Michigan employers will have to pay workers well over $12 per hour starting next year due to a state Supreme Court ruling.
Announced Wednesday, the court’s 4-3 decision reinstates poorly written minimum wage and paid sick leave ballot initiatives from 2018, with the first of four yearly minimum wage increases and new paid sick leave requirements taking effect on Feb. 21, 2025.
Farm employers should not take any immediate action as the business community is currently discussing possible legislative options to address this nearly unworkable language, advised MFB Legislative Counsel Ben Tirrell.
In their ruling, Michigan Supreme Court Justices struck down a move previously used by the state Legislature, in which lawmakers adopted two 2018 ballot initiatives related to minimum wage and paid sick leave — then amended them during the same legislative session.
“Ironically, the majority opinion declares the Legislature’s attempt to adopt and amend unconstitutional, yet it uses its judicial power to revive and amend the initiative that was intended to be placed on the ballot for public consideration,” Justice Brian Zahra wrote in his dissent of the court’s decision.
“In the clearest way possible, the Court exercises legislative power, drafting new legislation that has never been approved by the Legislature or approved by the voters. Without a single vote of support from the elected Legislature or the citizens, this Court has now written the public policy of this state as to minimum wages, tipped wages, and earned sick time.”
Under the ruling, the final wages for each yearly increase will be calculated by the State Treasurer, with adjustment for inflation between the original 2019 start date of the ballot proposals and date of the court’s decision on July 31, 2024. While that calculation still must be made, it’s widely expected that the state’s 2025 minimum wage will be around $12.50 per hour — with additional increases planned through 2028.
By 2029, the state’s minimum wage is expected to exceed $15 per hour.
Michigan Farm Bureau was joined by nine agricultural commodity organizations in filing an amicus brief to the state’s court of appeals and Michigan Supreme Court, along with numerous other business groups, explaining the impacts of the minimum wage ballot initiatives.
The agricultural groups advised that the requirements in the original ballot language would cost an estimated $83 million annually just for the state’s agriculture and forestry employers, increasing the odds for business failures, lost jobs, and a shifting of domestic production to international competitors.
“In reality, most Michigan farms already pay far over even these revised minimum wage schedules,” said MFB Lead Economist Loren Koeman.
“However, the court’s decision will also dramatically increase the number of agricultural employers covered by mandatory paid sick leave requirements, representing a major cost and challenge in terms of implementation and recordkeeping for these typically smaller family-run businesses.”
Koeman also noted that the ballot proposal language does a poor job anticipating the unique needs of highly temporary and seasonal farm employers and will significantly increase the labor and compliance costs for many family farms businesses across the state.
‘Existential blow’ to restaurants
The ruling also paved the way for a gradual phase-out of the minimum wage for tipped workers — which currently stands at $3.93 per hour.
Starting next year, tipped wages will be set at 48% of the traditional minimum wage. That percentage will increase through 2028, after which tipped employees will receive the state’s minimum wage.
Calling the court’s ruling “tone-deaf,” Michigan Restaurant and Lodging Association President and CEO Justin Winslow said the decision “strikes a likely existential blow” to the state’s restaurant industry and the nearly 500,000 workers it employs.
“As our recent industry operations survey illustrated, 40% of full-service restaurants in Michigan are already unprofitable, meaning this decision is likely to force more than one in five of them to close permanently, eliminating up to 60,000 jobs along the way,” Winslow wrote in a statement.
According to Winslow, industry operators and tipped employees have overwhelmingly expressed their preference to preserve the current tip credit and the earning potential it provides.
“We urgently call on the Michigan legislature to act swiftly, implementing a compromise solution that prevents this impending catastrophe before it is implemented.”
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