Michigan Minimum Wage Hike and End of the Tip Credit Are Back on Track After Supreme Court Ruling

In 2018, the Michigan Legislature received petitions proposing, among other things, raising Michigan’s minimum wage for tipped and non-tipped workers. The Michigan Legislature voted in September 2018 to adopt the petition into law.

However, following the November 2018 election, the Michigan Legislature voted to drastically amend the laws. This legislative maneuvering watered down those increases, and ensuing litigation challenged the constitutionality of such efforts, placing the minimum wage hike in limbo for the past several years. That limbo ended on July 31, 2024, when the Michigan Supreme Court held that the Republican-controlled legislature’s “adopt-and-amend” approach to the Improved Workforce Opportunity Wage Act (“IWOWA”) was unconstitutional.

The Court’s ruling in Mothering Justice v. Attorney General means the minimum wage increases originally contained in the voter-approved version (with modifications to account for the years-long delay in implementation) will become effective on February 21, 2025. As will be discussed in a subsequent post, the decision also invalided the legislature’s changes to the Earned Sick Time Act (ESTA) for the same constitutional reasons, such that on the same date, most private and non-federal public employers in the state will need to provide between 40 and 72 hours of paid sick leave to every employee, depending on the size of their workforce.

New Minimum Wage Hike Schedule

The IWOWA, as passed by voters, contained a schedule for phased minimum wage increases over several years. For tipped workers, the law was to also gradually reduce and ultimately eliminate the tip credit, which allowed employers to pay tipped workers as low as 38% of the state’s minimum wage. As noted, the Court’s reinstatement of the law considers the almost six years that have passed since its enactment, allowing for an inflation adjustment to the schedule.

Accordingly, the new Michigan minimum wage will be phased in as follows:

• February 21, 2025: The minimum wage will be $10.00 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 48% of the minimum wage.
• February 21, 2026: The minimum wage will be $10.65 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 60% of the minimum wage.
• February 21, 2027: The minimum wage will be $11.35 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 70% of the minimum wage.
• February 21, 2028: The minimum wage will be $ 12.00 per hour plus the state treasurer’s inflation adjustment. The tip credit will be 80% of the minimum wage.
• February 21, 2029: The state treasurer shall calculate the inflation-adjusted minimum wage as stated in 2018 PA 337, § 4(2). The tip credit will cease to exist.

As of the date of this post, the inflation adjustment has not yet been determined.

Michigan employers have six months to prepare for the effective date of the initial minimum wage hike. During this time, they should consult with employment counsel to review and adjust their current compensation structures to ensure compliance and avoid potential claims and penalties. If you have questions about the Court’s decision and its impact on your business, please contact Jordan Held at Kreis Enderle.