Meeting in the Middle

The latest reactions to Michigan’s new minimum wage, tip credit, and sick leave policies

By Art Bukowski | May 3, 2025

Could have been better. Could have been worse.

Broadly speaking, that’s the consensus among folks on both sides of the fight for higher minimum wage, more sick time, and a phase-out of the tipped worker pay credit a few months after new legislation was adopted.

As predicted, legislators in an eleventh-hour deal reached a compromise of sorts before changes to all these items (including a complete elimination of the tip credit) were scheduled to take effect in February. Now, businesses and workers are figuring out exactly what it means to their bottom lines.

Northern Express takes a look at how it started and how it’s going, particularly for local restaurants.

How It Started

The Michigan Supreme Court in July 2024 issued a ruling that stood to completely eliminate the state’s tip credit (which allowed tipped workers to be paid $3.93 an hour) by 2029 and raise the state’s minimum wage to roughly $15 dollars an hour (it was $10.33) over three years.

This sent shockwaves through the restaurant industry, and understandably so. If and when the tip credit was eliminated, restaurants would have to start paying their workers the full minimum wage. Industry advocates said it could cripple and potentially close scores of restaurants across the state.

The ruling also allowed workers to accumulate more paid sick leave than was prescribed under state law and removed the paid sick leave exemption for employers with less than 50 employees.

This all began with a pair of ballot initiatives introduced in 2018 that outlined sweeping changes to Michigan employment laws and compensation. Rather than have voters weigh in on the matter, the Republican-led legislature adopted into law both proposed ballot measures. But a few months later, the legislature substantially amended and “watered down” these measures, leading to a legal challenge.

After winding its way up to the Supreme Court, justices ruled that the state legislature’s “adopt-and-amend” modification of what was described in the ballot initiatives was unconstitutional, thereby reverting the laws back to the ballot initiative versions.

A Last-Minute Compromise

Though labor advocates celebrated the ruling, insiders predicted that legislators would intervene and stave off a potentially massive impact on the restaurant industry.

The insiders were correct. Only a day before the new rules were set to take effect, legislators agreed on bills that considerably revised the changes outlined in the Supreme Court’s ruling.

Though minimum wage will still increase to $15 by 2027, the most noteworthy and impactful legislative change involved the tip credit. Instead of completely eliminating this credit, legislators set rules that gradually increase the pay of tipped workers to 50 percent of the minimum wage by 2030. This means employers will still have to pay tipped workers more, but much less than previously expected and in a more palatable timeline.

The revisions also softened paid sick leave requirements, but still increased time owed to workers and required employers under 50 employees to provide sick time. The final law mandates that employees accrue one hour of paid sick time for every 30 hours worked, with a cap of 72 hours annually for most employers and 40 hours for small businesses (10 or fewer employees).

Monique Stanton is president and CEO at the Michigan League for Public Policy, which was a strong advocate for the changes outlined in the initial Supreme Court ruling. While the February legislation is a step in the right direction, she says, it still feels like a letdown.

“We really wanted to see the original language that was included with the ballot initiative implemented, so we were ultimately disappointed in the legislation that was passed earlier this year,” she says.

Sigh of Relief

Local restaurant leaders have mixed feelings about the new rules, but are unanimously relieved that the tip credit remains. Skylar Mode, general manager of Traverse City’s Mode’s Bum Steer, recalls a ton of anxiety in the wake of the Supreme Court’s ruling last year.

“It was definitely scary,” she says. “We were coming up with all kinds of scenarios trying to figure out what we were going to do if that happens. We are very lucky the tip credit didn’t [go away].”

Over at Amical, owner Jeff Libman points out that many servers, particularly good ones, were set to make considerably less money if relegated to direct wages alone. Libman, Mode, and many others in the industry had concerns about losing good servers to other professions had the tip credit disappeared.

“Saving the tip credit was huge. Servers can still do their jobs and get rewarded for being really good at it via tips,” Libman says. “That was the big thing we all wanted to keep, so that’s fantastic.”

For her part, Stanton contends that an increase in direct pay wouldn’t necessarily mean the end of tips, and that many tipped workers (especially those with inconsistent customers or in lower-end restaurants) would have benefitted from an elimination of the tip credit.

“When other states have boosted their tipped minimum wage to match the regular minimum wage, there hasn’t necessarily been this significant decrease in tips,” she says.

Shelby Oberstaedt is vice president of operations at Mission Restaurant Group (North Peak, Jolly Pumpkin, Blue Tractor, and many more). She was concerned not only about losing good workers, but about a massive, crippling payroll increase across the hundreds of workers employed by her group. On her end, it’s hard to not feel OK with the final outcome.

“I think we’re in a good spot with where it landed,” she says. “We looked at all angles—this is the best case scenario, this is the worst case scenario—and I think we met somewhere in the middle.”

That said, Oberstaedt said increased labor costs, regardless of how they manifest themselves, will likely need to be passed on to the consumer.

“When we do have to pay more in labor out, whether it be for sick pay or for minimum wage increases or whatever the case may be, to offset those costs, chances are there’s going to have to be increases in [the customer’s] cost,” she says.

The sick time changes have the biggest impact on places like Mode’s, which have a smaller staff. Mode says it’s too early to determine how much of an impact it will have on her business, as it remains to be seen how much her employees will use it.