2 weeks Ago By Gina Joseph
Now that the election is over Kevin Abdallah is hoping Michigan legislators will return to the table and figure out a way to save the tipped minimum wage being phased out by a Michigan Supreme Court ruling . “Nobody wants this,” said the owner of Juan Miquel’s in Clinton Township. “I know restaurant owners don’t want it.
” Nor do servers or bartenders. In September more than 750 men and women working at restaurants, theaters, hotels and other businesses gathered for a rally on Capitol Hill in Lansing calling for swift legislative action to preserve the historical tip credit. “Why do we have to change the system,” said Lory Klinger, co-owner of Luciano’s Italian Restaurant.
“Everyone is happy with the way it works with tips and I feel like the customers are happy too.” What happened? Last summer the Michigan Supreme Court issued a ruling in the case Mothering Justice v Attorney General that will increase the state’s minimum wage and eventually phase out the tipping wage. As explained by the Michigan Restaurant and Lodging Association (MRLA) the ruling struck down the Improved Workforce Opportunity Wage (2018 PA 368) and Paid Medical Leave Act (2018 PA 369) arguing they are unconstitutional because they amended the ballot incentives that had been adopted into law within the same legislative session.
The high court followed the blockbuster ruling with a clarification outlining how things will work. The minimum wage in Michigan is $10.33 an hour.
Beginning on Feb. 21, 2025 the hourly minimum wage in Michigan will rise to $12.48 an hour, and then every Feb.
21 after that it will rise again in increments; $13.29 in 2026, $14.16 in 2027 and $14.
97 in 2028. The court’s ruling will also impact the state’s tipped minimum wage. The minimum wage for servers, bartenders and other workers who are expected to make the bulk of their earnings through tips is currently $3.
93 per hour. If at the end of the day a tipped employee’s earnings including both their base wage and tips fall below the local minimum wage for any given hour worked, their employer — by law — is required to compensate for the shortfall. This tip credit system is used in 43 other states.
One of the reasons it is the preferred system for owners, operators, bartenders and servers is that it helps businesses in the hospitality industry, often working on a thin profit margin, to manage labor costs while ensuring their employees have the potential to earn an income that, on average, far exceeds minimum wage. The court is calling for the tipped minimum wage to be phased out. As of Feb.
21, 2025 the tipped minimum wage will increase to 48% of the full minimum wage to $5.99 per hour, 60% in 2026 to $7.97, 70% in 2027 to $9.
91, 80% in 2028 to $11.97, 90% in 2029 and after being adjusted for inflation 100% the following year. By 2030 the tipping wage will be non-existent, which is exactly what the industry doesn’t want.
“If I wanted to make $15 an hour I would go to work for McDonald’s or Taco Bell,” said a server from Sedona’s Taphouse, who asked not to be identified and was among the hundreds of workers at a rally in Lansing organized by Save MI Tips. “Serving has made it possible for me to buy a car, a house and put my daughter through school and sports allowing me to maintain a happy life.” Another server said the ruling is totally unfair.
“You can’t tell me that after all these years of building my life on tips, you can just take that away and offer me $15 an hour,” she said. “You can’t strip away everything I’ve worked for and pretend that it’s better.” She would just quit.
As would Rachel Sunk. She’s been working as a waitress at Sunshine Coney Island in Warren for 13 years and is among the servers fearing the change. “People will not tip as much as they do if they have to pay more for their food,” she said, noting that people tip because they appreciate good customer service but also out of the goodness of their heart knowing how wages are structured.
Klinger and Abdallah, as with many restaurant owners, fear they will lose their best employees. “If it’s a good night — and that’s usually on the weekends — I have servers who will make $300 in tips,” said Klinger, whose parents opened the restaurant in Clinton Township after immigrating to the U.S.
from Sicily. What they brought to America besides a catalog of Italian recipes handed down from generation to generation was the notion that if you work hard at something you will succeed. While Klinger’s father died last year her mother still works in the kitchen preparing her recipes while also caring for the people she employs.
“My father would be so mad,” Klinger said, of the court’s ruling. Not because of the minimum wage for workers. He would have supported that.
“It’s because they did not consult restaurant owners before making their decision,” Klinger said. People will always be able to tip workers for good customer service. However, if these changes go into effect without adjustments business owners would certainly face some tough decisions.
“If I have to pay my employees $8 more an hour that money would have to come from somewhere and usually it’s the customers who have to pay,” said Abdallah, who employs about 40 workers including servers, bartenders, cooks and dishwashers. “I would definitely have to go up in pricing.” Layoffs are another option.
.A survey conducted by the MLBA shortly after the supreme court’s decision found that 65% of businesses in the hospitality industry would have to lay off staff in order to survive. According to the survey: • 18% of owners said they would have to lay off 20% of their staff • 15% said they would lay off 30% of their staff • 10% said they would have to lay off 50% of their staff to survive the payroll increases “The greatest impact on servers will be layoffs,” said Scott Ellis, executive director of the MLBA for the past 12 years.
“Customer service and tips can only exist if those jobs still exist.” Having to face a potential 280% increase in payroll expenses, a vast majority of business owners would unfortunately have to change how their businesses operate. “At the end of the day they’d likely have to reduce staff, reduce hours of operation, raise menu prices, add a service charge to orders or make other operational changes,” Ellis said.
Some might even require patrons to pick up their food and beverages from a counter or invest in a robotic server, which Abdallah saw in motion during a recent trade show for restaurant owners. “Many would be forced to close up shop entirely because the framework set by the supreme court is just not a sustainable one for most businesses in the hospitality industry,” said Ellis. As for who or what prompted the change to the tipping wage? “Labor unions and activist groups have been pushing to end the tipped minimum wage for many years, a mission that they’ve already proven unsustainable,” said Ellis.
One example is the Restaurant Opportunities Center (ROC). They opened Colors, a pilot restaurant in New York City that provided a higher base wage but did not allow tipping. “That experiment failed tremendously and was plagued with accusations of wage theft, poor working conditions and health code violations.
Colors closed in 2020,” Ellis said. “Currently in Michigan, servers are making more than $25 an hour on average and they themselves don’t want these changes to be implemented.” Advocacy groups across Michigan including the MRLA and Save MI Tips are actively working with the legislature and administration to secure a solution in advance of the effective date of this ruling to offset its most damaging impacts to the hospitality industry.
Advocates stress they are not saying raising the minimum wage is not good for workers they just would like the tipping system left alone. Patrons who visit restaurants throughout Macomb, Oakland and Wayne counties are being told of the changes through table signs created by groups such as the MRLA and Save MI Tips who are encouraging Michiganders to send a letter to their new and incumbent legislators urging them to support a legislative solution that saves Michigan’s tax credit. Just before the election state Rep.
Joe Aragona (R-Macomb Twp.) also introduced legislation to get rid of tax on tips. The bill is quite simple: If approved by the Legislature and signed into law starting in the 2025 tax year tips would not be considered taxable income in Michigan.
“That means tipped employees would be able to deduct proven tips (as indicated on the employees declaration for federal insurance contributions) from their adjusted gross income on their state income taxes. While there’s not much both Democrats and Republicans agree on during the election this was a move that both President-elect Donald Trump and Vice President Kamala Harris supported. “To those hotel workers and people who get tips, you are going to be very happy because when I get to office we are going to not charge taxes on tips, people making tips,” Trump said while campaigning.
Aragona’s ‘no taxes on tips’ bill also defines the term gratuities and sets the definition of a tipped employee as an employee working in an occupation in which the employee regularly receives more than $30 a month in gratuities. “Quality waitstaff hustle for their money,” said Aragona, noting he consulted with restaurant owners before drafting the bill and they liked the idea. ‘Getting rid of taxes on tips will give them an incentive to work more and provide better customer service.
It will help with staffing issues because more people will want to work in restaurants and customers will get better service.” While Trump pledged to end taxes on tips it’s still unclear how he would fund the idea and avoid creating a budget shortfall. This still leaves restaurant owners in a pickle with payroll.
With only 105 days left before the court ruling takes effect members of the hospitality industry are still hopeful that the tipping wage can be saved. “Our next step is just to continue doing what we’ve been doing since the supreme court’s decision was made,” Ellis said, noting lawmakers have been gathering information from all sides. “When all is said and done, we hope they make the right decision and listen to the servers and business owners in their districts.
Because these folks will ultimately be the ones who face the consequences of action or inaction on this matter.”.
