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.

 

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!”

Restaurants provide 51% of the meals in the state, according to John McNamara, vice president of the Michigan Restaurant and Lodging Association, which lobbies on behalf of the industry.

On Sept. 5, restaurant workers from metro Detroit had a chance to voice their opinions on the issue of the tipping credit during a media roundtable sponsored by SaveMITips.com at Ford’s Garage in Novi. The event was led by McNamara. State Rep. Kelly Breen, D-Novi, was on hand to hear their thoughts.

Danielle Napper is currently a server at Ford’s Garage in Dearborn and has worked in the industry for 33 years. She said that although she has certifications as a real estate agent, mortgage expert, and is one credit shy of being a registered nurse, serving is her career choice. She said serving allows flexible scheduling and the opportunity to make a substantial income. She said that last year alone she was able to generate over $72,000 on paper by working three- to four-hour shifts six days a week.

“If I had to go and make regular wages, $15 or $10 dollars an hour, and work a 40-hour week, I would never be where I’m at now,” Napper said.

Danielle Kourtakis hails from the United Kingdom but works as a server/bartender at Ford’s Garage in Novi. She said that while it’s true that they don’t have tipping in the U.K., restaurants there don’t offer the same type of service. She said at U.K. restaurants, customers get a menu, there will be a number on that table and they have to go find a worker and give them their order, and when the food is ready, customers often will have to go retrieve the food themselves.

“I think that the tip credit is so widely misunderstood that we need you to advocate for us to keep this tip credit,” Kourtakis said to McNamara and Breen. “I think that at a baseline what the tip credit is, is an agreement between myself and my boss, that he has the ability to pay me 38% of minimum wage, and in return for that he provides me with an environment where I can make a lot more money than that. We also have an agreement where if I don’t make that much money, that he will make up the difference. I did the math, and if you traded me my tips from last month, which was probably one of my slower months, for a minimum wage paycheck, I would have taken a 200% pay cut. That’s a huge impact on my household.”

She said servers need the tip credit to remain in order to pay for their expenses such as mortgages, child care and college tuition.

“I think that our industry is being used as a pawn,” she said. “This institution that’s advocating for this is making people believe that they’re doing us a favor or that my boss is getting away with something by not paying us the full minimum wage, and that is absolutely not the case. I think education on this issue is key.”

Billy Downs, owner of Ford’s Garage, said that if this bill goes through as scheduled and the tipping credit is eliminated, the prices of food at his restaurant will go up at least 25%, and he will have to streamline servers down to two-thirds of what he currently has. He said at Novi there are about 30 servers.

“The biggest thing is if this goes through, I’m going to have to raise prices and that would be such a bummer, because everybody is so tight, and if we raise prices, we are going to lose guest counts and then we are going to reduce staff,” Downs said.

Breen said the thought process behind the initiative was that they “absolutely, positively” want everybody to earn a living wage with just one job. However, she said that with what ended up being created, that “might not be the case.”

“I don’t want to see anything happen to our restaurants. I don’t want to see anything happen to you guys,” Breen said. “So, please understand the intentions are good.”

Breen said the government wants all servers to have good benefits and make a decent wage, and while some restaurants are able to provide that environment for servers, others do not.

“I don’t know what the answer is,” Breen said. “I’m not going to pretend I know what the answer is. What I do know is that there are some people trying to work on a solution.”

She said she fully understands what the servers are saying and wants to hear more from them.

SaveMITips.com and the Michigan Restaurant and Lodging Association are inviting servers and bartenders to rally in Lansing on Sept. 18.

 

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.”

 

Looking for clarity
After the July 31 ruling, Nessel made a motion on behalf of the state of Michigan, the Michigan Department of Treasury and the Michigan Department of Labor and Economic Opportunity on Aug. 21 to clarify several aspects of the change.

“Respectfully, the Michigan Department of Treasury has read this Court’s opinion in earnest and believes there exist ambiguities as to how to interpret and implement this Court’s directives in accounting for inflation for the graduated wages for the 2025 through 2028 time period,” the motion states.

One consequential piece of Nessel’s motion in regard to tipped workers questions the usage of the word “credit” in the original ruling instead of “rate.” If no clarification is given, LEO will implement a base minimum wage with increases. In the original ruling, this will start out with 48% in the first year, making gradual increases until it hits 100% of the minimum wage by the sixth year. Also being examined is when wage increases would occur starting in 2026.

The court is examining how to calculate the new wage for inflation from 2025 to 2028 and provides five options to do this. Out of the five, it favors starting the calculation from when the law would have begun in 2019. This would set the new minimum wage at $12.48 in 2025 and would cap it at $14.97 in 2028.

“This motion for ‘additional guidance and clarification’ is merely an effort to confuse the court’s clear decision and shows that the state is more concerned with the interest of business owners than the welfare of the working class, including over 350,000 restaurant workers in the state,” Chris White, director of the Restaurant Opportunities Center and one of the plaintiffs in the case, said in a prepared statement. “It’s a stark injustice to question an increase of $2.49 per hour over three years for low-income workers.”

Nessel said the state is looking for a clarification from the court no later than Sept. 15, 2024. If no direction is given, the Department of Treasury will implement the option that starts the calculation for inflation from 2019.