State Rep. John Roth, R-Interlochen, on Thursday secured passage of his plan to restore the tip credit and protect small businesses from intrusive paid sick time mandates. House Bills 4001 and 4002passed the House with overwhelming bipartisan support.

 The bills were introduced in response to a Michigan Supreme Court decision from last summer that puts unrealistic mandates on small businesses regarding wages and sick leave while phasing out the tip credit, which helps keep costs low for customers while tipped workers end up earning well above minimum wage.

“If we don’t act, these changes will have a catastrophic impact. Increased payroll costs will be passed on to customers. As prices rise, fewer people will choose to eat out; pushing many restaurants to cut hours, reduce staffing, or even shut down entirely,” Roth said in a Thursday speech before the House. “Think about that: if we don’t act, family restaurants and businesses that have been around for generations will cease to exist. Our main streets will transform into shells of what they once were. We have received almost 40,000 letters in support of maintaining the tip wage. It’s clear this is their livelihood and should be their choice. I ask for your support to do the right thing and help our servers maintain their jobs.”

Under current law, the minimum wage in Michigan is $10.56 per hour, recently rising from $10.33 on January 1. If the changes are allowed to go into effect on Feb. 21, the minimum wage would immediately shoot up to $13.29 an hour. Simultaneously, the tip credit would rise from 38% to 48%, drastically increasing the payroll burden of restaurant owners.

One of the keys to plan, Roth said, is maintaining the tip credit at the current 38% – which is achieved under the legislation passed today.

“In Grand Traverse County, the average server’s earnings are around $30 per hour with tips,” Roth said. “Eliminating the tip credit would slash the average take-home pay for servers and bartenders in the county by 50% over the next five years. Evidence from other states that have removed the tip credit shows that consumer tipping dramatically declines. While some may tip a dollar or two for exceptional service, the standard 15 to 20% will vanish.”

However, Roth said ensuring the minimum wage rises to match inflation is important. That’s why under his plan, the minimum wage would still rise to $12 an hour on Feb. 21; to $12.50 on Jan. 1, 2026; to $13 an hour the next year; and additional dollar increases for each subsequent year until 2030 when the state treasurer would be required to adjust the minimum wage reflect the average annual percentage change in the Consumer Price Index for the most recent 5-year period.

House Bill 4002, also passed Thursday, ensures workers and small businesses can retain the paid leave options that work for them. The plan also clarifies the looming rules, viewed by many as a one-size-fits-all mandate that is unrealistic and so confusing even lawyers can’t understand.

House Republicans made the tip credit and sick time changes their chief priority as soon as the Supreme Court handed down its ruling. For months, legislators lobbied and urged Democrat leadership to consider changes. The culmination of those efforts came in December when House Republicans took a stand and refused to attend session unless the tipped wage and sick time legislation came up for a vote, instead spending time meeting with restaurant workers and local business owners across the state.

With the passage of both bills Thursday, House Republicans have illustrated their commitment to fulfilling their promise to tipped workers and small businesses.

Both bills now move to the Senate for further consideration.

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