Molly Mackler, bartender at Eastern Palace Club in Hazel Park, prepares a “painkiller” cocktail. Legislation that will go into effect next year will change how workers are compensated in Michigan, including tipped workers in the service industry.
By: Andy Kozlowski, Nick Powers | Madison-Park News | Published August 23, 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!”
Adam O’Connor is one of the co-owners of Eastern Palace Club in Hazel Park. He said he understands the concerns, but he’s also relatively optimistic about the policy.
“I think (the new policy) may be difficult for small business owners, especially in the hospitality industry where margins are already razor thin. I think that it will unfortunately cause most businesses to raise their prices — we may see that in the future. Especially in times of inflation like we’re going through right now, it will put more strain on that margin,” O’Connor said.
“But we definitely welcome it here,” he said, referring to the new law. “We have always paid our employees above minimum wage, whether they’re tipped or not. We set out to do that from the very beginning. And here, we’re very fortunate to have a wonderful guest base who are very giving in terms of tips. Our staff does very well for themselves, but I understand that in other places that may not be the case. So I think this (law) is great for tipped workers.”
O’Connor emphasized the importance of ensuring employees are well-paid.
“We have a beach-themed bar — you don’t want staff to go in there and be grumpy because they’re not making money. So it’s important they’re paid adequately and that they have time off, so they can have a positive attitude while they’re working. And I think the guests feel that here at Eastern Palace Club.
“I know business coalitions worked with the state on this new policy. I believe that small businesses are the lifeblood of our communities,” he said. “We’ll just have to wait and see in a few years if this puts people out of business, if prices go up, or if businesses can adapt.”
Andy French is a Hazel Park resident who works as a bartender at Howe’s Bayou in Ferndale.
“I honestly think it’s long overdue,” French said of the new state law. “But people are also going to realize that the model may have to change more than just paying workers more.”
French said that he has run bars for about 15 years. A prior bar where he worked was in New Orleans. He said at that location, the lowest paid worker was already at $12 per hour. The staff pooled their tips and divided them by the number of hours worked. Everyone except management received a share — even “backend” staff such as dishwashers and cooks.
While there was at least one top-performing bartender who left the place feeling she’d make more on her own, the policy generally worked well for staff, French said, and fostered an environment where servers worked cooperatively rather than competing for tables.
In addition, the New Orleans bar introduced an automatic 20% tip applied to all meals that was explained upfront on the menu as an investment in staff.
“We were worried we’d get some backlash when we announced it on social media, but there was a flood of support,” French said. “We occasionally had customers who came in who didn’t fully read the menu, even though it was written right there in front of them, and they would sometimes get upset. But then we had tons of people who saw the 20% tip on there, and still threw in another 20% on top of it.
“To us, it was the fairest way to educate the customer on what a living wage is, and how we can deal with food costs increasing but also still pay our employees well,” French said. “We could’ve just raised our prices significantly, but then people would have complained about the cost and tipped less because of the expensive bill. It’s about helping customers understand that they’re supporting people.”
He said the state’s increase in the minimum wage could help raise awareness for the fact that tipped workers in the service industry often have much lower base wages. But he cautioned that it will also affect different businesses in drastically different ways.
“Let’s say you’re a smaller mom-and-pop shop and you have a dedicated clientele with your regulars — I don’t think their tips will change that much, and I don’t think they’ll be like, ‘We heard you’re making more per hour, so we’re going to tip you less.’ I highly doubt that would happen,” French said. “But the new base wage will affect the small mom-and-pop shop in other ways, more than a chain bar would be affected, because those big businesses have been enjoying record profits since COVID happened, and they’re far more capable of paying their employees a living wage.”
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.”