Increased Minimum Wages and Tip Credits Avoided – For Now

As of today, Michigan employers can breathe more easily, following yesterday’s decision from the Michigan Court of Appeals, reversing a trial court decision that struck down minimum wage and paid sick leave amendments passed by the Michigan Legislature. Absent this decision, on February 20, 2023, the minimum wage would have risen from $10.10 an hour to $13.03, while the tip credit would have increased to $11.73, from its previous level of $3.84.

Those dramatic changes were first proposed in two petition drives in 2018, addressing paid sick leave and minimum wage issues. Under provisions of the Michigan Constitution addressing voter-initiated legislation, once petitions are certified by the Board of State Canvassers, the proposed legislation must be sent to the state Legislature, which then has 40 days to adopt the statute as written; reject the statute; or reject the statute and propose a new version, which then is placed on the ballot along with the petition version. In 2018, the Legislature selected option number one, and adopted both statutes as written. Then, before the legislative term ended on December 31, 2018, the legislature substantially amended both laws, limited the amount of paid sick leave that had to be given to employees, and drastically reduced future minimum wage increases. Those changes were effective March 29, 2019 and have been the law since.

A lawsuit was filed challenging the Legislature’s ability to adopt a voter-initiated law and then amend it in the same legislative session, arguing that language in the state Constitution forbade this practice (often referred to as “adopt and amend”). In July 2022, the trial court agreed, finding that the amendments adopted by the Legislature were unconstitutional and reinstating the laws as initially adopted. The petition-drive statutes were thus set to become law on February 20, 2023, unless the appellate courts intervened.

That intervention occurred on January 26, 2023, in a unanimous Court of Appeals decision that, while not approving of “adopt and amend,” concluded that language in the Constitution prohibiting the legislature from taking both steps in a single session did not apply to voter-initiated legislation, but only to petition drives to change already-approved laws (which is the referendum process). So, the 2018 amendments remain on the books, and the minimum wage rate remains $10.10.

Undoubtedly, yesterday’s decision will be appealed to the Michigan Supreme Court. But until that Court issues a decision, employers can continue to rely on the laws on the books since March 2019.

Nemeth Bonnette Brouwer PC will continue to monitor paid sick time and minimum wages laws, along with all employment law issues in Michigan. Feel free to contact any one of our attorneys with your questions.