Lawmakers pass 11th-hour revised wage, sick leave reforms, keep tipped system
The GOP-controlled House and the Democrat-controlled Senate compromised and approved a bipartisan bill to save the tipped wage system.
OTTAWA COUNTY — Local restaurant owners were breathing a sigh of relief Friday after Michigan lawmakers approved an 11th-hour bipartisan bill that will keep tipped workers below the state’s minimum wage.
The pair of bills, which cleared the Michigan House on Jan. 23, were approved by the state Senate just moments before a midnight deadline on Feb. 20. The bills (HB 4001 and HB 4002) will increase minimum wage and change paid sick-time laws.
If Michigan lawmakers hadn’t reached a compromise on the bills, tipped workers were set to receive the state’s standard minimum wage. Instead, the Senate amended a bill that will keep the subminimum wage at 38% of the state’s $12.48 minimum wage, bringing tipped workers' wages up from $4.01 to $4.74.
The state’s minimum wage is now set to increase over the next two years until it tops out at $15 an hour on Jan. 1, 2027, with the next scheduled increase scheduled for Jan. 1, 2026, to $13.73.
Meanwhile, the tipped worker subminimum wage will rise over the next six years to 50% of the state minimum wage.
The bills, known as Wage Act and Earned Sick Time Act, were reintroduced last year after the Michigan Supreme Court ruled in 2018 that the Republican-controlled Legislature acted unconstitutionally when it adopted a pair of voter initiatives on minimum wage and paid sick leave — in order to render them moot — then later amended them in the same legislative session.
The original wage bill intended to make service industry workers earn the state minimum wage by 2030, but after outcry from workers and small business owners over the potential harm of shifting away from the established tipped system, the GOP-controlled Legislature “adopted and amended” it, which triggered a lawsuit.
Original Bills proposed changes | Amended Bill actual changes |
Proposes to increase minimum wage to $15 an hour over the next five years, as well as gradually phasing out tipped workers' subminimum wage by 2030. | Will increase minimum wage to $15 an hour by 2027, while also gradually increasing tipped workers' subminimum wage to 50% that of minimum wage by 2031. |
Allow workers at large companies to accrue 72 hours of paid sick leave a year, and 40 hours of sick leave at smaller companies (10 employees or less), as well as an additional 32 hours of unpaid sick leave. | Keeps the 72 hours of paid sick leave for workers at larger companies a year, and the 40 hours of paid sick leave for smaller companies, but removed the 32 hours of unpaid sick leave. |
Advocacy groups for tipped workers marked the recent compromise as a win.
“With Gov. Gretchen Whitmer’s signature today, thousands of community restaurants and tens of thousands of servers and bartenders can exhale, knowing their voice was heard,” the Michigan Restaurants and Lodging Association posted to Facebook on Feb. 21. “They can now begin the work of planning for their collective future with the knowledge that a tip credit has once again been preserved.”
The group, which lobbies on behalf of restaurants, also thanked the many protestors who voiced their opinion in Lansing, and thanked the legislators for hearing their complaints.
MRLA criticized the group One Fair Wage, a workers advocacy group that advocated for reforming the tipped wage system in 2018.
“It’s now time for Saru Jayaraman and the astroturf One Fair Wage group to pack up shop and go back to California,” MRLA said of One Fair Wage President Saru Jayaraman
A couple of hours after Whitmer signed the bills into law, Jayaraman posted a video to the group’s One Fair Wage social media advocating for the elimination of subminimum wage.
“I just wanted to note on the issue of sexual harassment, the seven states that have gotten rid of this subminimum wage, including Minnesota, have half the rate of sexual harasment as Michigan,” said Jayaraman in a video post on Facebook. “And that is because workers in those states report that they are not as dependent on tips. They get higher tips, but they are not as dependent on them to pay their bills. And so they are able to reject harassment from customers as a result.”
Outside of the immediate wage change, small businesses have until Oct. 1 to implement the new paid sick leave rules, while new small businesses have three years to adjust to the new requirements.
Under the new paid sick leave rules, companies have to allow employees to accrue one hour of sick leave for every 30 hours of work. A small business of 10 or fewer employees may limit this to 40 hours a year, while a business with more than 10 employees may limit it to 72 hours a year. The new law also expands earned sick time uses, now allowing employees to take time off for childcare.
Many restaurant owners finally have some answers on how their livelihoods and businesses will be affected.
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Matt Murphy, owner of Murphy’s Restaurant in Allendale, said the last couple of months were frustrating. He compared the uncertainty to COVID-era rules, where guidelines changed sometimes on a daily basis.
“Will wages go up? Will this bill be extended? No one knows, and that’s the frustrating part,” Murphy said Feb. 17. “The state has my address … send me a letter with the new guidelines. That’s all we ask. We are unsure of what the payroll will look like this week or if we have to start tracking paid sick time hours earned.”
Meanwhile, One Fair Wage announced on Friday it’s beginning to gather Michigan signatures (223,000 valid signatures are required to make the ballot) for a referendum vote against the new minimum wage, according to the Detroit Free Press.
— Christopher Thome covers business and development for Ottawa News Network. Contact him at cthome@ottawanewsnetwork.org.
