State Rep. Mike Hoadley today said it is critical for the Legislature to pursue common-sense reforms as soon as possible to help limit the blow that a short-sighted decision from the Michigan Supreme Court will have on small businesses and workers.

The court’s ruling raises the minimum wage and eventually eliminates the tip credit for servers, bartenders, and other workers who frequently make more with tips than they would through a higher minimum wage. In 2018, the Michigan Legislature took necessary action by adopting two citizen-initiated laws to ensure that a minimum wage increase and new paid sick leave rules worked for all Michiganders. Amendments to these laws struck a balance by fostering economic growth while protecting workers.

“These changes will be devastating for small businesses across our region and the state – especially for bars, restaurants and their employees,” said Hoadley, of Au Gres. “When these laws were amended, careful consideration went into how these reforms would impact all sides. This partisan ruling legislates from the bench, imposes part of a radical national agenda onto our state, and ultimately does the exact opposite of helping workers given the amount of layoffs that will occur. Unfortunately, it continues a pattern we have seen the last few years of policies that make our state less affordable and desirable for workers and job providers.”

A recent survey by the Michigan Restaurant and Lodging Association lays out the dire consequences of pressing forward with more extreme elements from the original proposal as mandated by the Supreme Court. More than 92% of restaurants said they will be forced to hike their prices, with many anticipating increases of 20-25% by early 2025. Sixty-six percent of restaurant owners said they would be forced to lay off employees, and 20% said they would be forced to shut their doors.

A recent survey found that 82% of Michigan restaurant servers wanted to keep the tipping system in place, and 79% worried about losing their job if the tip credit were eliminated. Similar minimum wage laws enacted earlier this year by California for fast food workers have resulted in closures, layoffs, reduced hours and an uptick in self-service kiosks.

Hoadley said it is critical for the Legislature to pursue solutions that will keep local economies, small businesses and workers from suffering. The changes are set to go into effect Feb. 21, 2025.

“A failure from the majority to urgently act would once again show Michigan Democrats’ detachment from our state’s small business community and hard-working servers who have overwhelmingly opposed the changes to the tip credit,” Hoadley said. “We need to get to work to protect people’s livelihoods.”