Michigan restaurants may have to more than double the wage paid to tipped employees in February of 2023 unless the Michigan Court of Appeals steps in to save the industry. This would double their labor costs and put many restaurants out of business. Others would significantly raise the menu prices. Either way, if the “tip credit” which currently permits Michigan restaurants to pay all servers and bartenders 38% of the minimum wage, which is currently $3.65/hour, all of us restaurant goers are in for a big, and unpleasant surprise.

This started in 2018 when One Fair Wage filed for a ballot initiative that sought the increased wage requirements. The Michigan Legislature, intent on not letting this happen first consulted with Michigan’s then attorney general, Bill Schutte, who said the legislature could simply pass legislation to adopt the law, then amend it in the next legislative session. This was despite an earlier AG opinion (Frank Kelly) that prohibited that action because it effectively takes the people’s power of initiative and referendum away. This is the same power that brought legalized adult use marijuana (2018) and the ten cent bottle return (1976) to Michigan law.

So, the 2018 Legislature adopted the law, then in lame duck, amended it to reinstate the tip credit. Of course One Fair Wage filed a lawsuit against the legislature in the Michigan Court of Claims which was delayed significantly by the COVID pandemic. Finally in July of 2022 Judge Mark Shapiro ruled that the Legislature’s Adopt and Amend was unconstitutional and eliminated the tip credit to become effective on February 19, 2023.

The Michigan legislature filed an appeal and we are now awaiting their ruling. They could uphold the current law, or strike it down again.

Elimination of the tip credit would be a monumental change to the entire Industry as we know it. There are some restaurant servers at high end restaurants that we love who make six figures and that would go away. In fact, most servers would earn much less which is why there is currently overwhelming support for the maintaining the status quo. Restaurants are already operating on razor thin margins.

The Michigan Restaurant and Lodging Association, of which I am a member, is fighting hard for the industry and we stand with them. While we do not support the legislature effectively taking the power of initiative away, we do support the tip credit because its best for the industry, its employees and consumers.