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‘Adopt And Amend’ Kick-In Projected To Equal Pandemic For Restaurant Closures

November 29, 2022

Article by MIRS News, for SBAM’s Lansing Watchdog e-newsletter

Michigan could see “another pandemic-level of restaurant closures” if the Court of Claims “Adopt-and-Amend” ruling comes to fruition and eliminates Michigan’s tip credit, according to Justin Winslow, president of the Michigan Restaurant and Lodging Association (MRLA). 

The Michigan Court of Claims ruled in July it was unconstitutional for the Legislature to adopt citizen-initiated petitions and then alter them within the same legislative session. The ruling comes after the Republican-led Legislature in 2018 passed citizen initiatives to increase the minimum wage and strengthen paid sick leave protections only to turn around and pass laws that water down both policies shortly after.

One petition increased the minimum wage to $12 an hour for all workers, including tipped workers, which will significantly alter the culture of dining out in Michigan.

“Unless you see that case, that ruling overturned…this industry is looking for a very serious change in its business model,” said Winslow on this morning’s episode of Michigan’s Big Show, adding that 40,000 to 60,000 restaurant jobs could be lost. 

The state’s Court of Claims made its ruling, it provided a Feb. 19, 2023 implementation date so employers could prepare for the changes. A Court of Appeals hearing for the case is scheduled for Dec. 13.

A Sept. 6-9 survey of 307 hotel and restaurant operators (equal to approximately 24% of Michigan’s hospitality industry) – found 91% of businesses would need to increase their prices if the ruling stands.

Additionally, 58% said they would need to lay off employees and 36% stated they would need to reduce operating hours. 

“A lot of those small independent full service restaurants — your diners, your pubs, your taverns . . . These are the types of places where one in six of them have said to us that they don’t have the wherewithal to go forward. They’re the ones who would close,” Winslow said. “It still is avoidable. We have some time here, but that’s what’s on the horizon in just over two months.” 

Michigan is one of 43 states operating with a tip credit, meaning if a tipped worker does not obtain the difference between the full minimum wage and tipped minimum wage an employer must make it up. 

If the “Adopt-and-Amend” ruling is not overturned, the state’s minimum wage will be situated at around $13 hourly in February and the tipped minimum wage will skyrocket by more than 200% to approximately $11.72. 

“You know who likes that the least? The servers. They’re making over $25 an hour on average in Michigan this year. That number continues to grow and they’re the ones who seem most impacted, but least interested in seeing this change happen – and that’s part of the rub here,” Winslow said. 

He said that restaurants have already reduced hours of operation due to the impacts of the COVID-19 pandemic, and strong inflationary pressures have instigated price increases. 

“. . . So trying to increase it from there to deal with this court case is coming at what we say is essentially the worst possible time you could imagine this happening to this industry,” he said. “This industry is still operating with 40,000 fewer workers than it was just before the pandemic, so it’s already made a dramatic change in the industry from how it used to operate to how it does right now, and this would be another dramatic change.” 

 Winslow said he is hopeful the MRLA can have realistic conversations with the Governor and the Legislature, and “we’ve heard some positive things so far, so we’ll see where things play out.”

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