Josie Briggs serves up breakfast at The Pantry Restaurant in Sterling Heights. Some restaurant or business organizations have reacted to a recent Michigan Supreme Court ruling and its resulting, upcoming changes to minimum wage and paid sick leave requirements.
By: Eric Czarnik, Nick Powers | Sterling Heights Sentry | 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.
Business owners, associations react
Stacy Ziarko, the president and CEO of the Connect Macomb chamber of commerce, said she has heard from some of her members about the ruling and its potential effects.
When asked for comment on the issue, Ziarko deferred to Michigan Restaurant and Lodging Association President and CEO Justin Winslow. In a statement responding to the state supreme court ruling, Winslow called the decision “tone-deaf.” He said his organization learned from its recent survey that 40% of responding Michigan full-service restaurants aren’t making a profit.
Winslow said the resulting changes could strike a “likely existential blow” to many Michigan restaurants. He added that that could create job losses that could reach as high as 60,000 out of the current estimate of almost 500,000 restaurant industry jobs in Michigan.
“We urgently call on the Michigan legislature to act swiftly, implementing a compromise solution that prevents this impending catastrophe before it is implemented,” Winslow said.
Lisa Lauretti is one of three co-owners at The Pantry Restaurant along Van Dyke Avenue, south of 15 Mile Road, in Sterling Heights. She said that while the court ruling hasn’t really affected her restaurant just yet, she predicts that it’s going to eventually have a huge impact, once the changes go into effect.
Lauretti said the seven or eight waitresses who currently work at The Pantry make $4 an hour plus tips, and she said there currently is not a paid sick leave system in place.
“I don’t know if I’m going to be able to handle paying the girls,” Lauretti said. “Eight dollars an hour more, I’m going to have to raise my prices substantially, and I feel that … I’m going to have to do way more business in order to pay those people.”
Lauretti also noted that many people can’t afford to eat out as much as before, citing inflation and the cost of goods as contributing factors.
She also predicted that the changes would cause some customers to not tip as well. That would ultimately give the waitstaff a pay cut during a time when many people in the industry are living paycheck to paycheck, she said.
“In our restaurant, they (the waitstaff) make a lot of money,” Lauretti said. “Everybody is going to be hurt all the way around. If you’re paying $50, $60 for a bill, they (customers) are not going to pay you 20% (for a tip).”
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.
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.
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.”