— In less than three weeks, new laws in Michigan will boost the minimum wage, overhaul how tipped workers are compensated and require a system for paid sick time across the state, while some businesses worry they won't survive the coming standards.

Unless Michigan lawmakers intervene, the approaching crossroads — the policies are set to take effect Feb. 21 — will affect everything from massive restaurant chains, such as Applebee's and Olive Garden, to small family owned businesses, such as Maurer's Sanitary Cleaners on East Saginaw Street in Lansing.

At Maurer's, Ann Chaffee, one of the owners, oversees 10 employees. She said she is worried about how she'll cope with a new requirement that her workers be able to accrue up to 72 hours of paid sick time each year. Chaffee said she already offers two weeks of general paid time off but will likely have to decrease that benefit because of strict regulations in the new law.

"We can't afford it," Chaffee said.

Chaffee's grandfather bought the dry cleaning business she now operates in 1931. She's worked there for three decades. Standing behind the counter with family photos looking over her left shoulder on Friday, Chaffee said she doesn't remember another moment with turmoil similar to what Feb. 21 is bringing.

Under the new standards, workers taking their earned sick time have to let their employers know "as soon as practicable," according to the text of the law. That could be another hurdle for businesses like Maurer's, which has multiple locations where a single individual takes in clothes and returns customers' items.

"You could come to the door and it's locked," Chaffee said. "And then, I'm going to get an angry phone call saying, 'I need my suit for whatever today. And there's nobody there.'"

The new regulations are partially the result of a July 31 Michigan Supreme Court ruling. In a 4-3 decision, the justices decided that six years earlier in 2018, Michigan 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.

Saru Jayaraman, president of the national organization One Fair Wage, touted the Supreme Court's decision in July.

"This is a great day for the more than 494,000 workers in Michigan who are getting a raise," Jayaraman said. "We have finally prevailed over the corporate interests who tried everything they could to prevent all workers, including restaurant workers, from being paid a full, fair wage with tips on top."

A battle over tips

Of the coming changes, the most debated has been Michigan's tipped wage standard, which affects restaurants across the state.

Currently, Michigan's minimum wage is $10.56 an hour, but those who get tips are required to be paid 38% of that by their employers, or $4.01 per hour. If their tips don't make up the difference, employers have to cover the shortfall.

Under the standard activated by the Michigan Supreme Court, Michigan's minimum wage will gradually increase to $14.97 an hour by Feb. 21, 2028, and the tipped wage will incrementally increase to be 100% of the traditional minimum wage.

On Feb. 21, the movement begins with the minimum wage going to $12.48 an hour, an 18% boost, and the tipped wage rising to $5.99, an about 50% jump.

The restaurant industry has urged the Michigan Legislature to intervene, but the Democratic-controlled Michigan Senate has not approved a Republican-authored House plan to keep the tipped wage at 38% or has not agreed to delay the coming increases.

As an alternative to the House plan, Sen. Kevin Hertel, D-St. Clair Shores, has proposed a plan that would raise 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.

"Several senators have introduced a package of bills on this issue, and they will be evaluated through the normal legislative process," said Rosie Jones, spokeswoman for Senate Majority Leader Winnie Brinks, D-Grand Rapids.

The Michigan Restaurant and Lodging Association has said the July court decision marked "a likely existential blow to Michigan’s restaurant industry and the nearly 500,000 workers it employs." On Thursday, the trade association labeled the situation an "avoidable crisis." Likewise, an organization called Save MI Tips has contended that, under the coming laws, "tipping and jobs will be altered or gone forever."

Jason Hester, who's been in the restaurant business for over 20 years, owns Starlite Diner and Coney Island in Flint. He said the changes in the minimum wage and the tipped wage set to take effect this month would add more costs to restaurants that are already struggling.

"Uncontrolled food costs, labor costs, rents are high, insurances are high, really every spectrum of business operations are through the roof," Hester said. "In the restaurant business: first it was COVID, then inflation, supply-chain issues, now we're faced with the Fair Wage Act ... where they want to end tip credits and change the minimum wage.

"It's going to be a death sentence for 20% to 30% of the businesses out there."

Rising prices?

Customers don't understand that prices are not going to decline, Hester said, so the "governmental interference" in the restaurant business through the new law will make prices rise even more at his restaurant to combat the wage hikes for servers and other employees.

Self-serving kiosks and counter service might be options for operators to control costs but could turn off customers, he said.

"People like to be served," Hester said. "It's going to be hard to be nimble. You're going to have to raise your prices, change your business model, get rid of people, downsize your menu to make it easier to work with less people. It's definitely a lose-lose for the employee and the customer."

The elimination of the lower tipped wage is a challenge for restaurants and their workers even with phased-in increases, said Rebekah Paxton, research director at the Virginia-based nonprofit Employment Policies Institute.

The current system benefits restaurants with slim profit margins and allows tipped employees, who often view their position as commission-based, to earn more than the minimum wage, she said.

"I constantly hear employees saying, tipping is a way that we can maximize our income," Paxton said. "The sky is the limit. We don't have to be capped at a certain amount of income."

However, some people are looking forward to the changes expected to take effect Feb. 21.

Monique Stanton, president and CEO of the Lansing-based nonprofit Michigan League for Public Policy, said she supports increasing the minimum wage and establishing earned sick time in Michigan, particularly for low-income workers.

"We know that boosts to the minimum wage help people, frankly, make ends meet,” she said. “We know that people are struggling day to day to pay for things like groceries, to pay for things like rent and utilities, and boosting minimum wage is one way, one of the many ways that we can do that."

Stanton contended that higher minimum wage wouldn't eliminate tips but instead boost overall wages. She said workers in states without a sub-minimum wage have seen higher take-home pay, even with a small decline in tips.

Sam Taub, a Hazel Park server and representative for One Fair Wage, supported the upcoming changes as helping workers. Taub told lawmakers at a recent House committee hearing that servers have to put up with "immense amounts of harassment" in order to secure the tips they need to make ends meet.

'People are confused'

The earned sick time change might have ramifications for businesses of all sizes and types.

Under the 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.

However, the guidance from the state says businesses don't necessarily have to create a separate bank of earned sick time from their current paid time off, as long as the employers' paid time off policy "provides at least the same benefits as provided" in the new law and accrues "at a rate equal to or greater than the rate" in the new law.

Companies that offer what's considered "unlimited" paid time off will have to show the state they are in compliance with the minimum standards of the new law, requiring new, detailed tracking of time off, said Brian Calley, CEO of the Small Business Association of Michigan.

For instance, Calley said, if an employee took three hours off during a day to take a family member to a doctor, that would count as paid sick time covered under the new law — and require documentation of those hours to show the business is in legal compliance.

"Employees are going to have to report (time off) in a way they've never had to report before," said Calley, a Republican former lieutenant governor.

Hours that apply to the new sick time law have to be tracked throughout the year because annual used accrued time can be rolled over into the next year, even though the unused hours "literally means nothing because these employees have unlimited leave," Calley said.

"It's extra work for the employer, of course, it's very clunky, it's just ridiculous," Calley said. "But for the employee, they go from having freedom to having to account for their time so the accruals can be done and report when they're taking time off."

Businesses should provide paid sick time to support the needs of workers, Stanton of the Michigan League for Public Policy argued in support of the new policies.

"Everybody gets sick at some point in their lives, whether it's the flu, their child gets sick, they have an unexpected injury, they have the norovirus …" Stanton said. "You should not have to face economic insecurity because you need to take a day off work because you're not feeling well."

But Mark Ware, CEO of Mission Point Resort on Mackinac Island, said there are multiple challenges for businesses in how the new laws operate.

In one example, the policies don't treat seasonal businesses differently than year-round business, he said. Some seasonal workers might be able to simply leave a week early through their sick time accruals, Ware said.

Likewise, the new law requires workers to give little to no notice to their employers in advance of calling in sick, he said.

Currently, Mission Point provides three days of sick leave and works with employees on a case-by-case basis, Ware said.

"People are confused," Ware said of businesses responding to the coming laws. "They don't know what they're supposed to be doing. They don't know if the rules are going to change again."

A past statement from a coalition of Michigan business organizations called the sick time law "one of the most far-reaching and stringent paid time off laws found in any state."

Some business owners, like Ann Chaffee of Maurer's Sanitary Cleaners, are still hoping the Legislature intervenes. If not, it will be up to them to abide by the complex new standards.

"I don't have an HR (human resources) director," Chaffee said. "I'm it."

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