What Restaurateurs and Hoteliers Need to Know About Michigan’s Changing Minimum Wage + Paid Sick Leave Laws

After a legal tug-of-war that spanned six years and three state courts, not to mention left thousands of Michigan hospitality workers and owners in suspense, Michigan’s tip credit is once again on the verge of elimination.

​On July 31, the Michigan Supreme Court issued a ruling in Mothering Justice v. Attorney General, which inspected the constitutionality of a specific legislative maneuver used by state lawmakers nearly six years ago. While not directly ruling on the issues of minimum wage and paid sick leave, the decision nonetheless had a direct - and immense - impact on the way Michigan hospitality businesses operate.  ​

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BACKGROUND ​

The story starts in 2018 when two ballot initiatives were introduced to raise the state’s minimum wage, expand paid sick leave mandates, and cut Michigan’s tip credit, which many restaurants rely on to keep costs manageable and workers paid far above minimum wage.  
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• A ballot initiative is a voter-led petition, which can be placed on ballot for the public to weigh in on if it is filed correctly with the Secretary of State, gains enough signatures and passes the approval of the Board of Canvassers.  ​​​

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​This ballot initiative garnered enough signatures to be placed on the ballot in 2018, but before election day, state lawmakers moved to adopt the ballot initiative as law, which is an option for legislature when a ballot initiative is presented. Then, later in that legislative session, lawmakers amended the laws to be more sustainable for Michigan’s independent business community and hospitality industry. The tip credit was also preserved after servers made it clear they supported the opportunities and income generated by the tip credit. 
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• The adopted-and-amended laws were called the Improved Workforce Opportunity Wage Act (2018 PA 368) and the Paid Medical Leave Act (2018 PA 369).  ​

​Mothering Justice, the organization representing the ballot initiative’s supporters, filed a lawsuit against the Attorney General aimed at the “Adopt-and-Amend" strategy and kicked off a lengthy legal ordeal as the case wound its way through Michigan’s court systems.  
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• The strategy, referred to as “Adopt-and-Amend", was the focus of the lawsuit, not the content of the Improved Workforce Opportunity Wage Act or the Paid Medical Leave Act.  ​

​In July 2022, Court of Claims ruled the “Adopt and Amend” tactic was not constitutional in the same legislative session and declared the laws should revert back to their original form without amendments.  
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In December 2022, the Attorney General filed an appeal with the Michigan Court of Appeals, and in January 2023, the Michigan Court of Appeals ruled unanimously that nothing in Michigan’s constitution barred the legislature from adopting and amending a ballot proposal in the same session, thereby keeping the tip credit intact.  
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However, that decision was also appealed, this time to the state’s highest court. On July 31, 2024, the Michigan Supreme Court decided in a contentious 4-3 split that “Adopt and Amend” in the same legislative session was unconstitutional.  
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Consequently, the Improved Workforce Opportunity Wage Act and the Paid Medical Leave Act were repealed, and the two 2018 ballot proposals are required to become effective laws as originally written – including the elimination of the tip credit. 
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• The original law related to sick leave is named the Earned Sick Time Act.  

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IMPACT ​

The process by which that happens, however, is complex and still unfolding.    
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For one, the state Supreme Court laid out a revised timeline for the law’s implementation. On February 21, 2025, the court decided, wages and paid sick leave guidelines will start changing, with a gradual scale of implementation for minimum wage. However, those exact rates are yet to be determined as the court prompted the state treasury to come up with rates in relation to inflation.  ​

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Based on the MRLA’s initial calculations and interpretation of the ruling, below is an outline of approximate changes to wage and tip laws to become effective on February 21, 2025*:    

• Michigan’s minimum wage will increase to approximately $12.40 per hour  

• Michigan’s rate for tipped employees will increase to 48% of the regular minimum wage, approximately $5.95  

• Michigan’s tip credit will steadily be phased out and eliminated by 2029, with wages rising somewhere near $13.50 per hour in 2028.  

In late August, however the Michigan governor's administration produced their own timeline and interpretation of the court’s ruling, but also sought clarity from the state Supreme Court about the implementation of the new wage, due to confusion about how to account for inflation. The administration has requested a response from the high court by September 15. The MRLA will file a response by September 4.  

The administration’s proposed timeline is as follows:  

• In 2025, the minimum wage would rise to $12.48 and the tipped wage to 48% 

• In 2026, the minimum wage would rise to $3.29 and the tipped wage to 60% 

• In 2027, the minimum wage would rise to $14.16 and the tipped wage to 70% 

• In 2028, the minimum wage would rise to $14.97 and the tipped wage to 80%  

• In 2029, the minimum wage would increase based on inflation and the tipped wage would rise to 90%  

• By 2030, the tipped wage would be non-existent 

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​The estimated changes to paid sick leave are as follows and will also go into effect on February 21, 2025:  

• All Michigan employers must provide an accrual of 1 hour paid sick leave for every 30 hours worked 

• Employees are entitled to a maximum of 72 hours of sick time per year  

• Employers with less than 10 employees must provide 40 hours of that sick time paid 

• Employers with MORE than 10 employees must provide 72 hours of sick time paid ​
• Sick leave must be carried over with no cap  
• Employers cannot require a doctor’s note until 3 consecutive sick days off  
• All employees qualify for these sick time laws, regardless of status, including seasonal, temporary, exempt or non-exempt  
• All employers must provide the paid sick live regardless of number of employees  
• For tipped employees, the employer must pay sick leave that equals the base wage plus the average tips, as determined in previous pay period.  
• Employers must also allow paid sick leave to be taken on the smallest time increment allowed on HR software  

*Wages are approximations using calculations outlined in the ruling by the Michigan Supreme Court, but a definitive wage scale is anticipated from the Michigan Department of Treasury later in August. 
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​​ON THE HORIZON  

Notably, the state Supreme Court included in its complex ruling a clear acknowledgment that the legislature is within its purview to change the contents of the law put forth in the ruling. After all, the decision in the case Mothering Justice v. Attorney General only sought to decide if the legislature could adopt and amend a ballot initiative in the same session, and six years later, the legislature is well into a new session.  

The MRLA is working round-the-clock with lawmakers to find a common-sense solution that secures a responsible way to raise the state’s minimum wage, smooth out rigid guidelines for Paid Sick Leave and protect the rights of workers, while also offsetting the most damaging aspects of these laws on Michigan’s hotels and restaurants.  
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In short, these laws could possibly change again in the future, and the MRLA is working hard to save the tip credit while raising the topline minimum wage responsibly and to ensure paid leave policies are flexible and reasonable for all. 

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GET INVOLVED

​This is a pivotal moment for Michigan's hospitality industry, with catastrophic consequences possible for hotels and restaurants across the state, as well as the workers they employ and the communities they serve. 

 Members of Michigan's hospitality industry have a chance to share their voice and get involved.  

• Send a letter to your legislator urging them to support a legislative solution that saves Michigan's tip credit. 

• Share your story! The MRLA amplifying the voices of owners and operators helps to secure a solution that maintains the tip credit. Submit a testimonial video sharing how this ruling will impact your business. 

• Learn more about Save MI Tips, an independent server-led initiative passionate about saving the tip credit, and engage your tipped employees so they can become advocates on their own behalf.  

• Order table tents for your business, placing the issue in the public eye and alerting your community to the importance of supporting Michigan restaurants right now  ​

​LEARN MORE 

For over 100 years, the MRLA has been providing Michigan's hospitality industry with necessary tools and resources, and now we're working overtime to answer your questions and connect owners and operators with the information they need to know. 

Together with MRLA Legal Center Partner Fahey Schultz Burzych Rhodes PLC, the MRLA has created two in-depth FAQ documents covering the most pertinent and pressing topics surrounding the new minimum wage and paid sick leave laws.  Delve into the Improved Workforce Opportunity Wage Act and understand the Earned Sick Time Act. 

Additionally, all MRLA Members receive exclusive access to the MRLA Legal Center's resources, including a free 15 minute consultation with expert legal counsel. Visit the MRLA Legal Center today to ask questions and get answers. 

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