Court’s ruling on wages and sick time reverberates across region

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
Many business owners and associations have decried the decision.

Bill Roberts, the owner and president of Roberts Restaurant Group, had a similar view of the changes. Roberts Restaurant Group owns Streetside Seafood in Birmingham, Cafe ML in Bloomfield Township, Roadside B&G in Bloomfield Township, and Bill’s in Bloomfield Hills.

“It will not be good for the customers, nor the staff, nor the restaurant owners. … Ultimately, it’s going to increase prices to the guests significantly,” he said. “It’s hard to project that far out, but I was playing with numbers, and my four restaurants, in 2028, it would cost us probably another $400,000-$500,000 in payroll and taxes — and you know where that comes from. We have to raise prices. We feel like prices are already high as we are coming out of COVID. Wages have gone up, inflation has caused food prices to go up, and shoot, every time the plumber or electrician walks in the door they’re charging practically double what they did four or five years ago, so it’s putting a hurt on our industry.”

Roberts is also concerned that the price increases he says will be needed to sustain the mandated changes will deter customers from dining out.

“If a burger goes from $18 to $20 right now at an upscale restaurant, it will be $24 or $25 in several years. We’d rather not be increasing our pricing, frankly. At what point does someone not go out as often? We’re seeing it already. We’re seeing guests splitting some items or ordering the lower priced items on a menu, or not getting the big bottles of wine they had been, so we are already seeing some fallout from the inflation that’s been rampant over the last several years. … Though we’re doing business and it appears like things are fantastic, they really aren’t on the bottom line. Our industry is struggling and we’re working hard to make some of these changes more palatable.”

Marty Knollenberg, Sedona Taphouse/Knollenberg Hospitality LLC owner, said no one at his restaurant is paid under $12. He does have concerns with the changes to tip credit and earned sick time, and how it could affect the current rise in the cost of living.

“There are a lot of loopholes, and my hope is the Legislature will fix this,” Knollenberg said. “I don’t know what they’re trying to solve, and I wish the union groups pushing for this would ask who’s paying for this.”

He said he feels that his own staff would prefer the current system, specifically in terms of how tips are addressed.

“They like the system we currently have,” Knollenberg said. “Some servers start as hosts and find with their tips they make more money as servers.” Knollenberg said the loopholes should be modified in legislation and that Michigan representatives related to the service industry should be listened to.

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.

 

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.”

 

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.