Hearing scheduled in 3% interest case

On Tuesday, Sept. 1, the Michigan Court of Appeals will consider the state’s appeal of a 2018 ruling that school employees were owed additional interest on the 3% of their earnings illegally withheld by the state.

In December 2017, the Michigan Supreme Court ruled in favor of returning to educators their 3% withheld from 2010-2012 to fund retiree health care—a benefit those school employees were not even guaranteed to receive.

After employees got very small interest payments as part of their refunds, unions that backed the case (including MEA, AFT Michigan and AFSCME) filed a motion seeking additional interest to be paid.

In an August 2018 ruling, Judge Stephen Borrello of the Court of Claims ruled in favor of the higher interest rate, saying, “Without legal justification, the State ordered the seizure of plaintiff’s earnings.  Then the State continued to hold those earnings for seven years – some two years beyond the date that the State’s Attorney General indicated that it was futile to continue to pursue the matter.  The Court cannot fathom a better scenario whereby the equities demand an award of interest on the funds held in the escrow account.”

The state appealed that ruling, which is the subject of the Sept. 1 hearing.  Before then, the court will determine whether it wishes the hear additional oral argument from the parties.  If not, then the matter will be submitted for a decision based on the written legal briefs.  No timeline exists for the issuance of the court’s written decision.