if an employer/employee or an independent contractor relationship exists. That test focuses primarily on whether the work performed is an integral part of the employer’s business and if the compensation from the employer is the primary income source. Recently, the Michigan unemployment agency adopted the US Internal Revenue Service 20-factor test.

Nationally, the Biden administration has signaled its approval of the California “ABC” test, which requires all three of the following conditions to be satisfied in order for the worker to have independent contractor status:

• the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
• the worker performs work that is outside the usual course of the hiring entity’s business; and
• the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

This test makes it more difficult for employers to prove that those doing work for them satisfy the independent contractor requirements, and if adopted by the federal DOL, this test could soon be adopted by Michigan’s administrative agencies.

Businesses and workers are often complicit in the objective to characterize the worker as a non-employee independent contractor, as both parties save money. However, governments lose a lot of revenue and are therefore critically examining those relationships. Also, if the relationship sours or the worker is injured while working, the worker will often seek employment-related benefits, such as workers’ compensation or unemployment, and the business will have no insurance coverage in place to manage the risk for independent contractors. Best practice, at a minimum, is to be conservative in characterizing workers as independent contractors and to make sure appropriate insurance coverage is in place for non-employee independent contractors.

Internships

Unpaid internships have been the subject of considerable scrutiny in the past few years, notably from the standpoint of whether private businesses can rely on unpaid interns. The US Department of Labor’s Wage and Hour Division has developed a test for evaluating whether an individual constitutes a “trainee” (intern) for the purposes of the Fair Labor Standards Act (FLSA) and does not require to be paid.

See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.

Michigan does not have other enforcement guidance.

The COVID-19 pandemic continues to negatively impact the ability of employers to attract and retain foreign national talent. The pandemic, and the federal government’s response, disrupted virtually every aspect of the US immigration system. The processing of immigration benefits by US Citizenship and Immigration Services (USCIS) has dramatically slowed, and visa processing abroad by the US Department of State (DOS) has been impacted by lack of available appointments.

Corporate Structure and Relationships

Employers are finding it increasingly difficult to sponsor foreign nationals for employment in the US. Increased scrutiny by USCIS and DOS has resulted in lengthy delays in the adjudication process and greater rates of visa denials. Many local USCIS field offices have lengthy processing times due to staffing issues and a backlog from their closure earlier in the pandemic. The pandemic has also impacted the ability of US embassies and consulates to offer appointments for visas.

Visa requirements

Employers often consider the H-1B and L visas when sponsoring foreign nationals for employment in the US. However, due to increased scrutiny and changes in the immigration processes for the above visa classifications, employers may also wish to consider the H-1B1, E, and TN visas in addition to the H-1B and L.

The H-1B visa

The H-1B visa is generally reserved for specialty occupations – positions requiring the theoretical and practical application of a body of highly specialized knowledge and which require the attainment of a bachelor’s degree or higher in a specific specialty or its equivalent, as a minimum for entry into the US. New H-1B petitions are sometimes subject to an annual lottery due to high demand and USCIS has conducted a lottery in recent years. In 2020, the lottery underwent a significant processing change that resulted in the implementation of an additional fee for employers. This classification has experienced increased scrutiny in recent years, resulting in lengthy processing delays and increased rates of denial.

The L visa

The L visa is generally reserved for international companies seeking to transfer executives, managers, or specialized workers to the US. Like the H-1B visa, the L visa has experienced heightened scrutiny, resulting in lengthy processing delays and increased rates of denial. In addition, a change in the immigration process for renewals has added to the length of time required for a renewal and increased costs.

Due to the challenges of securing visa sponsorship for foreign national employees through H-1B or L visa classifications, employers are exploring alternatives to include the H-1B1, E and TN visa classifications.

The H-1B1

The H-1B1 visa is reserved for citizens of Chile and Singapore. Like the H-1B visa, the H-1B1 is generally restricted to specialty occupations. Similar in many respects to the H-1B visa, the H-1B1 is attractive to many employers due to the relative ease and reliability of the H-1B1 sponsorship process. This visa classification is generally a more reliable and faster option than the H-1B visa.

The E visa

Another option for sponsorship of foreign national employees is the E visa. The E visa category includes treaty traders (E-1), treaty investors (E-2) and Australian specialty occupation workers (E-3). To qualify as an employee of a treaty trader or treaty investor, the employee must share the same nationality as the employer, and the employee must be engaged in the duties of an executive, manager or specialized worker. The E-3 visa applies to Australian nationals performing services in a specialty occupation similar to the H-1B visa category but more easily attainable. As with the H-1B visa, employers have generally found the E visa to be reliable, fast and cost-effective, although there is concern with timing due to the lack of visa appointments at numerous US embassies and consulates because of the pandemic.

The TN visa

The TN (NAFTA) visa allows employers to sponsor citizens of Canada and Mexico for employment in the US in a professional capacity. While the North American Free Trade Agreement (NAFTA) has been replaced by the United States–Mexico–Canada Agreement (USMCA), USMCA retains the TN visa classification. To be eligible for the TN classification, the profession must be noted on the treaty (list) and the foreign national employee must satisfy the qualifications for eligibility for employment in that profession. Employers have generally found this visa classification to be reliable, fast and cost-effective. Of note, an employer seeking to sponsor a Canadian citizen for employment under this visa classification may simply need to have the sponsored employee present an application package directly to a US customs and border protection agent. Unfortunately, Mexican citizens requiring a visa are generally required to attend an appointment at a US embassy or consulate.

For a business to remain union-free, it is critical to establish a positive culture and get buy-in from the employer’s leadership team. The vast majority of union campaigns start because of perceived toxicity in the workplace (eg, favoritism or no outlets for employees to express their views). Being union-free vests the organization with the autonomy to make decisions about policies and other terms and conditions of employment. If employees are represented by a union and/or ever vote a union into the workplace, an employer has a legal obligation to bargain virtually every potential change to workers’ terms and conditions of employment with the union.

Reaching a collective bargaining agreement with a union after being organized can also be a lengthy process. According to a recent analysis by Bloomberg Law, on average, it takes 409 days between the time a union is certified and the time a collective bargaining agreement is finalized with the employer. During this period, employers are not permitted to make unilateral changes in employee wages, hours and working conditions. Accordingly, many employers strive to remain union-free in order to enjoy maximum flexibility.

The pre-hire and interviewing process is a significant opportunity for Michigan employers to identify and hire the strongest employment candidates. Before the employment interview, employers should consider requiring applicants to complete an employment application that accurately describes prior educational and work history, reasons for leaving prior employment, references, and any special skills.

Application Information

The employment application should include a certification by the applicant that they have provided complete, accurate and truthful information on the application, and the consequence for failing to do so at hire or if discovered during employment. It should also include an affirmation of the “at-will” nature of the employment relationship and limit any verbal or written modifications. Employers should refrain from making verbal or written assurances of "long-term" or "permanent" employment, or other statements that could adversely affect the employer’s ability to successfully assert at a later time that the employee was employed at-will. Employment applications should reflect that applicants are aware of post-offer testing and background checks, and the possibility to request reasonable accommodations, if needed.

The employment application and the interview process should not ask questions or elicit information about legally protected characteristics such as age, national origin/race, religious practices, pregnancy or desire to have children, sex, sexual orientation or gender identity, or medical conditions or disabilities, and similarly should avoid questions that would elicit this type of information.

Background Checks and Physical Assessment

Criminal and credit checks

Many jurisdictions “ban the box”, meaning the employer is prohibited from asking about criminal convictions on an employment application. Michigan does not have a ban the box statute except for state employers. In fact, a 2018 Michigan executive order actually prohibits any restriction on private employers’ ability to inquire about an applicant’s criminal history. Local ordinances may however, limit background checks. The background check process (criminal and credit) is also regulated by the federal Fair Credit Reporting Act.

Physical assessment

The Americans with Disabilities Act (ADA) requires employers to provide reasonable accommodation to disabled applicants to permit them to participate equally in the hiring process.

The ADA prohibits employers from any pre-employment inquiries about an applicant’s medical conditions. Thus, the employer may not ask any questions designed to elicit medical information prior to a conditional job offer being made.

After a conditional offer of employment has been made, the employer may then arrange a post-offer medical examination, provided that this is required of all applicants for the position. To withdraw an offer of employment, the employer must be able to demonstrate that the individual is unable to perform the essential functions of the job in question, even with reasonable accommodations.

The Genetic Information Nondiscrimination Act (GINA) similarly imposes restrictions on employers during the hiring process (and afterward), making it unlawful for employers to request genetic information with respect to employees. Because genetic information is defined broadly to include family medical history, employers should ensure that any post-offer medical examinations, even those conducted by occupational doctors, do not elicit this information.

COVID-19 Impact

The COVID-19 pandemic has not changed this basic process, but it has highlighted a host of new issues that might arise during the interactive process, as well as caused employers to revisit what are the essential functions of a job. For example, an applicant may have an underlying condition (asthma, diabetes) for which they seek reasonable accommodations that may not have been discussed pre-pandemic. In addition, while attendance at the workplace on a day-to-day basis has historically been recognized as an essential function of the job, the success of remote work has forced many employers to revisit whether remote work may serve as a reasonable accommodation for a particular applicant/employee. Inquiring into an applicant/employee’s vaccination status is permissible. However, the employer would still have a duty to reasonably accommodate non-vaccinated applicants/employees if they had a sincerely held religious belief that prevented them from getting vaccinated, or a disability covered by the ADA which made vaccination inadvisable.

Michigan Anti-discrimination Laws

Under Michigan law, it is illegal for employers to discriminate in the hiring process based on certain protected categories, as detailed below.

The Elliott-Larsen Civil Rights Act (ELCRA)

Michigan's Elliott-Larsen Civil Rights Act (ELCRA), MCLS § 37.2101 et seq, prohibits job application questions about the following protected characteristics of the applicant: race, color, national origin, age, sex, height, weight, or marital status (MCLS § 37.2206(2)). Following the 2020 landmark US Supreme Court decision in Bostock v Clayton Co, the Michigan Supreme Court’s July 28, 2022 opinion in Rouch World LLC v Department of Civil Rights ruled that the words “because of sex” in the ELCRA protects discrimination based on sexual orientation (the decision did not address gender identity). MCLS § 37.2202(1)(d) prohibits hiring discrimination due to a person's pregnancy, childbirth or a related medical condition. MCLS § 37.2205a prohibits application questions regarding an applicant’s misdemeanor arrest, detention, or disposition that did not result in a conviction.

The Michigan Persons with Disabilities Civil Rights Act

The Michigan Persons with Disabilities Civil Rights Act, MCLS 37.1101 et seq, prohibits job application questions concerning the disability of a prospective employee that are unrelated to the duties of the particular job (MCLS § 37.1206(2)(a)). The law also prohibits hiring discrimination on the basis of an applicant's disability or genetic information unrelated to the duties of a particular job (MCLS § 37.1202(1)(a)). Employers may not refuse to hire an individual when adaptive devices or aids would enable the individual to perform the job (MCLS § 37.1202(1)(f)).

The Michigan Department of Civil Rights Pre-Employment Inquiry Guide

The Michigan Department of Civil Rights Pre-Employment Inquiry Guide provides practical guidance to employers regarding the legal limitations on job applications in Michigan.

Local Anti-discrimination Ordinances

In addition to the classifications protected by state law, several Michigan cities have passed ordinances that prohibit hiring discrimination based on sexual orientation, gender identity, gender expression, and other characteristics.

The use of artificial intelligence (AI) in the hiring process has become more common for large employers. For example, Amazon and Hilton use AI to some extent to screen the thousands of applications they receive on a weekly basis.

Present Use of AI in Screening Candidates

To understand the potential legal issues posed by the use of AI, however, it is important to understand what AI really is and separate fact from fiction. AI, in its current form, does not consist of computers making hiring decisions. In reality, AI is much simpler – it is typically a series of mathematical algorithms used to screen large quantities of data. Employers have been using a type of AI for decades, albeit in a form most people now take for granted – text searching applications or resumes received. This process can now be automated with an algorithm so that a computer culls the applications by performing the text search. Certain online recruiting services such as LinkedIn Recruiter and ZipRecruiter, also employ AI earlier in the process, using algorithms to search the social media profiles of millions of potential candidates to determine whether to advertise a job posting to a particular candidate. AI can also be employed in the interview process through the use of programmed chatbots, which automatically ask a candidate a series of pre-programmed questions intended to discern information pertinent to the organization. Finally, AI can also be used to compare the experience of different candidates and to recommend which candidates to extend offers to, and the salary range to be offered to a candidate. In a nutshell, AI is particularly useful for routine tasks that involve sifting through large quantities of data, such as applicant screening.

Potential Legal Pitfalls of AI

Although AI is sometimes viewed as a preferred vehicle for eliminating potential bias, such as during job interviews, the reality is that AI has its own set of potential legal pitfalls. Firstly, because AI is programmed by humans, the AI code developed may have the programmer’s bias (conscious or unconscious) built into it as the programmer determines what data or parameters will be used. Courts have allowed claims to proceed under federal employment laws based on unconscious bias if the bias can be proven to have resulted in intentional discrimination against a protected classification. Similarly, Title VII of the Civil Rights Act of 1964 recognizes a legal claim for disparate impact when a selection criterion adversely impacts a protected class. Back in 2018, Reuters reported that Amazon had scrapped an experimental AI recruiting tool when it determined that the algorithm used by the recruiting tool had learnt to disfavor applicants using the term “women”.  An AI-hiring practice could also implicate the Americans with Disabilities Act if an algorithm made inquiries into an applicant’s physical disability, mental health, or clinical diagnosis. These inquiries are prohibited by the ADA in connection with a pre-employment candidate assessment.

Employers remain eager to harness AI to eliminate potential subjectivity and to automate certain aspects of the recruitment and hiring process. However, the technology is still considered to be in its infancy and the risks are abundant, which likely explains why many states have either passed or are considering legislation to protect candidates. For example, in 2020, Illinois enacted the Artificial Intelligence Video Interview Act, effective January 1, 2020. The law imposes limitations on employers who use AI for candidate video interviews. Other states are considering legislation to limit the discriminatory use of AI, or have created task forces to study the issue. This area of law is likely to continue to evolve as more employers turn to AI in the hiring process.

Promoting Competition in the US Economy

During 2021 and 2022, employers’ use of restrictive covenants to limit their employees’ post-employment competitive activities remained a more volatile issue. President Biden issued an executive order on July 9, 2021, on “Promoting Competition in the American Economy” which, among other things, was critical of employers’ use of non-compete agreements. The executive order directed the Federal Trade Commission (FTC) to “consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility”. As of the date of this publication, the FTC had not yet promulgated any regulations addressing this issue and no federal law restricts the use of non-competes.

Michigan's 1985 Statute

In Michigan, the enforceability of restrictive covenants changed significantly in 1985. Prior to 1985, restrictive covenants were considered void and illegal as restraints of trade under Michigan statutory law. On March 29, 1985, this statute was repealed and replaced with MCLA § 445.774(a), which is now applicable to restrictive covenants and agreements entered into after March 29, 1985. The 1985 statute now permits a restrictive covenant that “protects the employer’s reasonable competitive business interests” provided the restrictive covenant is “reasonable as to its duration, geographical area, and the type of employment or line of business”.

A restrictive covenant must be supported by “sufficient consideration”. The courts continue to define and evaluate “sufficient consideration”, “reasonable duration”, and “geographical area”. A Michigan Court of Appeals decision found the “[m]ere continuation of employment is sufficient consideration to support a non-compete agreement in an at-will setting”. With respect to duration, the courts have generally found a period of six months to three years to be reasonable. The reasonableness of the geographical area will be determined by the scope of the business and the legitimate competitive business interests of the party seeking to enforce the restrictive covenant. Restrictive covenant provisions seeking to preclude an individual from working in any capacity in any location for a competitor have been found to be unreasonable.

If a Michigan court finds a restrictive covenant to be “unreasonable in any respect”, the Michigan statute permits a court to limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

Trade Secrets

Michigan has adopted the Michigan Uniform Trade Secrets Act (MUTSA), MCLA 445, 1901 et seq. Under MUTSA, “trade secret” means information (which includes a formula, pattern, program, device, method, technique or process) having independent economic value from not being generally known or readily ascertainable that has been subject to reasonable efforts to maintain its secrecy. The party seeking to protect a trade secret must also demonstrate the defendant did not have express or implied consent to disclose or use the trade secret information.

Michigan’s definition of trade secret does not protect all information a company may consider proprietary or confidential, and the courts require the party alleging a trade secret violation to specifically identify the alleged misappropriated trade secret. Examples of information that has garnered trade secret protection include information regarding specialized equipment and industrial processes, chemical processes, manufacturing methods, marketing and sales strategies, contractual details for customers, pricing lists and profit margins. Customer lists may be protected, but if such lists are compiled from personal or publicly available sources, or if the information is readily ascertainable from other channels, these lists may lose protection. Software, computer programs, data compilations and automation tools are not automatically entitled to trade secret protection and also must meet MUTSA’s requirements for such protection.

A party making a MUTSA trade secret claim must do so within three years. Remedies may include both injunctive relief and damages for the actual loss (compensatory damages) and unjust enrichment, or a reasonable royalty for the unauthorized disclosure. Attorneys’ fees may also be recovered. Other civil remedies for trade secret protection under tort and other common law theories are displaced by MUTSA’s remedies; however, a party may still pursue contractual remedies.

Because not all information may be considered a trade secret by Michigan courts and because contractual remedies are not preempted by MUTSA, contractual protection of information through confidentiality agreements more broadly defining proprietary and/or confidential information is a common and recommended practice. Such agreements are generally enforceable in Michigan.

The Federal Defend Trade Secrets Act of 2016 (DTSA) also creates a federal civil cause of action for trade secret misappropriation. The DTSA is similar in many respects to MUTSA, but does not preempt or displace MUTSA.

Privacy Protections

Privacy rights in Michigan are covered by both common law and statutory protections. The Supreme Court of Michigan has recognized four common-law privacy claims:

• intrusion upon an individual’s seclusion, solitude or private affairs;
• public disclosure of embarrassing private facts;
• publicity that places an individual in a false light in public; and
• appropriation of an individual’s name or likeness for another’s advantage.

In some respects these claims overlap, each turning on particular facts that generally involve the disclosure of information that is either “highly offensive”, “unreasonable”, or “false” and that is private and/or disclosed publicly or to a large number of people.

Statutory protection

Michigan also provides statutory privacy protections for certain information. Michigan has an eavesdropping statute prohibiting eavesdropping by third parties, including employers, on private conversations (MCLA 750.539a et seq). In such cases, all participants in the conversation must consent to recording the conversation. A participant may, however, record the conversation. Despite several challenges to the interpretation of this law, the Michigan Supreme Court has declined to change prior lower court precedent.

Michigan’s Polygraph Protection Act prohibits employers from requiring that applicants or employees take a polygraph (MCLA § 37.201 et seq). Michigan’s Persons with Disabilities Civil Rights Act prevents employers from performing genetic testing or requesting genetic information (MCLA 37.1101 et seq).

Michigan’s Bullard-Plawecki Right to Know Act prohibits employers from gathering or maintaining records regarding “an employee’s associations, political activities, publications, or communications of non-employment activities”, without written authorization (MCLA 423.508).

Michigan’s Social Security Number Privacy Act, MCLA 445.81 et seq, limits how an employer may use, display or transmit an employee’s social security number, and violations may result in civil and/or criminal penalties. Among other things, this statute requires encryption if four or more consecutive numbers of a person’s social security number will be used to gain access to the internet, websites, or computer systems or networks.

Michigan’s Internet Privacy Protection Act, MCLA 37.271 et seq, generally prohibits employers from accessing personal internet or social media accounts of employees and prohibits retaliation against a person who fails to disclose such information.

An employer in Michigan can prescribe limits on an employee’s use of its data or equipment, but exceptions do apply.

Even before the "Black Lives Matter" and "Me Too" movements, employers should have had thorough policies addressing discrimination, harassment, and retaliation, and should have supported the implementation of such policies through proactive training.

Workplace Training

Training, which many employers mandate, will identify the types of behaviors that are inappropriate in the workplace, how to report concerns and specifically identify who to report those concerns to, and prohibit retaliation against those who pursue complaints or assist in an investigation. Supervisors’ training should also identify a supervisor’s role in setting the standard of professional workplace behavior, and how to appropriately escalate, investigate, document, and address reports of prohibited behaviors, including through any necessary intermediate remediation and discipline. Most employers also include workplace respect, diversity and anti-bullying training designed to foster an inclusive and respectful workplace.

State Reaction to "Black Lives Matter"

In reaction to the "Black Lives Matter" movement, the State of Michigan declared that racial inequity is a public health crisis and mandated implicit bias training for healthcare workers and state employees. There is no such mandatory training legislation for employees of private employers, although the majority of private employers are redoubling efforts to identify and eliminate bias from hiring, firing, and other employment decisions.

Promotion of Inclusive Workplace

More generally, examining corporate culture and policies in these areas, and ensuring that employees – and especially managerial personnel – are properly trained to root out bias, harassment, and prejudice has taken on even greater importance given the growing social awareness of these issues over the last few years. Coupled with the widespread use of social media, this has made many employers rethink their approach on these subjects, both from a legal and a general business standpoint. Part of that process has led companies to shift their focus from just preventing illegal conduct to actively promoting more inclusive and respectful workplaces. Many employers have taken it upon themselves to adopt policies and training programs consistent with promoting a culture of inclusion, and to paying more attention to equity and implicit bias concerns raised by employees.

The Occupational Safety and Health Administration (OSHA) is the federal agency charged with enforcing all applicable safety laws and regulations in the OSH Act. Roughly 22 states have been granted authorization to establish their own occupational safety and health programs. Michigan has an approved state plan, and the Michigan Occupational Safety and Health Administration (MIOSHA) administers the OSHA statutory and regulatory mandates. Michigan typically follows the federal OSHA regulations and does not implement standards that are stricter than the federal guidelines.

Initially, Michigan established its own employer response requirements to the COVID-19 pandemic through executive orders. The Michigan Supreme Court struck down some executive power to issue such orders, but public health orders remained viable. At the time of writing, Michigan has repealed its emergency COVID-19 workplace rules and efforts to establish a permanent COVID-19 rule. MIOSHA instead applies existing rules and the general duty clause to other COVID-19 workplace enforcement. A Michigan statute previously prevented employers from disciplining or retaliating against employees electing to stay home if they or their close contacts had COVID-19 or COVID-19 symptoms. Michigan employers will want to ensure they also check for other applicable orders or directives from other agencies within the state, especially as the COVID-19 situation remains fluid.

Workers' Compensation

The Michigan workers' compensation framework has several advantages for employers, including relatively modest statutory caps on benefits available under the Act, the ability of the employer to direct authorized medical care, and a robust exclusivity provision. The Michigan Worker's Compensation Act is adjudicated through an administrative law structure, with hearings being held by a single hearing member assigned to that geographic location. Appeals against the decision of the single hearing member may be appealed to the full Board.

The provision of employee benefits and the documentation of employee benefit plans is largely a matter of federal law under the Employee Retirement Income Security Act of 1974 (ERISA). Generally, state law is preempted as it relates to employee benefit plans.

Paid Medical Leave Act

Effective March 29, 2019, the Michigan legislature enacted a paid medical leave statute requiring covered employers (those with 50 or more employees – including outside of Michigan) to provide 40 hours of paid time off for an eligible employee’s or their family member’s health condition, due to domestic violence or sexual assault, or closure of work or school due to a public health emergency. Employers must pay close attention to the coverage requirements defining an eligible employee. Additionally, employers can select from front-loading or accrual over time of the 40-hour paid leave benefit. Employers also have flexibility, by policy, to define increments of use and the notice, procedural and documentation requirements associated with use. Many employers will satisfy the paid leave requirement with existing paid vacation days, paid personal days, and other paid time off.

2018 Paid Sick Leave Ballot Initiative

On July 19, 2022, the Michigan Court of Claims ruled that the Michigan legislature violated Michigan’s constitution when it adopted and later amended (within the same legislative session) the 2018 Paid Sick Leave ballot initiative. Under the original Paid Medical Leave Act initiative, employers with fewer than 50 employees would have to provide 72 hours of leave as opposed to 40 hours (likely without any current credit for already provided vaccinations) and comply with expanded and more onerous use and notice requirements, as well as be subject to new retaliation provisions. Small businesses (fewer than ten employees) would have to grant a combination of paid and unpaid leave up to 72 hours.

On July 20,2022, the legislature and the state of Michigan filed an appeal seeking a stay. Also, the Department of Labor and Economic Opportunity has indicated that due to the appeal, they will not currently enforce the Court of Claims decision. The status of this litigation and the Paid Medical Leave Act must still be confirmed.

Payment of Wages and Fringe Benefits Act

Michigan’s Payment of Wages and Fringe Benefits Act regulates the frequency of wage payments, format, and allowable deductions for the benefit of the employer and related procedures.

Terminating an employee is one of the most difficult decisions facing employers and is also the most likely to result in litigation.

At-Will Terminations

If the employment relationship is at-will, it means that an employee has no contractual right to continued employment. That said, employers should always explain the basis for any employment termination. In the context of a lawsuit claiming that the termination decision was unlawfully discriminatory or retaliatory, many statutes permit an employer to avoid liability where they are able to articulate a legitimate, non-discriminatory (and/or non-retaliatory) basis for making their decision.

Termination of Employment by Operation of Contract

Where the employer and employee have entered into an employment agreement, that agreement will often address how and under what circumstances the employment relationship will terminate. Close attention should be paid to the language of the employment agreement, especially where there are defined terms addressing termination for “cause”, “change of control”, and other provisions. Employees are not entitled to severance pay as a result of termination unless the employer agrees to provide it according to the terms of an agreement or policy, or a discretionary decision to offer it. Many employers offer severance pay upon termination. Best practices dictate that severance or separation agreements include a release and waiver of all claims against the employer (unless release and waiver is precluded by explicit operation of law).

Separation Agreements and Releases

Waivers by employees age 40 or over are subject to special procedures to obtain a release of claims under the federal Age Discrimination in Employment Act (ADEA). In order for a waiver of claims to be valid under the ADEA, the release and waiver provisions must:

• be written in plain language understandable by the average individual eligible for the severance;
• specifically refer to ADEA claims and rights;
• not cover prospective or future rights or claims;
• be in exchange for valuable consideration in addition to any benefits or pay to which the employee was already entitled;
• advise the employee, in writing, to consult with an attorney before signing;
• provide the employee 21 days to consider the agreement; and
• permit the employee to revoke the agreement within seven days after it is executed by the employee.

In the case of a group termination – ie, involving termination of two or more employees from the same decision-making process – employees receive 45 days (not 21 days) to consider the agreement (again, with a seven-day revocation provision) and a disclosure identifying the class of employees eligible to receive the severance package, their ages and the ages of all employees within the same job classification, division or organization who are not eligible or selected for participation in the termination program, along with identifying the selection criteria.

WARN Act Obligations

The Worker Adjustment Retraining and Notification Act of 1988 (the “WARN Act”) applies to any business that employs 100 or more employees (excluding part-time employees) and terminates employees under circumstances that qualify as a “plant closing” or “mass layoff”. In those instances, the employer must provide affected employees and certain government officials at least 60 days' advance notice of the job-loss event. Employers that fail to do so may be required to pay the affected employees back pay for each day of the violation, reimburse for any loss of benefits and medical expenses incurred, and pay civil penalties.

In addition to the federal WARN Act, Michigan has its own mini-Worker Adjustment and Retraining Notification ("mini-WARN") law. The Employee-Owned Corporation Act, MCL §§ 450.731–450.738, encourages (but does not require) an employer to notify the Michigan Department of Licensing and Regulatory Affairs (LARA), the affected employees, any employee organization representing them, and the affected community as soon as possible after making a decision to close a facility at which at least 25 employees work.

COVID-19 Considerations

Effective July 14, 2022, Michigan rescinded its COVID-19 employment-related anti-discrimination and retaliation statute. Liability protections for companies were also rescinded. Nevertheless, terminating someone because they have the virus or are suspected of having the virus can result in disability discrimination or retaliation claims. See 6.2 Discrimination, Harassment, and Retaliation Claims.

Alternative Dispute Resolution

The law in the United States generally favors the private adjudication of disputes.

If the employer and employee have entered into an enforceable agreement to arbitrate a dispute, and the disputed matter is the type of claim that the parties agreed to arbitrate, courts will typically order the parties to proceed to arbitration. Arbitration can cover the full range of employment-related disputes.

Michigan law presumes that the employment relationship is at-will and terminable by either party for any reason or no reason, with or without notice. Care must be taken to ensure that an employer follows Michigan requirements for preserving the at-will status of the employment relationship.

Where there is an individual written contract of employment, or an agreement that the employment relationship will continue for a specified, definite duration, termination of the employment agreement proceeds according to the terms of that agreement. If termination violates the terms of that agreement, the employer may be subject to a breach of contract/wrongful termination claim and damages equivalent to the pay the employee would have received under the contract.

In Michigan, a non-union employee who argues that their employment is not at-will, but rather requires “just cause” to terminate, may attempt to prove such in one of three ways:

• proof of a contractual provision for a definite term of employment or a provision forbidding discharge without just cause (see 2.1 Defining and Understanding the Relationship);
• an agreement, either written or oral, that expressly and unequivocally supplies job security; or
• an implied contract where the promises made within an employer’s policies and procedures instill a “legitimate expectation” of job security in the employee.

An employer’s emphasis of the at-will nature of employment and use of a contractual disclaimer (in employment applications, offer letters, handbooks, policy statements, etc) as well as the employer’s reserved right to change or terminate its policies at any time (with or without notice) is critical to limiting liability and avoiding a plaintiff employee’s argument that they may only be terminated for “just cause”. Also, supervisory training to avoid misleading assurances or implied promises of continued employment is required to avoid the creation of circumstances supporting a “just cause” claim.

While beyond the scope of this summary, employers can establish internal dispute resolution procedures that are “final and binding” to support the use of “just cause” or “satisfaction” (versus “at-will”) employment status.

Even with at-will employment, other employment agreements are enforceable, such as those concerning confidentiality, intellectual property, and restrictive covenants to arbitrate and waive class-action participation, and/or an agreement to shorten the statute of limitations.

Federal Law

There are many federal employment laws that prohibit discrimination, harassment, and retaliation based on legally protected characteristics (sometimes referred to as “immutable traits”) or based on legally protected activity by an employee. The legally protected characteristics that are protected under federal law include age, gender (including sex and now including sexual orientation and/or gender identity), pregnancy, race, color, national origin, disability, military or veteran status, genetic information, religion, and citizenship. Federal law is now settled, with the US Supreme Court decision in Bostock v Clayton County, that discrimination based upon an employee’s sexual orientation and gender identity is prohibited by Title VII of the Civil Rights Act of 1964.

Litigation and Remediation in Michigan

As of July 28, 2022, Michigan’s Supreme Court held in Rouch World LLC v Department Of Civil Rights, that Michigan’s Elliott-Larsen Civil Rights Act also prohibits discrimination on the basis of sexual orientation. Elliott-Larsen applies to all employers, while Title VII applies to employers with 15 or more employees. In addition to federal laws, Michigan’s civil rights laws expand the coverage of legally protected characteristics to include height, weight, and marital status.

Employees in Michigan do not have to first exhaust administrative remedies by filing a charge with the Michigan Department of Civil Rights before bringing a civil suit alleging discrimination, harassment, and/or retaliation under Michigan’s civil rights laws. The limitations period for filing a civil suit is three years, although most courts enforce agreements to abbreviate the limitations period that applies to actions brought to enforce Michigan civil rights in employment laws. (Note: an abbreviated limitations period is not generally enforced in the context of federal employment claims.)

An explicit policy prohibiting discrimination, harassment, and retaliation is a key component in addressing employee concerns and defending against a civil suit. Equally important, in terms of regulating workplace behaviors and defending against litigation, is the provision of periodic training, and especially supervisors’ training; supervisors, as the employer’s agents, are subject to individual liability under many Michigan civil rights laws.

Impact of "Me Too", "Black Lives Matter" and COVID-19

The "Me Too" and "Black Lives Matter" movements have highlighted harassment and retaliation claims based on sex and race. COVID-19 has brought forth claims based on employee medical conditions and accommodations, and alleging retaliation based on voiced safety concerns, however Michigan’s Covid-19 Employment Rights Act (MCL 419.401) prohibiting discrimination and/or retaliation against an employee who quarantines after a positive test, close contact or symptoms, has been repealed for claims filed after July 1, 2022. That repeal was in exchange for repeal of Michigan’s employer COVID-liability protections law (HB6030/SB1258). Claims filed before July 1, 2022 are preserved, but both laws will be fully repealed July 1, 2023.

Under federal law, sexual harassment claims that are settled may not be tax deductible if subject to a non-disclosure clause. Michigan does not have such a provision.

With few exceptions, the FLSA governs wage and hour claims brought by employees in Michigan. The FLSA requires that all covered, non-exempt employees be paid at least minimum wage for every hour worked, and receive overtime pay at no less than 1.5 times the regular rate of pay for all hours worked in excess of 40 within a workweek.

Potential wage and hour-related claims can include misclassification of a worker as an independent contractor or consultant (rather than as an employee), misclassification as exempt from overtime pay, payroll docking policies and practices, “off-the-clock” unpaid work hours, meal periods, breaks, overtime, record-keeping, deductions from pay, and rounding.

Michigan law severely restricts when and how an employer can deduct money from an employee’s paycheck.

Class and Collective Actions

Because an individual employee’s wage claim may be small, wage claims may be brought in a class action (referred to as a "Rule 23 class") or a collective action under Section 216(b) of the FLSA. Through either framework, a large number of employees citing similar wage or compensation errors may join together to seek back pay, front pay, punitive or liquidated damages, and attorneys’ fees. Carefully crafted individual agreements to arbitrate claims, including a waiver of the right to proceed in a class or collective action, may help combat the risks and costs associated with class and collective actions, though certain lawmakers at the federal level have recently addressed potential lawmaking to limit or eliminate employee arbitration agreements.

Nearly every federal and Michigan employment law protects employees who report perceived unlawful acts, or participate in an investigation into the same. Even if it is ultimately determined that the employee’s perception is wrong, the employee will generally have “a right to complain” and still be protected unless it is shown that the employee knew they were making a false report. Thus, protection is granted to employees who report or complain about, for example:

• job safety issues;
• discrimination or harassment;
• violation of the Affordable Care Act;
• wage payment violations;
• environmental violations;
• fraud against the government, including tax evasion; and
• misappropriation or misuse of investor funds in the context of a public company.

In Stegall v Resource Tech. Corp., Michigan’s Supreme Court recently clarified that public-policy claims of retaliatory termination can be based on internal reports of alleged violations of law. Employers would be well advised to establish a standalone non-retaliation policy. When an employee who has engaged in protected conduct must be disciplined or discharged, an employer should be able to provide substantial (and, ideally, documented) evidence of the non-retaliatory basis for the discipline or discharge.

Government Redress of Grievances

The growth of social justice movements has also created increased awareness of the ability to pursue government redress of grievances. While Michigan has not yet done so, some states have adopted laws prohibiting confidentiality provisions in separation agreements that would otherwise prevent employees from discussing the facts of a discrimination or harassment claim with government agencies. The impact of COVID-19 has accelerated the number of employees reaching out to government officials to express concerns over a variety of health-related issues, including hygiene protocols and adherence to social distancing and mask mandates that have been adopted by government bodies. This trend will result in more investigations and potential actions by law enforcement, state health agencies, and the state and federal OSHA.

The growth of various social justice movements has caused many employers to reassess their training programs with respect to discrimination and harassment. The previous focus on simply preventing illegal conduct has shifted to one fostering a culture of inclusion. Part of that process involves giving greater emphasis to identifying bias, including unconscious or implicit bias; a greater awareness and sensitivity to these issues, particularly on the part of human resources personnel and managers; and strengthening the mechanisms by which employees can express concerns and by which those concerns will be evaluated. The promotion of environments that encourage reporting and offer multiple avenues to bring concerns forward, coupled with an appropriate response to the behaviors at issue, are important components of such a program.

In response to racial disparities surrounding healthcare illustrated by the COVID-19 pandemic, Michigan’s governor declared racial inequity to be a public health crisis and directed LARA to begin the process of promulgating rules to establish implicit bias training standards as part of the knowledge and skills necessary for licensure, registration, and renewal of licenses and registrations of health professionals in Michigan. The governor also directed all state employees to attend implicit bias training.

In addition to wage and hour claims, certain forms of discrimination claims are often brought in a class action under Federal Rule of Civil Procedure 23. A class action allows a large number of employees citing similar alleged discriminatory practices to join together against an employer to make claims for monetary and equitable relief.

Potential damages vary depending on the statute under which an employment-related claim is brought, but may include back pay, front pay, punitive or liquidated damages, and attorneys' fees. The court can also order the employer to reinstate/rehire employees found to have been improperly discharged.

In class and collective actions, the remedies may be multiplied by the number of employees implicated. Seemingly minor errors in the payment of wages that by themselves would not cause concerns about litigation by an individual plaintiff can mutate into high-stakes litigation when large numbers of employees and former employees combine and become eligible for unpaid wages, liquidated damages and penalties, and attorneys' fees and costs, particularly when the potential minor errors span a number of years.