Small Business in Michigan Continues to Take Punches with Judicial Overturn of Changes Made to Paid Sick Leave and Minimum Wage

In 2018, at the urging of the National Federation of Independent Business in Michigan (NFIB) and the business community, the Michigan legislature adopted the minimum wage and paid sick leave initiative proposals thereby removing them from the November statewide ballot. This action preserved the ability of the legislature to amend these proposals by a simple majority vote and approval of the governor. Had they gone on the ballot and passed, they could only later be amended with three-quarters majorities. The business community then worked with the legislature to amend the language in both the paid sick leave and minimum wage proposals in December 2018.

NFIB worked to make sure that the smallest of businesses (under 50 employees) were exempted from the paid sick leave requirements and removed many of the onerous regulations and requirements contained in the original language for those employers with over 50 employees.  The regulations and limitations in the original proposal would have wide implications beyond just business, but affect schools, universities, local government, and hospitals.

The original minimum wage law would have instituted a minimum wage of $12 per hour by 2022 and the tipped minimum wage would be increased to match the regular minimum wage by 2024. This was changed to slowly ramp the minimum wage to $12.05 by 2030 and retain the tipped minimum wage for restaurant employees.

In July of 2022, Court of Claims Judge Shapiro overturned the amendments claiming the legislature’s actions were unconstitutional and you cannot “adopt and amend” in the same legislative session. A stay was issued until February 2023 and the case was heard by the Michigan Appeals Court on Tuesday, December 13, 2022. NFIB along with other business groups have filed an amicus in support of “Adopt and Amend.”

The devastation to small businesses if these amendments are rescinded is incalculable.  Many small businesses in Michigan are still trying to recover from government-mandated shutdowns during the pandemic, supply chain issues, inflation, skyrocketing energy costs, and labor shortages. While these are challenges that all businesses in Michigan continue to face, smaller businesses have less margin and resources to absorb these multiple economic punches. The regulatory and economic burden in this unamended legislation would likely be the death blow to many small and medium-sized businesses.

Restaurants in particular would be harmed due to the loss of the tipped minimum wage.  We all know a favorite restaurant or two that went out of business during the pandemic.  It’s estimated that one in six full-service restaurants would be forced to close if the court does not uphold the changes made in 2018.

The loss of “main street” businesses goes far beyond economic effects. Small businesses are often the ones that support local events through their involvement both economically and as volunteers. They are the ones that show up when there is a tragedy, or a student needs help achieving a dream. Unlike bigger corporations, they are invested in their communities because they are a part of the community. When those businesses are gone, it weakens and not only those towns and cities, but our whole state.

For now, we wait on the courts to determine the fate of small business in Michigan.

Authored by Amanda Fisher, State Director for the National Federation of Independent Businesses in Michigan.