unemployment benefits

Five Stories that Matter in Michigan This Week – June 10, 2022

Five Stories that Matter in Michigan This Week – June 10, 2022; Legal, Legislative, and Regulatory Insights

Wayne County Announces $54 Million Fund for Small Businesses

A new $54 million fund to support small businesses, called the Wayne County Small Business Hub, was announced at last week’s Detroit Regional Chamber’s Mackinac Policy Conference (“Mackinac Conference”). It will provide support to new and existing businesses, with a specific focus on minority- or women-owned businesses, and micro businesses with 10 or fewer employees with a focus on technical assistance.

Why it Matters: Small businesses are often the first to be hit when the economy slows, and with credit markets tightening there are likely to be fewer sources of liquidity for small business owners to tap. This new fund, a collaboration between the Wayne County Executive’s Office and New Economy Initiative, will provide needed resources for historically disadvantaged businesses.

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Ford and Pfizer to Make Significant Investments in Michigan

Also at the Mackinac Conference, Ford Motor Company and Pfizer announced significant investments in Michigan. Ford reportedly will spend $2 billion across the company’s Michigan plants, and intends to create more than 3,000 jobs. Pfizer will make a $120 million investment at its Kalamazoo facility.

Why it Matters: With a great deal of economic doom and gloom in the headlines, these announcements are bright spots showing that large companies are still making investments in their businesses—and in Michigan, in particular.

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Concerns Expressed About Losing Another EV Investment in Michigan

But it’s not all good news on the economic front in Michigan. At the Mackinac Conference, John Rakolta Jr., chairman of Walbridge, pointed out that Michigan is missing out on major opportunities in the electric vehicle industry. For example, Stellantis announced last week that it was bypassing Michigan and locating its new electric vehicle battery manufacturing plant in Kokomo, Indiana.

Why it Matters: According to a study by Fortune Business Insights, the global electric vehicle market is expected to grow from approximately $287 billion in 2021, to $1.3 trillion by 2028. To take advantage of this opportunity, Michigan must make itself attractive to companies in the electric vehicle market. As Rakolta points out, this involves more than designing tax incentives. It requires a more comprehensive approach to utilities, zoning and other important business, financial, legal and regulatory issues.

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Unemployment Claimants Get to Keep Pandemic Overpayments

Michigan sought to claw back Pandemic Unemployment Assistance benefits paid to many Michigan residents who were accused of misreporting their income. Michigan argued that claimants were liable because they entered their gross pay from prior years to determine their weekly benefit amount when they should have entered their net pay. Michigan reversed course and announced that it would no longer seek to claw back the funds after media reports revealed that at least some claimants were asked during the application process to provide total pay—not net pay—which resulted in confusion and overpayments.

Why it Matters: This announcement surely came as a relief to many Michigan residents who were embroiled in disputes with the Michigan Unemployment Insurance Agency. More broadly, this situation demonstrates the importance of using precise, accurate language in contracts and other important documents. The alternative is to invite confusion, dispute and litigation.

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Michigan Cannabis Company Files for Chapter 11 Bankruptcy

A Kalamazoo cannabis company, Master Equity Group, recently filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court in the Western District of Michigan.

Why it Matters: This case will be closely watched by the cannabis industry, as well as by corporate restructuring professionals. Bankruptcy courts have historically prevented cannabis companies from filing for protection under the United States Bankruptcy Code because, while marijuana is legal in Michigan, it remains illegal under the federal Controlled Substances Act. And because bankruptcy courts are federal courts, similar attempts by cannabis companies to file for bankruptcy protection have been disallowed.

Related Practice Groups and Professionals

Administrative & Regulatory | Michael Ashton
Business & Tax | Mark Kellogg
Labor, Employment & Civil Rights | Aaron Davis
Cannabis | Klint Kesto

Michigan Attorney General Argues that Legal Marijuana Use Shouldn’t be Grounds to Deny Unemployment Benefits

In 2018, Michigan legalized the recreational use of marijuana. Marijuana use remains unlawful under federal law. Despite the legality under state law of use, some Michigan workers who have lost jobs have had state unemployment benefits denied on the basis that they failed an employer’s drug test due to marijuana use.

Michigan Attorney General Dana Nessel (the “AG”) has waded into the fray to argue that an apparent conflict in state laws related to marijuana use and unemployment benefits should be resolved in favor of terminated workers seeking benefits.

In three cases currently before the Michigan Unemployment Insurance Commission (the “Commission”), the AG filed an amicus curiae brief (a brief filed by a non-party with a strong interest in a matter) arguing that engaging in a “legal” activity (i.e., using marijuana within the permissive scope of Michigan law) that does not affect an individual’s work should not be a valid basis for denying benefits.

The AG’s Position on Conflicting Statutes

Michigan’s Employment Security Act (“MESA”) entitles workers to apply for and receive unemployment benefits. Workers can be denied benefits, however, under specific circumstances. Two of those circumstances include (1) situations where the employee tests positive for illegal drugs or (2) commits misconduct related to work. These were the statutory “disqualifications” applied to deny benefits.

AG Nessel sets forth three arguments in support of her position:

First, that an employer cannot deem off-site and off-hours private activity that does not affect job performance, to constitute “misconduct” under the MESA;
Second, § 29(1)(m) of the MESA defines a drug test as a “test designed to detect the illegal use of a controlled substance.” The AG argues that the tests administered to the claimants did not detect and could not have detected the “illegal” use of marijuana because such use is legal, subject to certain exceptions not applicable in these cases; and,
That the denial of unemployment benefits for the private legal use of marijuana conflicts with the plain language of the law making marijuana use legal. That law provides the use of marijuana cannot be “grounds to deny any . . . right or privilege,” and provides in § 4 that “[a]ll other laws inconsistent with th[e] act do not apply to conduct that is permitted by th[e] act.”

The AG’s briefing attempts to clarify that her position is not meant to question or diminish an employer’s rights to enforce a workplace drug policy. Nor, according to the briefing, does her position address other questions including possessing or using marijuana while on the employer’s property or while working, or an employee being under the influence of marijuana while at work.

What it Means for Employers

It is important to note that the outcome of these cases will not impact an employer’s right to discipline or terminate an employee based on marijuana use outside of work. Questions related to Michigan’s status as an “at-will” employment state are not before the Commission.

The outcome may, however, limit an employer’s ability to challenge the grant of unemployment benefits to a worker terminated for off-premises, off-hours marijuana use. The issues involved almost certainly will be resolved ultimately at the Michigan Court of Appeals.

We will continue to keep you apprised of any further developments in these matters. In the meantime, if you have any questions about these issues, please contact please contact Dave Houston or your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. All statements made in this article should be verified by counsel retained specifically for that purpose. Please contact us with any specific questions.

Fraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

Unemployment Compensation Benefits Extended to 26 Weeks

On October 20, 2020, Michigan Senate Bill 886 was signed into law by Governor Gretchen Whitmer. The bill extends the expansion of unemployment benefits for Michigan workers from 20 weeks to 26 weeks. Extended Benefits are now available for claims established on or before December 31, 2020, on which date the extended benefits provision expires.

The Michigan legislature passed the bipartisan legislation, which is now Public Act No. 229, following the Michigan Supreme Court’s ruling on October 2, 2020, that the governor lacked the authority, after April 30, 2020, to issue or renew COVID-19-related executive orders under the Emergency Powers of Governor Act of 1945. The new law, with certain exceptions noted below, largely reflects the now invalidated Executive Order 2020-76, which provided for temporary expansions in unemployment eligibility.

Public Act No. 229 provides that:

The maximum unemployment benefit period is extended from 20 weeks to 26 weeks;
Certain eligibility requirements for an individual to receive benefits would not apply if COVID-19 prevents the individual from meeting the requirements;
Benefits are to be charged to the employer’s “non-chargeable” account when a worker is laid off due to COVID-19, meaning that the employer’s experience rating is not affected by the cost of extended benefits;
Workers may receive benefits during time off work due to a COVID-19-related cause.

Public Act No. 229, in contrast to Executive Order 2020-76, does not waive the requirement that an unemployed worker must be “seeking work” to be eligible for benefits. Thus, except in certain circumstances, claimants will need to prove they are actively searching for a job to receive benefits. The requirement that a claimant seek work to receive benefits can be waived if either (i) the employer notifies the Unemployment Insurance Agency (“UIA”) that the layoff is temporary and that work is expected to be available in a declared number of days, not to exceed 45 days, following the last day the laid-off individual worked, or (ii) the UIA finds that suitable work is unavailable both in the locality where the individual resides and in those localities in which the individual has earned wages during or after the base period.

Another way in which Public Act No. 229 deviates from Executive Order 2020-76 is that it requires the UIA to review the claimant’s job history for the 18-month period preceding the claim filing date. Any disqualification identified during that period would prevent the extension of benefits. Executive Order 2020-76 had waived that requirement, requiring the UIA only to only consider a claimant’s most recent job. In a statement issued in conjunction with signing the bill into law, the governor’s office called the 18-month look-back period “a waste of resources because employers are not being directly charged for benefits paid at this time.”

If you have any questions about how this new law affects your business, please contact your Fraser Trebilcock attorney.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.