House Republicans serve up reforms for tipped wage and paid leave

New minimum wage and paid sick leave laws set to become effective in 37 days could raise the cost of eating out in Michigan by 25% or more. But the state House is considering legislation that could head off the worst effects of the new regulations.

Two bills introduced on Jan. 9 aim to reform incoming paid leave rules and the phaseout of the tipped wage credit, both of which became active after a July Michigan Supreme Court ruling.

House bills 4001 and 4002, introduced by Reps. Jay Deboyer, R-Clay Township, and Rep. John Roth, R-Interlochen, would modify new laws that, as of Feb. 21, will require paid time off for all employees and minimum wage for tipped wage workers.

The 2024 decision by the state’s high court followed years of lawmaking, and the resulting laws, which have become a hot potato for both parties. Taken together, the new laws could increase restaurant costs by a quarter or more, according to a restaurant industry survey.

“We’ve heard from countless hardworking small business owners and their dedicated employees about what this ruling would mean for them,” DeBoyer said in a news release. “It would be a catastrophe. Many small businesses would close, their employees would be out of work, and the places that remain open would have to significantly raise their prices on people who go out and support businesses in their community, which will lead to an even bigger fight to stay open.”

Under the new law, employees will accrue one hour of paid sick leave for every 30 hours worked. Employers must let workers use up to 72 hours of sick time per year, which can be rolled over into the next year.

If the current law stands, an employee could be a “no-call no-show” worker for up to three days without being fired, Roth told Michigan Capitol Confidential in a phone interview.

Roth used Michigan’s ski resorts as an example. They hire up to 500 seasonal employees during ski season. All employees, including seasonal and part-time, will now have paid time off. If one of the seasonal workers decides not to show up for two days, the employer cannot fire the employee and is still required to pay time off.

Multiple businesses fear the February law change, Michigan Capitol Confidential has reported.

Other states and cities that enacted paid leave found negative effects, Rebekah Paxton, director of research at the Virginia-based Employment Policies Institute told CapCon in an email.

“Evidence from Connecticut and other cities that have tried mandating paid leave found negative impacts on businesses and slashed hours and income for their employees,” Paxton wrote. “Combined with the state Supreme Court’s decision to reinstate a measure to eliminate the tip credit, is a ‘one-two punch’ for Michigan's businesses and workers,” she wrote.

Paxton and Michael LaFaive, senior director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, analyzed the consequences of the Supreme Court ruling in a June blog post.

The change will take effect Feb. 21, 2025, with a revised schedule to account for inflation that will phase out the tipped credit by 2029 and raise the hourly minimum wage to nearly $15 an hour.

The new Republican bill, however,suggests a graduated minimum wage schedule starting at $12 an hour on Feb. 21, 2025, and ending at $15 an hour by 2029. The plan would restore the tipped wage.

The bills would only apply the time-off requirement to employers with 50 or more employees. It would also remove the three-day “no-call no-show” allowance.

During last month’s lame-duck session, the fight over restoring the tipped wage and paid sick leave escalated until Republicans refused to attend because the Democratic trifecta that controlled the Legislature and the governor’s office wouldn’t address the issue.

Senate Majority Leader Winnie Brinks, D-Grand Raids, did not respond to an email seeking comment.