Dive Brief:
- The Michigan Supreme Court ruled Wednesday that the state must implement two laws, one that raises the minimum wage and gradually eliminates the tipped subminimum wage in the state, and another that governs the accrual of sick time.
- The court held that the laws would take effect as if they’d been passed on July 31, 2024, as initially written, meaning the tip credit in Michigan will be gradually phased out between Feb. 21, 2025, when it rises from 38% to 48% of the state’s minimum wage and Feb. 21, 2029, when it will be phased out entirely.
- A handful of other jurisdictions are phasing out the tipped subminimum wage including Washington, D.C.,and Chicago. New York State is also considering this action.
Dive Insight:
The court ruled against the adopt-and-amend tactic used to weaken the minimum wage and sick leave laws. In 2018, the laws were presented to the state legislature as a result of referendum petitions. The legislature, then controlled by the Republican party, adopted the laws in September 2018, but amended them to significantly weaken them in November 2018 after the defeat of Bill Schuette, the Republican nominee for governor, but before Gretchen Whitmer, the victorious Democrat, was inaugurated.
“Under the Michigan Constitution, the Legislature would not have been able to make these amendments by a simple majority vote if the initiatives had appeared on the ballot and had been approved by a majority of Michigan voters in the 2018 election” the court found.
“The Legislature cannot reject or alter an initiative without the voters’ approval,” the opinion states.
Using the adopt-and-amend scheme, the state legislature delayed implementation of the labor law reforms in Michigan by six years. If the ballot initiative had passed, or if the legislature had adopted but not amended it, the tip credit would have been eliminated in 2023.
One Fair Wage, a workers advocacy group that lobbies for the elimination of the tipped subminimum wage, said the court decision would result in wage increases for around 494,000 workers in Michigan.
“Today’s court decision not only ensures that all workers in Michigan receive a raise; it also makes Michigan the eighth state to end the subminimum wage for tipped workers, the first state East of the Mississippi to end the subminimum wage for tipped workers, and the first state anywhere in over 40 years to do so,” Saru Jayaraman, the president of OFW, said in a statement.
Mike Whatley, the VP of state affairs and grassroots advocacy for the National Restaurant Association, said that trade organizations have been largely successful at stopping attempts to eliminate the tipped subminimum wage, despite recent losses in Chicago and Washington, D.C.
“The tip credit compensation model has been the target of legislation in several other states this year, but in 17 states and two local municipalities, bills to eliminate the tip credit were stopped by tipped employees and their employers,” Whatley said in a statement emailed to Restaurant Dive.
The NRA has made a the preservation of the tipped subminimum wage a key political priority. Opponents of the elimination of the tip credit claim it will lead to catastrophic job losses. Since D.C. began eliminating the practice last year, economic data show only moderate changes in overall full-service employment, which is down by about 1,000 jobs, or 3.2% in the District, year-over-year, but still above 2022 levels.
The NRA, according to Whatley, supports “the efforts of the Michigan Restaurant and Lodging Association to protect the state’s tip credit and will continue to work closely with them in the weeks ahead.” The NRA directed questions about further political challenges to the Michigan court decision to the MRLA, which did not immediately respond to requests for comment.
