Great Lakes Wire

A recent survey conducted by the Michigan Restaurant and Lodging Association (MRLA) revealed that if Michigan restaurants are required to pay waitstaff and other tipped workers $14 hourly, over 92 percent would need to raise prices, and more than 40 percent of operators would consider selling their business. The survey, conducted from May 1-6, included responses from 209 food service operator members.

The survey results come as the Michigan Supreme Court approaches a July 31 deadline to rule on an "adopt-and-amend" action used by the Legislature in 2018. In that year, two ballot initiatives aimed at increasing the minimum wage and imposing paid sick time mandates garnered enough signatures to appear on the general election ballot. One initiative proposed raising Michigan’s minimum wage incrementally until it reached $12 in 2022 and eliminating the tip credit system for service workers. The other mandated employers with ten or more workers to provide 72 hours of paid sick time annually.

Instead of allowing these initiatives to proceed to the ballot, the Legislature amended them. Under legislation signed by Republican Governor Rick Snyder, the minimum wage would reach $12.05 by 2030, maintaining the tip credit system and requiring employers with fifty or more workers to offer forty hours of annual paid sick time.

The constitutionality of this legislative action is now under scrutiny by the Michigan Supreme Court. Justin Winslow, president of MRLA, expressed concerns during a virtual press conference: "If 'adopt-and-amend' is ruled unconstitutional...it is going to have catastrophic impacts on an industry that is already on the edge." According to Winslow, one in five full-service restaurants might close permanently if they are forced to eliminate the tip credit.

Should the court rule against the Legislature's actions, restaurant owners may be obligated to pay tipped employees $14 hourly and provide seventy-two hours of paid sick time. Consequently, 65.59 percent of surveyed MRLA members indicated they would lay off employees; 20.43 percent said they would close their business; and 41.94 percent noted they would reduce operating hours.

Of those who would increase menu prices due to these changes, over twenty-one percent anticipated price hikes between twenty and twenty-five percent starting in early 2025.

Winslow emphasized that small independent restaurants would bear the brunt of these potential changes: "Small independent restaurants really make up the backbone of our membership here at MRLA...the ones who will be impacted most."

He also highlighted ongoing discussions with legislators about finding a compromise to maintain the tip credit system: "It’s getting a lot of purchase with those legislators on both sides of the aisle right now," he said.

The MRLA survey also found that among its respondents, nearly sixty percent experienced lower customer traffic over the past twelve months compared to last year. Furthermore, while approximately sixty-three percent reported operating at a profit, thirty-seven percent did not.

"Fewer people are going into restaurants," Winslow noted. "I think there’s a very concerning percentage of restaurants right now in Michigan that simply aren’t profitable."

This article was provided courtesy MIRS News for SBAM’s Lansing Watchdog newsletter.

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