Sept. 20, 2024 | This Week in Government: Supreme Court Agrees With Minimum Wage Plan

The Michigan Supreme Court on Wednesday clarified how the state should move forward with a minimum wage increase plan, concluding the Department of Treasury interpretation of the ruling is correct and clearing the way for a $14.97 minimum wage by 2028.

In its most recent order for Mothering Justice v. Attorney General (MSC Docket No. 165325), the high court noted the Department of Labor and Economic Opportunity’s and the Department of Treasury’s calculations for a new minimum wage phase in plan were on track.

The departments had asked for clarification on multiple issues, arguing there were different ways to calculate the inflation adjustment for the minimum wage and that the court missed a phase-in percentage on the tipped wage increase (See Gongwer Michigan Report, Aug. 22, 2024).

Originally, the agencies had asked for the court to weigh in by September 15, but that date lapsed with no response. The justices were not bound to that deadline, however, and today issued clarifications of key footnotes in the opinion initially authored by Justice Elizabeth Welch.

Treasury is required to submit its wage increase figures by November 1.

Key in the order is how to calculate the inflation adjustment for the new minimum wage. The state presented several options but said Treasury believed the court intended for it to begin calculating inflation on January 1, 2019, through July 31, when the adopt and amend ruling was issued.

The department’s calculations had the minimum wage increases at $12.48 in 2025, $13.29 in 2026, $14.16 in 2027, and $14.97 in 2028.

As to whether the state correctly interpreted the court’s remedy in respect to inflation, the order said the state was correct.

“The defendants interpret the opinion as requiring that they ‘bring the statutory minimum wages in Section 4(1) current to July 31, 2024, through an inflationary catch-up beginning January 1, 2019.’ The defendants are correct,” the order said.

In a statement, Michigan Restaurant & Lodging Association President and Chief Executive Officer Justin Winslow said he was displeased with the Supreme Court’s attempt – and failure – to clarify the concerns of “18,000 anxious restaurant operators today – nearly 50 days after the original ruling unnecessarily threatened to close one in five full-service restaurants in Michigan.”

“The unfortunate reality is that restaurant operators are now just 156 days away from the onset of tip credit elimination, which will wreak havoc on the industry and its nearly 500,000 employees,” Winslow said. “A remarkable event transpired at our state Capitol today, as 700 restaurant servers and bartenders expressed their frustration, bordering on anger, that their elected leaders aren’t showing up to do their job. They are all rightfully concerned that their own jobs are at risk, and they want to see action before it is too late.”

Winslow called on the Legislature to keep working on the issue, hoping their efforts would be bipartisan in nature and help save jobs. Winslow’s group is one of several business organizations asking the Legislature to preserve the lower minimum wage for tipped workers. It is currently 38% of the minimum wage but will be phased out under the law set to take effect next year.

Justice Elizabeth Welch wrote a concurring opinion detailing where the drafting confusion may have arisen, while Justice Brian Zahra wrote a dissenting opinion joined by Justice David Viviano.

The state in its filing also noted the original opinion in outlining the phase-in for the tipped wage skipped from 80% of the regular minimum wage in 2028 to 100% in 2029. The law, however, includes a 90% phase in.

The court agreed and said the tipped wage in fact would reach 100% of the regular minimum wage in 2030 rather than 2029 as it first wrote.

Additionally, the court clarified the wage adjustments would take effect February 21 of each year beginning in 2025. The state normally implements minimum wage increases on January 1 of each year.

Zarah’s dissent accused the majority of again entering “amendments to employment-law statutes and attempts to clarify the uncertainty surrounding its opinion.”

“A majority of this Court has no authority to rewrite unambiguous statutory provisions in pursuit of its subjective understanding of ‘equity,’” Zahra wrote. “Such power is vested with the Legislature, not the judicial branch, and no case available to the court in Michigan or any other jurisdiction in this nation has adopted or condoned the extraordinary remedial actions taken in this case by the court, both in the initial opinion and in the instant order.”

Several unions urged the Legislature this week to let changes to the state’s minimum wage law and required paid sick take effect early next year, ramping up the pressure lawmakers are receiving from both sides as to what course to chart this fall.

The pressure from unions to the Democratic-controlled Legislature came as Republicans and hospitality workers pressed Wednesday for a legislative change to a pending minimum wage law that they said was unwanted and would lead to reduced wages or massive job losses.

Senate Minority Leader Aric Nesbitt (R-Porter Township) renewed calls for Democrats to come to the table and negotiate a fix during a Wednesday morning press conference.

“At this point, the Democrat majority and the governor have failed to show any signs of doing anything about it,” Nesbitt said.

He said without legislative action, the state is on the verge of losing 50,000 jobs. He said the figure comes from a per-capita extrapolation from the more than 3,000 job losses that have been reported in Washington, D.C., over the past year since it lowered its tip credit.

In June, the Michigan Restaurant and Lodging Association estimated through a member survey that job losses would be between 40,000 and 60,000 if the laws are enacted, as well as about 20% of restaurants closing.

The Michigan Supreme Court in July ruled that two voter-initiated measures were unconstitutionally adopted and amended in 2018, one involving worker wages and the other mandated paid sick time (See Gongwer Michigan Report, July 31, 2024).

“The Legislature must act now to avoid an all-out crisis in the hospitality industry. Michiganders need their lawmakers to provide leadership and common-sense solutions,” Nesbitt said.

Sen. Michael Webber (R-Rochester Hills) agreed. He said Southeast Michigan has a vibrant hospitality sector that is at risk with the ruling. Many workers in his district could either lose their jobs or take significant pay cuts with the loss of the tip credit, he said.

“Had these changes been in place during the pandemic lockdowns, it’s difficult to imagine how many more restaurants would have shut,” Webber said. “We need to do our jobs as lawmakers so that servers and hospitality workers can do theirs.”

Senate Majority Leader Winnie Brinks (D-Grand Rapids) said Tuesday her caucus is still gathering information from stakeholders and gave no timeline for when a potential solution might be offered.

A coalition of union groups this week in a letter to Brinks and House Speaker Joe Tate (D-Detroit) urged them to let the measures take effect.

“We write to reject any attempt to undermine this historic worker victory, and state emphatically that any effort to obstruct, slow down, divide workers, or otherwise undermine tangible benefits secured by workers, would be similarly unprecedented and improper,” the unions wrote. “Michigan legislators should honor the court’s decision and allow minimum wage increases to proceed without interference.”

The Michigan AFL-CIO, AFT Michigan, AFSCME Michigan, the Michigan Nurses Association, SEIU Michigan, the United Food and Commercial Workers Local 951, and the Michigan Education Association all signed the letter.

“We urge you to stand firm in support of these worker gains and reject any efforts to obstruct or undermine them,” the unions wrote. “The Legislature should let the court’s decision to stand as it is and continue to lead Michigan towards a future where workers and their families can thrive.”

Hundreds of hospitality workers rallied outside the Capitol Wednesday in support of amending the laws, saying they would lose their jobs or take a significant pay cut as they stand.

McKinna Goerner, an employee at Buffalo Wild Wings in Port Huron, said the minimum wage law changes would have a major negative effect on her and thousands of others who have chosen to work in hospitality.

Goerner said repealing the tip credit would end up “dragging (down) the very industry and workers it seeks to help.”

Michele King, who works at Peppermill Café in Grand Rapids, agreed. She said she has been in hospitality for 20 years. The wage reduction under the law change, she said, would upend her future retirement plans.

“I don’t understand why you have to change things that aren’t broken,” King said.

Earlier Wednesday, multiple GOP lawmakers told reporters of their experience in the hospitality sector in their earlier years.

Nesbitt said he worked at an ice cream parlor and restaurant in Decatur, which helped him save money during college.

Sen. John Damoose (R-Harbor Springs) said his first job was at a pizzeria in Harbor Springs, joking that it probably was his favorite job, despite serving in the Senate.

“These are good jobs, and I’ve never seen a policy that’s supposed to help people who don’t want the help as much as this,” Damoose said.

Legislation that would make permanent the rate reduction in the retirement contribution cap for schools cleared the Senate along party lines Tuesday to the praise of K-12 educators and the scorn of Republican lawmakers.

Movement on the proposed change to SB 911 puts it closer to the governor’s desk. It was not transmitted by the House in June when the Legislature passed the 2024-25 budget, a move that upset some school groups and stakeholders at the time.

Under the changes, school districts would be able to spend more of their allotted money on operations and education instead of directing it to the retirement system.

Members voted 20-16 for the bill.

Prior to passage, an S-2 substitute was adopted which would move the timeline for the reduction to the unfunded actuarial accrued liability cap to 15.21% by the 2025-26 fiscal years for K-12 schools. The House version of the bill had phased it in by the 2027-28 fiscal year. The rate was previously 20.96%.

The bill also would eliminate the 3% contribution toward retirement health care benefits now required of Michigan Public School Employees’ Retirement System employees hired before Sept. 4, 2012.

These changes were included in the 2024-25 budget. However, without the policy bill, the changes were considered one-time. Additionally, SB 911 was needed to allow for the elimination of the 3% contribution.

Gov. Gretchen Whitmer‘s office said Monday that she looks forward to the bill reaching her desk. The House still needs to concur with the Senate changes before it goes to the governor.

The bill drew pushback from Republicans prior to the vote.

Sen. Thomas Albert (R-Lowell), who helped spearhead the legislation that put the funding floor for the state MPSERS payments in 2017, brought up the concerns he has for months expressed over the proposed changes.

Throughout the budget process, Albert questioned the Office of Retirement Services’ actuarial decision that separates the statutory floor funding between one applied to the pension plan and another applied to other post-employment benefits.

“The idea of getting rid of the floor or not paying the floor is a really bad idea, and it’s going to be very costly over time,” Albert said. “The pension system is still $30 billion in debt.”

He said the 2017 law changes stabilized the yearly payments, which he said the changes pushed by Democrats will undermine.

“They’re undermining the floor funding provision, and it’s to fulfill their insatiable appetite to spend,” Albert said. “These costs are not going to go away. They’re only being pushed down the road, and when they’re pushed down the road further, you incur more interest costs. It’s more expensive.”

Senate Minority Leader Aric Nesbitt (R-Porter Township) laid into the majority and called the bill a case of theft.

“The bill before us is everything that is wrong with government: a cynical money grab whose victims won’t notice it until the thieves are long gone out of this building,” Nesbitt said. “Another empty win for the tax takers over the taxpayers. A raw deal dressed up to look like a good one. … This bill is theft, pure and simple, a complete failure of leadership.”

Sen. Dayna Polehanki (D-Livonia) said she was proud to support the proposed changes.

“By passing the legislation before us today, we’re making these common-sense changes permanent,” Polehanki said. “This bill will grant school districts more flexibility in deciding how to use these surplus funds.”

Bill sponsor Sen. Kevin Hertel (D-Saint Clair Shores) told reporters the bill reduces payments into a fund that is fully funded and instead gives districts more funding for other uses.

“We’ve heard from educators, from school boards, from superintendents, how this will positively impact their districts, and I think pretty soon we’ll see the real benefit to that going forward,” Hertel said.

Sen. Darrin Camilleri (D-Brownstown Township) told reporters the changes to the bill will allow for hundreds of millions more to be directed to classrooms each year.

“That’s what this bill is going to do and give them that certainty as they can plan out their local budgets,” Camilleri said. “We knew with our budget bill that we passed right before the summer break that we gave them those tools. Now this policy bill gives them the unprecedented certainty that they’ll be able to use that for many, many years to come.”

Camilleri disputed the argument being made by Republicans on the pension fund, saying those payments are still being made.

“We’re still doing our due diligence and being fiscally responsible on that part of the equation for our educators,” Camilleri said. “I’m not quite sure why they keep making this claim when they know full well that we are paying all of our bills on time.”

Several education groups issued Tuesday statements thanking the Senate for moving the bill and urged it to be quickly sent to the governor.

Chandra Madafferi, president and chief executive officer of the Michigan Education Association, said the bill will have a positive effect on more than 100,000 teachers and support staff.

“Our union has worked closely with lawmakers to pass this legislation because it will provide much-needed financial relief to hardworking educators and help alleviate some of the economic pressures contributing to the shortage of qualified educators in our children’s schools,” Madafferi said. “Michigan students deserve to have the best and brightest educators working in their schools, and key to that is making sure we are providing teachers and school support staff the full compensation they have earned.”

K-12 Alliance of Michigan President Al Latosz said the bill will allow for a significant increase in funding each year.

“We are grateful to the Michigan Senate for engaging in an ongoing dialogue with educators about the importance of responsibility and permanently reducing these decades-old debt payments that have been forced on our schools and students,” Latosz said.

A coalition of education groups in a joint statement praised its passage and urged the House to concur with the changes.

“The passage of the bill signifies a historic redirection of savings from MPSERS back to school districts across the state,” the coalition said. “The permanent rate reduction provides school districts with significant, ongoing and predictable financial relief, empowering them to invest more resources directly into classrooms – directly benefiting their students, teachers and school communities.”

The coalition included the Michigan Association of Superintendents and Administrators, the Michigan Association of School Boards, the Michigan Association of Secondary School Principals, the Michigan Elementary and Middle School Principals Association, the Michigan Alliance for Student Opportunity, and the Michigan Association of Intermediate School Administrators.

A group hoping to put a constitutional amendment on the ballot implementing ranked choice voting in the state is planning 40 town halls in an effort to educate voters and gain feedback on its proposal.

Rank MI Vote is kicking off its potential ballot initiative efforts with 40 town hall events in 40 days beginning on September 22.

Currently, the group has two different language options for the proposal, which will begin putting in front of volunteers and the public during its town halls and subsequent policy discussions in the last quarter of the year, Ron Zimmerman, executive director of Rank MI Vote, told reporters during a call on Monday.

Zimmerman said the group is looking at kicking off signature collections sometime in April 2025.

“We want to spend the final quarter of (2024) getting a lot of input from a lot of places: focus groups, town halls, so on and so forth, on the various options that we have,” he said. “Then the first quarter of next year, leading up to the petition drive would be all about now paying, you know, some of the top lawyers in Michigan, who ho supported language for other constitutional amendments to take those drafts and make them airtight. Pressure test them, you know, put them … through the scenarios of how it could be challenged and so on and so forth.”

Rank MI Vote has brought on Katie Fahey, who spearheaded the Voters Not Politicians ballot drive that eventually led to the Independent Citizens Redistricting Commission.

“Voters are choosing the fastest-growing democracy reform in the U.S., Ranked Choice Voting, to find problem-solving elected officials, not politicians who value partisan gridlock over the needs of voters,” Fahey said in a statement.

The scheduled town halls can be found on the group’s website.

The Senate Regulatory Affairs Committee reported a bill Wednesday that would allow 19-year-olds to work in the cannabis industry, lowering the age requirement.

SB 807, sponsored by Sen. Sean McCann (D-Kalamazoo), was reported 9-1. Sen. Dan Lauwers (R-Brockway) voted no.

Currently an individual must be 21 years old to work in the industry. Cannabis is also recreationally legal for those 21 and older.

Members of the committee clarified language in the bill by removing the word “volunteer.”

“This is a bill that’s taking the age to 19 to allow people to be employed in the cannabis industry and the substitute is very simple,” McCann said. “The word ‘volunteer’ was encountered in a version of the earlier version of the bill, and amongst all conversations with stakeholders, it was determined that word is not necessary in the bill. Essentially, no one is volunteering at this point in the cannabis industry.”

Some senators raised questions about how and why the age 19 was agreed upon as an appropriate age for being allowed to work in the cannabis industry, given that state law allows employees to sell alcohol beginning at age 18. McCann said there was some push and pull between existing statute and stakeholder desires that made 19 a reasonable option.

“The age being 19 is an attempt to reconcile different sections of the Constitution for the age and is just basically a compromise age between 18 and 21,” McCann said.

The Michigan Chamber of Commerce and Midwest Independent Retailers Association both submitted cards in support of the bill.