Crain’s Detroit Business
Jay Davis, Anna Fifelski
July 20, 2022
Business organizations in Michigan are advising their members to take a wait-and-see approach following a judge’s ruling this week that signaled an immediate increase in the state’s minimum wage and reinstitution of paid sick time requirements.
Michigan Retailers Association spokesperson Andrea Bitely in an email said the ruling could have a detrimental impact on the state’s economy.
“Michigan’s small businesses are continuing to dig their way out after two years of COVID-19,” Bitely said. “It is imperative that this ruling is appealed, giving small businesses a fighting chance to survive. If the appeal is unsuccessful, we urge the state of Michigan to give our small businesses grace and adequate time to adjust to these new mandates.”
Initiative petitions enacted by the state Legislature are immune from amendment during the session in which they passed, the Michigan Court of Claims Judge Douglas Shapiro ruled Tuesday. The decision restored the 2018 public acts raising the minimum wage and establishing paid sick time that the state Legislature approved and then reneged on.
Shapiro held that the “adopt-and-amend” strategy the lame-duck Republican-led Legislature and outgoing Republican Gov. Rick Snyder used to overturn the two petitions violated the idea behind the constitutional provision allowing the Legislature to enact initiative petitions into statute instead of letting them go to the ballot.
Shapiro’s ruling signaled strong and immediate changes to Michigan’s wage and sick time laws. As a result, the minimum wage rises from the current $9.87 an hour to $12 and the tipped minimum wage jumps from $3.75 to $9.60 per hour.
The other law in question exempts employers with fewer than 50 employees from having to provide paid sick days, a change that is estimated to leave up to 1 million employees without the benefit, unlike what was proposed. It also limits the amount of annual mandatory leave at larger employers to 40 hours instead of 72 hours as was written in the initiative.
Michigan Restaurant & Lodging Association President and CEO Justin Winslow, in favor of the adopt-and-amend strategy that was struck down as it relates to tipped workers, told Crain’s that anxiety is high amongst MRLA members.
“There’s concern and confusion,” Winslow said. “We’re trying to calm all of them down until that stay is granted. That’s everything in the short term. It’s something we expect, but it’s not guaranteed.
“I think it’s even understood by Judge Shapiro that this will be appealed. To transform the entire economy of the state, and the regulations around it, only to have to go back again, would be awfully disruptive.”
Winslow, whose group is reviewing with attorneys all of its possible options, believes a request for a stay could be filed as early as today due to the uncertainty in the state Department of Labor and Economic Opportunity.
Michigan Attorney General Dana Nessel, who was sued in her official capacity, had different lawyers from her office argue both sides of the case. It was not immediately clear if the attorneys who defended the amended laws will file an appeal and seek to pause the ruling, though some expect such a motion will be made.
The Small Business Association of Michigan believes no changes will be required until the state Labor Department provides some direction to businesses, it said in a statement posted on its website.
SBAM President and CEO Brian Calley said the impact of Shapiro’s decision is costly for small businesses because of the “pile-on” effect of the last few years.
“We had business closures and restrictions that lasted longer than most of the rest of the nation. We’ve had out-of-control inflation, major supply chain failures, and historically low labor force participation rates,” Calley said in a Wednesday email to Crain’s. “This is yet another obstacle for small businesses to navigate and overcome, with the impact on certain industries being felt more harshly than others.”
Members of the Michigan Chamber of Commerce are concerned about the impact of the ruling on employers and employees, said Wendy Block, vice president of business advocacy and member engagement at the chamber.
“While we are still sorting through the details, we are stunned by this determination and its many varied implications,” Block wrote in an email to Crain’s. “The talent shortage has employers already paying historic wages and benefits — all while facing rising inflation and supply chain chaos — just to keep the doors open. Employees should be equally concerned about the cost pressures this decision will place on businesses and the impact it could have on employee hours and benefits. We believe time and energy should focus on ways to help job providers fully rebound from COVID impacts and workers overcome barriers to employment like ensuring affordable childcare, housing and transportation. We remain hopeful the Court of Claims decision ultimately will be overturned.”
Block said that the Michigan Chamber is advising its members to avoid making any drastic decisions.
“The business community currently does not have standing in this case so we cannot directly intervene,” Block wrote. “However, we are considering our options and will be weighing the benefits of filing an amicus brief if and when the Court of Appeals agrees to take the case.”
Sandy Baruah, president and CEO of the Detroit Regional Chamber, told Crain’s the organization is also disappointed with the decision.
“The Detroit Regional Chamber supported the Legislature’s action in 2018 and is disappointed by the surprise decision of the Court of Claims,” Baruah wrote in an email to Crain’s. “Given the strong wage growth in the last two years, the implications of the Court’s decision are unclear. We advise our members to wait for guidance from the Department of Labor and Economic Opportunity before implementing any changes.”
Longtime restaurateur Joe Vicari, whose Joe Vicari Restaurant Group owns and operates more than 20 restaurants in metro Detroit, called the ruling unnecessary.
“A tipped worker at one of my restaurants is only making $3.75 an hour, yes, but they’re making close to $300 in tips,” Vicari said Wednesday. “That increase is going to hurt the industry, particularly the restaurant owners. It’s a big move. It’s not necessary. Most places, particularly restaurants, are already paying way above minimum wage. There’s no need for that change.”
Not everyone is frustrated with the ruling, though.
Michigan AFL-CIO President Rob Bieber in a statement called the ruling a victory for Michigan workers.
“The shameful actions of the 2018 Republican state legislative majorities and then-Attorney General Bill Schuette showed complete disregard for our state’s constitution, with the sole purpose of taking rights away from working people,” Bieber said. “With this decision, the people’s will expressed in these citizens’ initiatives is now restored and goes into full effect as it should have back in 2018.”