By: K. Michelle Moran, Nick Powers | Grosse Pointe Times | Published August 13, 2024
METRO DETROIT — A recent 4-3 ruling by the Michigan Supreme Court affecting the state’s laws governing minimum wage and sick time is sending shockwaves through many businesses, including the restaurant industry.
All workers will receive a pay bump to more than $12 an hour in 2025 with tipped workers gradually reaching $12 in 2029. The final amounts will be determined by the state’s treasurer. The current minimum wage is $10.33 and $3.93 for tipped workers.
All employees, including part-time and temporary workers, are entitled to paid sick leave. Every 30 hours an employee works generates one hour of paid sick leave. Employees get 72 hours paid sick time a year at large companies. However, employers with fewer than 10 employees need to only pay for 40 hours of sick leave a year.
These sweeping changes will go into effect Feb. 21, 2025. For some, it’s a step toward a living wage for workers. For others, it’s a hit to businesses across the state and possibly tipped workers.
How this happened
This ruling was years in the making. It’s the result of wrangling to keep the issue off the ballot in Michigan by legislators against the changes.
It started with two petitions in 2018 that received the required number of signatures to potentially appear on the ballot.
One petition would have given workers gradual wage increases until the minimum wage became $12 in 2022. After 2022, the wage would be increased each year, as determined by the state, according to inflation. The minimum-wage gap between tipped workers and all other workers, 38% in 2018, would be eventually closed by 2024.
The other petition required employers to give employees one hour of paid sick time for every 30 hours worked per week.
The Legislature adopted the unaltered initiatives in September 2018. This kept them off the ballot and allowed lawmakers to alter them.
They did this in two bills. One caused the minimum wage increases to not exceed $12 until 2030 and removed the increases for tipped workers. It also removed increases to the wage based on inflation. The second made changes to sick time. It exempted employers with under 50 employees from providing paid sick time. It reduced the amount of paid sick time hours for larger businesses from 72 hours to 40.
The changes, led by Republicans, were approved along party lines by margins of 60-48 in the Michigan House of Representatives and 26-12 in the state Senate in a lame duck session in December 2018. They were signed by then-Gov. Rick Snyder and went into effect March 29, 2019.
In the Michigan Court of Claims, it was determined that the Amended Wage Act and the Amended Earned Sick Time Act were unconstitutional on July 19, 2022. This was reversed by the Michigan Court of Appeals, but was ultimately upheld by Michigan Supreme Court’s July 31, 2024, ruling.
“We hold that this decision to adopt the initiatives and then later amend them in the same legislative session (what has been referred to as ‘adopt-and-amend’) violated the people’s constitutionally guaranteed right to propose and enact laws through the initiative process,” the majority opinion states.
Business owners, associations react
Many business owners and associations have decried the decision.
The Michigan Retailers Association released a statement in the wake of the news.
“Bedrock principles of capitalism and a competitive labor market are thwarted by extending the paid leave law to employers with only one employee, dramatically altering the paid leave requirements for those with 50 or more employees, and mandating substantial changes to the minimum wage,” the association stated in a press release.
Other organizations including the Michigan Chamber of Commerce and the Small Business Association of Michigan struck a similar tone in press releases.
Joe Vicari, founder and CEO of the Joe Vicari Restaurant Group, spoke out against the changes. The Vicari Group, which includes mostly Michigan businesses under the Andiamo brand, has over 20 restaurants.
“This ruling will devastate the restaurant industry,” Vicari said in an emailed statement. “Many hard-working people will lose their jobs. Eighty-three percent of the restaurant industry did not want this law to pass!”
Restaurant owners and workers in the Grosse Pointes are concerned about the changes.
Daniel Curis has owned a Big Boy for 46 years and Champs Rotisserie and Seafood for almost 20; both are in Grosse Pointe Woods.
“It’s going to hurt a lot of the little guys like me,” Curis said.
But he’s even more worried about the impact the changes will have on his waitstaff, some of whom have been working for him for 10 to 20 years.
“A lot of my waitstaff is not very happy about that because they feel that’s going to limit their income,” Curis said. “Ultimately, (the ruling) is going to hurt tipped employees because people aren’t going to tip (anymore).”
While a bartender at one restaurant in the Pointes thought the addition of paid sick time might be a positive development for workers, a bartender at a different restaurant said it wouldn’t be beneficial, since she said sick employees typically exchange shifts with a co-worker.
Bartenders and servers believe that their tips will either decline or people will stop tipping altogether, which would hurt them financially, as the new minimum wage doesn’t come close to what they earn per hour in tips on a busy day.
“The people that were behind (the new laws) have probably never worked in a restaurant,” said a female bartender at a restaurant in the Pointes, who asked not to be named. “I’m not happy about it at all. Customers are going to be paying more money (for food) and servers are going to be making less.”
Yvonne Beckwith, a server at Champs, has worked in the industry for about 20 years. She’s worried her income will fall dramatically when the new rules take effect.
“We depend on this money,” said Beckwith, a mother of three. “I make more on tips here than I made at my last job, where I made $17 an hour. … Good servers work very hard, and I think we deserve to get the tips.”
Ava Hopko, who also works at Champs, said she might make more money when hostessing with the change, but not when waitressing. The college student said she’d prefer to see the current tipping model remain in place.
“Honestly … if we weren’t making the tips, I would consider going to a different job,” Hopko said.
The Grosse Pointe Chamber of Commerce is raising the alarm about the changes after hearing comments like these from their members.
“Responses we have received from restaurant employees do not support the new laws set to take effect in 2025 and are considering seeking employment in other fields,” GPCC President and Executive Director Jenny Boettcher said in an email interview. “One employee specifically, who has dedicated over 20 years to the industry, is now exploring opportunities in a different sector. It is truly disheartening to hear.”
Inflation and rising fuel and labor costs have already increased food and beverage prices, and critics of the new law say restaurant owners — who’ve had to raise menu prices because of these factors — will have to do so again because they’ll need to pay higher wages to their tipped employees.
“The problem with inflation the last few years is, you can only go so high (with menu prices),” Curis said. “It just cuts back on how many times people can go out to eat.”
Restaurant workers and owners fear rising menu prices will reduce the number or frequency of customer visits and, in turn, force restaurants to close or reduce their hours of operation.
The changes come at an already challenging time.
“Many businesses are still grappling with the aftermath of the Covid-19 pandemic, and now they are facing another significant challenge that could potentially devastate the industry,” Boettcher said. “Feedback from our members indicates that this new challenge has the potential to further cripple their restaurants.”
There was more than a little uncertainty on the part of some.
One restaurant manager in Grosse Pointe City, who asked not to be named, said he didn’t know yet what impact the changes might have.
“I just want the best for my employees,” he said.
The GPCC plans to continue to monitor the new laws, and they encourage anyone impacted by the changes to make their voices heard in Lansing.
“The Chamber is dedicated to keeping businesses well-informed with the backing of the Michigan Chamber of Commerce,” Boettcher said. “It is imperative for tipped employees to write their local representatives a letter letting them know this will hurt their income.”
A ‘landmark victory’
Michigan Attorney General Dana Nessel praised the ruling.
“This is a landmark victory for Michigan voters and a resounding affirmation of the power of direct democracy,” Nessel is quoted as saying in a press release. “The Legislature cannot manipulate its power to undermine the will of the people. This ruling sends a clear message that elected officials cannot disregard the voices of their constituents. I am glad to see the Court recognize and respect that the people reserved for themselves the power of initiative, a crucial tool meant to shape the laws that govern them.”
The Restaurant Opportunities Center called the day of the ruling “an important day to remember,” calling the decision a win for working families and democracy.
“This ruling is the answer to economic opportunities and job protections that every worker, every voter and every person—Black, white, Latino, Asian, gay and straight, binary and non-binary, Democrat and Republican, immigrants and Native Americans, young and senior—deserves,” Chris White, director, ROC Michigan, is quoted as saying in a statement. “Together with our coalition partners and allies, I am proud of what we have accomplished!”
The Michigan AFL-CIO also commended the ruling.
“We commend the Court for ruling what we all clearly witnessed back in 2018,” Michigan AFL-CIO President Ron Bieber said in a press release. “The Republican-controlled legislature’s flagrant disregard for the citizen initiative process has robbed Michigan workers of wages and sick leave for the past five years. Republicans in the legislature quite literally stole out of the pockets of Michigan workers and today’s ruling by the Supreme Court is the first step in righting this wrong and making workers whole.”