Deal close on Michigan's minimum wage for tipped workers, key lawmaker says

Lansing — Michigan state Sen. Kevin Hertel, the sponsor of a bill that would keep a lower minimum wage in place for workers who receive tips, said Wednesday that lawmakers were "close" to an agreement on how to set the pay standards going forward.

The negotiations in the state Capitol were ongoing, nine days before Supreme Court-ordered policies that would create statewide earned sick leave requirements and that would begin hiking the minimum wage take effect Feb. 21. Since the July 31 high court ruling, business groups and some restaurant workers have been calling on the state Legislature to intervene, contending the regulations will lead to job losses and financial turmoil.

It's been unclear whether the Democrat-controlled Michigan Senate would be willing to alter the looming laws, but a Senate committee advanced a bill to change the sick leave standards Wednesday and scheduled a meeting for Thursday to consider changing the minimum wage rates.

"I think we're close to a deal," Hertel told reporters.

"I think we can get there," the St. Clair Shores Democrat added. "But that's going to take all parties (being) willing to get there."

In a written statement, Michigan House Speaker Matt Hall, R-Richland Township, said he had "come to the table in good faith, trying to meet Senate Democrats halfway."

"We can get this done now," Hall said. "It’s well past time for Senate Democrats to meet us halfway, accept my offer and solve this crisis before next week’s deadline."

In a 4-3 decision, the Michigan Supreme Court decided that six years earlier in 2018, Republican lawmakers had unconstitutionally blocked two ballot proposals — one on earned sick time and one on the minimum wage.

GOP lawmakers had adopted the proposals to keep them from going before voters and then, changed them after Election Day to significantly weaken them and reduce the cost on businesses. The high court determined the proposals should become law as initially written. The Supreme Court set the effective date as Feb. 21.

Under the looming changes, Michigan's tipped wage, which is currently $4.01 an hour and 38% of the standard minimum wage, would be phased out and increased to $5.99 on Feb. 21, a jump of nearly $2 an hour. Gradually over time, the tipped wage would be hiked to 100% of the regular minimum wage by 2031.

The standard minimum wage will also move from $10.56 an hour to $12.48 an hour on Feb. 21 and then increased annually to $14.97 in 2028.

Alternatively, Hertel's bill would increase the traditional minimum wage to $15 an hour by 2027, while keeping the tipped wage at 38% of the standard rate in 2025. Then Hertel's measure would gradually increase the tipped minimum wage to 60% of the traditional minimum wage over a 10-year period.

The GOP-controlled Michigan House has approved its own measure that would keep the tipped wage at 38% of the minimum wage and increase the standard minimum wage to $12 an hour on Feb. 21. Then, under the House plan, the standard minimum wage would increase gradually to $15 an hour in 2029.

The Michigan Senate Regulatory Affairs Committee took about 90 minutes of testimony on the matter Wednesday from business leaders, restaurant workers and advocates.

Justin Winslow, president of the Michigan Restaurant & Lodging Association, testified on Wednesday that if the tipped wage jumps from $4.01 to $5.99 on Feb. 21, there will be job losses and some struggling restaurants will "move toward closure."

"40% of the industry in Michigan right now is not making a profit," Winslow said. "That is a staggering number. That means two out of five restaurants are on the edge of closure."

Michael Krueger, owner of the East Lansing restaurants Crunchy's and The Peanut Barrel, added that bars and restaurants operate on thin margins, had to weather the COVID-19 pandemic and already had to deal with high rates of inflation.

“We can only raise prices so much and still expect people to come out to eat," Krueger told the Senate committee.

However, Phillis Engelbert, owner of The Lunch Room, a restaurant in Ann Arbor, said it was wrong for lawmakers to try to suppress the minimum hourly wage for tipped workers.

"I believe that not paying everyone at least minimum wage before tips is shortsighted and ultimately bad for business," Engelbert told the committee.

Under current law, if workers' tips don't make up the difference with the tipped wage and traditional minimum wage, employers have to cover the shortfall.

Supporters of doing away with a lower tipped wage have contended that decreased pay threshold leads to economic instability, harassment and racial inequality.

"Living wages help us all live better," said Kathy Ginnard of Livonia, who previously worked in the restaurant industry.

Sean Egan, a deputy director within the Michigan Department of Labor and Economic Opportunity, presented data in Wednesday's committee meeting that indicated that the percentage that customers, using credit cards, left in tips held relatively steady, around 20%, across the 50 states, regardless of their different minimum wage standards.

In California, where the minimum wage for restaurant workers was listed as about $16 an hour, people still tipped about 17%, according to data on the average tip rate by state.

Sen. Dayna Polehanki, D-Livonia, asked, "Am I reading this right that according to this graph ... servers ... are going to see the same tipping behavior from customers no matter how much they make per hour?"

Egan replied that the numbers were from "just one study" that looked at credit card tipping behavior.

"The way we tip is more of a cultural behavior than it is related to earnings," Egan said.

It wasn't clear how the Michigan Senate planned to alter the sick leave standards because the bill the committee approved on Wednesday will see additional changes before a vote before the full chamber, senators said.

Under the currently looming policy, businesses with fewer than 10 employees must allow workers to accrue at least one hour of earned sick time for every 30 hours worked. Their employees could collect up to 40 hours of paid earned sick time in a year, but they could also use an additional 32 hours of unpaid sick time.All other business would have to allow their workers to use up to 72 hours of paid sick time annually.

Guidance from the Michigan Department of Labor and Economic Opportunity says employers must keep records that document the hours worked and earned sick time taken by employees for not less than three years.

Stacey LaRouche, press secretary for Gov. Gretchen Whitmer, said the Democratic governor was encouraging legislative leaders to delay the effective date of Feb. 21 to July 1 if they couldn't reach a compromise. Whitmer left the U.S. on Monday for a trade mission to the United Arab Emirates and Bahrain.

"If they are unable to reach an agreement by this week, she also encouraged them to pass a short-term extension through July 1," LaRouche said. "This would create more space for the House and Senate to continue negotiations while we work on the budget."

Hertel told reporters said he wasn't certain how such a delay could be done legally, given the Michigan Supreme Court set the effective date of the new wage and sick time laws.

Saru Jayaraman, president of the organization One Fair Wage, said her group would not accept "any delay" in Michigan workers getting "their hard-fought wage increase."

"They shouldn't even be touching something that voters asked for and the Supreme Court decided on," Jayaraman said.

One Fair Wage has threatened to run a referendum campaign in a future statewide election on any changes to the law that legislators enact.

On the Republican side of the aisle, Sen. Roger Hauck, R-Mt. Pleasant, said he still believed it would be hard for the Democrats to get their caucus on board with changing the policies set to take effect Feb. 21. Some Democrats — it's not clear how many out of the 19-member caucus — support the coming wage standards taking effect as they are.

"I hope we get a deal," Hauck said. "I want to get a deal. But we'll have to wait and see."

cmauger@detroitnews.com