State seeks clarification on implementation of increases to minimum wage and paid sick time

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State officials say there are more questions than answers following a decision last month by the Michigan Supreme Court that is expected to change the employment landscape in the state.

The July 31 opinion and order determined that the Legislature subverted the rights of citizens in 2018 by using an “adopt-and-amend” strategy in the same session to kill two ballot initiatives; one to eventually increase Michigan’s minimum wage to $15 an hour while phasing out tipped wages, and the other guaranteeing paid sick time to workers.

However, Michigan Attorney General Dana Nessel, on behalf of the Department of Treasury and the Department of Labor and Economic Opportunity (LEO), filed a motion with the Supreme Court on Aug. 21 requesting “additional guidance and clarification” of the decision.

“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,” stated the motion.

The motion, which requests an answer by Sept. 15, says that the “heart of the conflict” concerns the calculation of inflation as it pertains to the state’s minimum wage, which is currently $10.33 an hour, but would rise to more than $12 an hour early next year. But exactly how much more than $12, and how quickly it would rise through 2028, depends on the precise date that the inflation calculation should begin. In its ruling, the MSC only provided an end date of July 31.

With that date unresolved, the motion presents five options, stating that the state’s preferred method, and the one it will begin implementing unless ordered otherwise, would be to start the inflation calculation from when the law passed in 2019, which would set the new wage at $12.48 in 2025, topping out at $14.97 in 2028.

The state also says clarification is needed on three other issues; the meaning of the term “credit” when referring to tipped wages, whether the MSC intended to exclude the 90% graduated increase for tipped wages, and the effective dates for each year’s wage increases beginning in 2026.

Groups representing Michigan business owners have been adamant that the ambiguities created by the MSC decision, and the impact they will have, require action by the Legislature.

“We have concerns with the court attempting to legislate and the problems described in Attorney General Nessel’s court filing show that the best case scenario is for the Legislature to step in, sooner than later,” Save MI Tips spokesperson John Sellek told the Michigan Advance .

Selleck says only the Legislature can act in a decisive manner when it comes to the issue of eliminating the sub-minimum wage businesses are allowed to pay workers like waitstaff and bartenders, who also receive customer tips.

“Servers and bartenders make well beyond the minimum wage under the current system,” said Selleck. “If they wanted to be standard minimum wage workers, they would have pursued such a job. This is why Save MI Tips is calling on the Legislature to return to save the income and jobs of these workers.”

But advocates for the wage reform say the state’s highest court has ruled and the will of the voters who approved the ballot initiatives needs to be respected.

Chris White is the director of the Restaurant Opportunities Center of Michigan, which filed the lawsuit against the adopt and amend tactic.

“We oppose any attempts to weaken the minimum wage law. Our position is that the court has spoken and that the administration’s job is to do the administrating. We do not believe that the court should weigh in any further,” White told the Advance . “I know that there are other interest groups that want to challenge what the court has said, and I think that they would be better served working with us on finding ways to implement the changes.”

Brian Calley, who was the GOP lieutenant governor in 2018, is now the president and CEO of the Small Business Association of Michigan (SBAM). He told the Advance that the questions left behind by the MSC decision highlight the complexity involved in implementing mandatory wage and sick leave increases.

“The decision was quite difficult to understand,” said Calley. “We are still trying to understand the calculations and each of these possibilities, because the only one that the filing did the calculation for was their preferred option, which was option one (which is) a more aggressive interpretation that would result in a higher, faster minimum wage.”

Calley said by allowing for inflation to be added on the back end of the wage calculation, the MSC made things more complicated than they needed to be.

“I was quite surprised that the Supreme Court didn’t just say, ‘OK, what if those steps had happened right at annual inflation’ since that would have been a true reflection of what things would have been had the law went into effect back [when it] passed in 2018 and went into effect in 2019. That would have been the most straightforward kind of representation,” said Calley.

He also said the provisions for paid sick time, requiring employers with fewer than 10 employees to offer up to 40 hours of paid sick time annually and employers with 10 or more employees to give up to 72 hours, will not necessarily be met with approval by employees.

“ We surveyed our members [and] most businesses offer flexible leave banks that can be used for anything the employee wants; sick time, vacation, personal, whatever. The difficulty here is that it requires that it be accrued and the requirements around it are so specific that the likely impact is that employers will have to designate some of the flexible time off just to sick time. And so people that don’t usually use sick time and would rather have vacation time, I think they’re not going to be too happy about that,” said Calley.

Ultimately, however, Calley said the changes threaten to completely upend certain industries, particularly restaurants.

“We are very, very concerned about entrepreneurs that are already operating on tiny margins in a very, very difficult industry,” he said. “So, in that industry, we’re worried about the survival of the businesses, absolutely.”

White called the declarations that major job losses will result from the ruling “fear tactics,” especially when it comes to tipped workers.

“I believe that waitresses come out better and waiters come out better with this because they get a wage and they still will get tips, because we’re not going to stop tipping a waiter or waitress because they’re making 12 or 13 dollars an hour. We tip based upon service. We don’t tip based upon how much they make. We tip based on quality of service,” he said.

White said the Restaurant Opportunities Center of Michigan believes further complications will result if lawmakers are persuaded to wade back into the issue.

“I think we got here because the Legislature in the beginning didn’t take a hands-off approach,” he said.

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