Michigan's restaurants get a 205-day reprieve on tip credit ruling

The judge who effectively killed the standard says employers and regulators need time to adjust to his decision.
Photograph: Shutterstock

Full-service restaurants in Michigan won’t lose the use of a tip credit until Feb. 19 at the earliest, a state judge decided Friday.

The 205-day delay will provide employers and state regulators with time to prepare for the discontinuation of the credit and an increase in the state minimum wage to $12 an hour, Michigan Court of Claims Judge Douglas Shapiro wrote in granting the delay. The targeted start date had been Aug. 8.

Friday’s ruling allows restaurants to continue paying servers, bartenders and other tipped employees as little as $3.75 an hour if they collected at least $6.12 an hour in tips to bring them up to the state pay floor of $9.87.

But Shapiro refused to grant a permanent stay of the changes, writing that he doubted higher courts would reverse his ruling of July 19. In that decision, the judge killed the tip credit by finding that state legislators had exceed their authority in the way they thwarted a ballot initiative favored by organized labor.

The ballot measure would have entitled all workers, tipped or not, to a $12 an hour wage from their employers. Under Michigan law, the legislature can pre-empt an expected ballot initiative by passing a law that delivers the same provisions. Lawmakers did so, then amended the law to defang it. They postponed a $12.05 an hour mandated wage for nontipped workers until 2030 and raised the minimum due tipped employees to $9.60 an hour.

Shapiro ruled that the legislature cannot both pass a law to pre-empt a ballot initiative and then amend it in the same session of the legislature, since that thwarts the intention of the people. At least one election would need to be held in between to give voters a chance to put sympathetic legislators into office.

If Shapiro’s July 19 decision should not be reversed before Feb. 19, Michigan would become the eighth state to ban the use of a tip credit. Unions and other labor advocates are pushing the federal government to kill the use of the employer concession nationwide.

But even if a higher court should overturn the ruling, operators could still lose the credit. Signatures are being collected to put a single $15-an-hour wage on the state ballot for November.

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