An 11th-hour bipartisan deal amended minimum and tipped minimum wage rates in Michigan, along with rules about paid sick time.
Most business owners are content with the changes, while labor advocacy groups see the deal as a way to circumvent legislation and are calling for more wage equity between tipped and non-tipped workers.
While the federal minimum tipped wage sits at $2.13 per hour and the federal minimum wage at $7.25, each state has its own minimum wage, and they’re all higher than the federal rate. In addition, the so-called “tip credit” in many states enables businesses to pay tipped employees such as restaurant servers a lower rate. If an employee doesn’t make at least the state’s minimum wage, the employer must make up the difference.
Before Feb. 21, 2025, Michigan’s minimum wage was $10.56, and the tipped minimum was $4.01. Legislation adopted on Feb. 21 raised the rates to $12.48 and $4.74, respectively, with increases planned through 2031.
But Senate Bill 8, presented for Gov. Gretchen Whitmer’s signature at 1:30 a.m. Feb. 21 and later signed into law, represents a compromise from the original petition and later court order that would have raised rates to $12.48 and $5.99, respectively, with gradual increases through 2029 that would have eliminated the lower tipped wage.
Original petition, amendment and court order
Chris White, director of Restaurant Opportunities Center Michigan, an advocacy group for restaurant workers, said the Improved Workforce Opportunity Act of 2018 began with a 2014 campaign entitled One Fair Wage. A group later incorporated under the One Fair Wage name and is separate from ROC Michigan.
In 2018, the campaign had gathered enough signatures to put the proposed increases on the ballot. The Improved Workforce Opportunity Wage Act sought to increase minimum wage to $12 by 2022 and increase the tipped minimum wage until it was the same rate as minimum wage.
“We wanted to increase wages and bring equity to the industry,” said White.
However, in 2018, lawmakers instead adopted the petition language as law and then amended it to maintain the tipped minimum wage at 38% of the minimum wage and delay the minimum wage increase to $12.05 per hour by 2030. The advocacy group Mothering Justice filed a lawsuit against legislature, stating that the “adopt and amend” action was unconstitutional, as it was done in the same session. A July 2024 Michigan Supreme Court 4-3 ruling agreed, and ordered a reinstatement of the act’s provisions, adjusted for the passage of time, along with the Earned Sick Time Act, to go into effect Feb. 21, 2025.
After much debate and multiple iterations, lawmakers passed Senate Bill 8, which more moderately increased the tipped wage, capping it at 50% by 2031, and increased minimum wage to $15 by 2027 — sooner than indicated in the court-ordered legislation. The bill was passed in tandem with House Bill 4002, which addressed paid sick time and moderated the Earned Sick Time Act.
Reactions to new laws
Reactions to Senate Bill 8 are mixed. Some praise the bipartisan deal while others condemn lawmakers for circumventing the court order.
Mark Mendola, owner of D’Marco’s Italian Restaurant and The Backdoor Taco & Tequila Bar in Rochester, said this was a “rare instance” when lawmakers, the restaurant industry and labor groups worked together to find a solution.
“My servers are pleased with the outcome … The new legislation was a balanced and welcome change from what could have been a catastrophe,” Mendola said. It’s a balance of giving workers a fair wage and maintaining profits for struggling businesses, he went on to say.
White, however, said the actions of lawmakers set a “dangerous precedent,” given that they superseded a court order based on a petition that was never put up for a vote. “It sets the precedent that you can go around legislation,” he said. “It shows that both parties bowed to special interests and ignored the will of the people.”
Representatives from One Fair Wage, a national organization advocating for wage increases, have indicated that they will lead a referendum to have the law reversed, so the originally adopted increases go into effect.
Struggling restaurants, changes in consumer behavior
”Small businesses are struggling more than they have since COVID days,” said Mendola. Inflation rates, price increases for goods and labor costs have converged, making it difficult for restaurants, especially full-service ones, to thrive, he said. Customers are also spending less because their expenses are going up, he added.
The court-ordered wage increase would have forced restaurants to make choices to survive, he said. “Every expense matters. It’s just one of multiple levers.”
“They would have had to make choices, whether that’s going with fewer workers or raising food prices,” he said. “It definitely would have impacted businesses.”
For example, Mendola said that if the court-ordered increases went through, he would likely have one instead of two bartenders work an evening shift, and six instead of nine servers.
Mendola noted he pays his employees’ health benefits, which may have had to change if there were large wage increases.
The elimination of the lower tipped wage would have affected consumer behavior, Mendola said, and ultimately reduced or eliminated tips. “My servers can make anywhere from $15 to $35 an hour,” he said, adding that in making the tipped wage equal to minimum wage, “consumer behavior would change and they would no longer get tips.”
“There’s definitely tipping fatigue, and this would have been a tipping point,” said Mendola. “The servers in the industry, for the most part, nobody wants to see the tip credit go away.”
Organizations like Save MI Tips have lobbied to maintain the tip credit, citing a possible elimination of tipping, reduction in servers’ take-home pay, and restaurant services charges and price increases.
Lobbying for a living wage plus tips
However, organizations like ROC Michigan say the compromise legislation doesn’t guarantee a living wage for tipped workers or stability when restaurant traffic fluctuates, and that the tip culture is here to stay.
“We never intended for people to stop tipping,” said White. “They will continue to tip. No one asks how much a waiter makes before they tip. They tip based on service.”
“Restaurants are operating on a bad business model,” he added. “We’re concerned about the stability of the industry. The industry has to change.”
White argued that the court order represented a gradual change that restaurants could have planned for and that, while it could have been made retroactive to 2022, when wages were originally set to increase, it didn’t. “We’re talking about raising it to 50% in six years,” he said. “You have six years to figure this out.”
“Some restaurants are already paying $15 an hour,” said White, and those are the ones that will continue to thrive.
Asked about restaurant workers who’ve lobbied to maintain the status quo of a lower tipped wage, White called the efforts an “astroturf campaign” funded by restauranteurs.
“Wages have to increase to match the cost of living,” White said. “A higher wage leads to a solid workforce.”
Other states’ laws
In California, the minimum wage is $16,50, with some cities requiring even higher amounts, and employers are required to pay tipped employees the same minimum wage. In Washington, employers must pay the minimum wage of $16.66, and there’s no “tip credit” or reduced minimum rate for tipped employees. Alaska, Minnesota, Montana, Nevada and Oregon also offer no separate minimum rate for tipped employees.
Labor groups have pointed to these states as success stories for converging tipped and minimum wages, but Michigan Restaurant & Lodging Association representatives have indicated that restaurants in those states have had to implement service charges to avoid increasing prices for the consumer. Mendola said that in California, national chains are going out of business because of the tip credit elimination.
