Michigan tipped workers may kiss their tips or their jobs goodbye, thanks to the state Supreme Court and anti-tip credit group One Fair Wage (OFW). The legislature urgently needs to intervene.

In 2018, OFW put forth a ballot measure to raise the state’s minimum wage to $12 by 2022 with annual inflation adjustments. It would have also eliminated the separate wage for tipped workers.

Instead of putting the measure on the ballot, the Legislature used its “adopt and amend” power to enact some of the measure’s provisions. But it opted to preserve the tip credit — saving the tipping system overwhelmingly preferred by servers and bartenders for decades.

The Legislature’s action was prompted by local restaurants’ concerns that the original ballot measure would force them to close or cut staff. Employees also came out against the measure, claiming it would limit their job opportunities and tip income. Their pleas were heard.

Roughly six years later, the state Supreme Court has ruled that the Legislature’s action that saved the tip credit was unconstitutional. As a result, Michigan is on course to raise its tipped minimum wage by more than 300%.

But lawmakers were right to be wary of OFW’s misguided measure — the group’s attempts to implement similar policies within its own workplaces have failed.
OFW was born out of the Restaurant Opportunities Center (ROC), which became an activist organization determined to eliminate the tipping system — regardless of what actual tipped workers want.

Prior to its ballot measure woes in Michigan, ROC set out to create a model for the industry at its New York City Colors restaurant. Employees sued the group for having them work for “sweat equity” (unpaid work for the promise of future partial ownership). The restaurant was plagued by health code violations, and allegedly unable to pay staff on time. In 2020, Colors shut down for good.

Since then, ROC has been sued by former employees for discrimination, and OFW has received a campaign finance complaint from the Michigan Bureau of Elections and a U.S. House Oversight Committee probe into its lobbying activities as a tax-exempt nonprofit.

Yet OFW continues to push its harmful policies across the country.

OFW’s model failed because the economics don’t work for restaurants or employees. UC-Irvine economist David Neumark finds every $1 increase in state tipped wages causes significant job and employee earnings losses. Cornell University’s Michael Lynn finds that as state tipped wages rise, tip percentages fall. If staff layoffs and fewer tips aren’t enough, Harvard Business School research shows tipped wage hikes make restaurants more likely to close.

Most recently Washington, D.C., the self-proclaimed launch pad of OFW’s anti-tip credit agenda, has felt these consequences. Since a similar tip credit elimination law went into effect last May, restaurant employment is down and employees say they are earning less in tips.

Michigan will not be the exception. A recent Michigan Restaurant and Lodging Association survey found two-thirds of the state’s restaurants would have to lay off employees under the reinstated measure. Others said they would have to shut down. Miami and Trinity University economists estimate this measure could cost roughly $7,000 lost annually for tipped employees’ households.

A bipartisan group of legislators have heard distress signals from Michigan’s restaurants and employees, who say the current tipping system doesn’t need fixing. This latest threat to tipped workers must be addressed by state lawmakers immediately.