The Michigan Supreme Court has issued a decision that eliminates the tip credit, raises the minimum wage and expands paid leave. The decision against the “Adopt-and-amend” action by the Legislature reinstates the adopted 2018 citizens’ initiative for paid sick leave and minimum wage laws.
Why it matters: This ruling means Michigan’s minimum wage will rise to $10 per hour plus the state treasurer’s inflation adjustment rate starting February 2025, including for tipped workers. In addition, employers must now adhere to one of the most comprehensive paid sick leave laws in the country, requiring major adjustments to PTO policies and procedures.
Timeline
- November 1, 2024: State Treasurer determines inflation adjustment
- February 21, 2025: The Wage Act AND Earned Sick Time Act goes into effect
- February 21, 2025: Minimum hourly wage adjusted to $10 plus the state treasurer’s inflation adjustment AND tip credit increased to 48% of minimum wage
- February 21, 2026: Minimum hourly wage adjusted to $10.65 plus the state treasurer’s inflation adjustment AND tip credit increased to 60% of minimum wage
- February 21, 2027: Minimum hourly wage adjusted to $11.35 plus the state treasurer’s inflation adjustment AND tip credit increased to 70% of minimum wage
- February 21, 2028: Minimum hourly wage adjusted to $12.00 plus the state treasurer’s inflation adjustment AND tip credit increased to 80% of minimum wage
- February 21, 2029 (and after): Minimum hourly wage adjusted to inflation-adjusted minimum wage AND tip credit no longer exists
How this Impacts Businesses & Employees
Earned Sick Time Act
- All employees, including part-time and seasonal, must receive one hour of paid medical leave for every 30 hours worked, up to 72 hours annually.
- Employers need to reassess PTO policies, notice requirements, and documentation, while guarding against potential new litigation.
The Wage Act
- Minimum wage increases based on state treasurer’s inflation adjustment.
- The “tip credit” is eliminated, requiring tipped workers to be paid the full minimum wage, with tips as additional income.
- Significant financial adjustments for the hospitality and service industries, with labor costs potentially increasing 250%.
This decision marks a major change in Michigan’s labor laws, requiring employers to update their policies and procedures. As businesses brace for higher labor costs and new challenges, the Grand Rapids chamber will work with legislators to lessen the impact and support a smoother transition for all affected industries.
