By: Nick Powers, Taylor Christensen | Royal Oak Review | Published August 26, 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!”
Bob Morton, owner of Lily’s Seafood Grill & Brewery at 410 S. Washington Ave. in Royal Oak, believes that the tipped wage elimination is going to drastically change the restaurant industry, and not in a good way.
“I think that it is going to have a negative impact for the people that, in theory, it is trying to help,” Morton said. “If you look at that employee base as a whole, I think you can expect fewer jobs overall, lower wages, because that money is going to have to come from someone to make up for the tip credit.”
Morton said that the elimination of tipped wage will create a ripple effect ruining both the restaurant business and customer satisfaction, resulting in restaurants closing and more.
“I would project that many restaurants like us would not be able to continue on; just there’s no sense being in business if you can’t, if you can’t make money, and that’s going to result in closures, which is bad enough, because now you’ve lost those employees,” he said. “We have quite a few vacancies throughout Royal Oak right now, and I don’t think it’s a unique-to-Royal Oak problem, but I think economically, that’s going to impact real estate, which impacts tax revenue.”
The understanding of what exactly is happening is something that Morton was very passionate about emphasizing. He said that the common misconception is that tipped workers do not get paid the minimum wage, which according to him, is not true.
“Well, I think this is where there’s a lot of confusion. And to be totally honest, I think that this is how, when they were collecting signatures to get this on the ballot, how it was really sold, some misunderstanding that there’s different minimum wages,” he said.
Morton explained it like this: the tipped employee minimum wage is $3.93, and if that employee did not have any customers giving them tips that day, the owner of the restaurant would still be obligated to make up the difference, so that the employee takes home $10.33 an hour.
“My hope is that there can be a compromise,” he said. “I’m hoping that people that do have the ability to come up with a compromise at the state level can take a serious look at it before February, but we’ll see.”
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.”