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Court OKs challenge of Mich.’s tip credit

Photograph: Shutterstock

Restaurants in Michigan may see their labor costs soar as the result of a decision handed down yesterday by the state Court of Appeals.

The decision was another victory for One Fair Wage, a union-backed advocacy group that is striving to overturn restaurant employers’ tip credit state by state

The three-judge court ruled 2-1 yesterday that a proposal to increase the state’s minimum wage should be included on the ballot in the November general election. The initiative would hike the lowest legal wage to $12 an hour, from the current level of $9.25, by 2022.

The ballot proposal also calls for disallowing a tip credit for employers of staff members who count on gratuities for a significant part of their income. Restaurants that employ servers, bartenders and delivery drivers are obliged to pay those staff members only $3.52 an hour if the employees take in the rest of the minimum wage they’re due in tips, or at least $5.13 an hour. 

Ballot initiatives have been an effective way for labor advocacy groups to kill the tip credit in jurisdictions.  The leading opponent of the break for employers, One Fair Wage, has been virtually undefeated when a yea or nay on the credit was put to voters.  Its successes include Washington, D.C., and Maine, where the legislature subsequently reversed the popular vote.

Most employers routinely use that tip credit to hold down their labor costs. The convention, still in effect within 43 states, also helps full-service establishments narrow the income gap between front-of-house and back-of-house employees, a discrepancy that intensifies the struggle to recruit kitchen workers. Without the tip credit, servers and kitchen crew members would be paid the same wage, but servers would have the added income of gratuities. In states that don’t permit a tip credit to be taken, waiters and waitresses can make several times what their co-workers in the kitchen take home.

One Fair Wage, which is funded in part by labor unions, argues that every employee should be paid the same basic wage, and that employers should have no call or dependency on the gratuities given servers or bartenders. Groups that participate in the coalition have also argued that waitresses routinely have to submit to mistreatment from guests because of the dependence on tips.

Those arguments helped the group convince voters in the District of Columbia to overturn that jurisdiction’s tip credit in June. One Fair Wage is currently pushing for a reversal of the convention in Minnesota and New York, among other jurisdictions.

The group secured enough signatures from Michigan residents to put a proposal reversing the tip credit on the state’s ballot this fall. But Michigan Opportunity, a coalition led by the state’s restaurants, challenged the inclusion. It argued that One Fair Wage had not properly gathered the signatures. For instance, the challengers contended, not all signers of the ballot had been certified as residents, and some may have appeared more than once.

The four-person board that oversees the petitioning process reviewed the matter and deadlocked at 2-2 to allow the proposal to be included on the ballot. The matter was brought to the courts to resolve the standstill.

The Court of Appeals didn’t buy Michigan Opportunity’s argument. “The Court orders the Michigan Secretary of State, the Board of State Canvassers, and the Director of Elections to take all necessary measures to place the proposal on the November 2018 general election ballot,” it declared in its terse ruling yesterday.

Michigan Opportunity intends to appeal the Court of Appeals decision to the Michigan Supreme Court, a spokesman told the Detroit Free Press.

The four-person Board of Canvassers has already cleared the way for a paid sick-leave proposal to be included on the November ballot.

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