State Rep. David Martin today expressed alarm regarding a Michigan Supreme Court ruling that will negatively impact local job providers, their employees, and consumers across the state.

The decision will result in a sharp increase in the minimum wage starting in February and the eventual elimination of the tip credit for servers, bartenders, and other workers who frequently make more with tips than they would with a higher minimum wage.

“Our community thrives on the charm and uniqueness of locally owned restaurants and bars,” said Martin, R-Davison.  “These businesses depend on local talent – from teenagers earning their first paycheck to seasoned service industry veterans – and those hard-working individuals excel in their jobs, motivated by the tips they earn. The drastic changes imposed by the Michigan Supreme Court put these businesses and the people they employ in jeopardy. This decision will lead to smaller paychecks for employees, higher menu prices, and restaurant closures.”

In 2018, the Michigan Legislature adopted two citizen-initiated laws and amended them to ensure that the minimum wage increase and new paid sick leave laws worked for all Michiganders. That included preserving the tip credit system, a decision broadly supported by wait staff and the restaurant industry.

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. Meanwhile, another recent survey found that two-thirds of restaurant operators expected to lay off employees if the tip credit were eliminated, 94% would raise menu prices, and one in five full-service restaurants would close permanently.

In the decision split along party lines, the Michigan Supreme Court ruled that the 2018 Legislature overstepped by amending the citizen-initiated laws the same year they were adopted. If the current Legislature does not step in and make further changes, the state’s minimum wage will increase on Feb. 21, 2025, and a phase out of the tipping system will begin. Experts believe the new minimum wage is likely to climb to about $12.50 next year and continue to rise through 2028, depending on inflation calculations by the state treasurer.

However, Martin said the current Legislature can and should return to work and make changes to protect small businesses, many of which are already struggling to keep up with rising costs.

“Our small businesses are the backbone of our community, and we only have a short window to protect them from these detrimental changes,” Martin said. “Some are barely hanging on after all they’ve been through over the past few years. We need to step up and do what we can to protect these businesses and the people they employ.”

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