The Michigan Chamber supports remedial legislation targeted to address consequences of the recently approved state minimum wage increase. These include legislative action to maintain the status quo with respect to overtime requirements for certain categories of employees and to revise and update the training wage to maintain employment opportunities for young, inexperienced workers.

The Michigan Chamber also reaffirms opposition to any proposal to write the minimum wage law into the State Constitution; peg future minimum wage increases to the rate of inflation (commonly referred to as indexing); eliminate or substantially reduce the tip credit for employees who regularly receive gratuities; and/or impose more harsh penalties on employers for non-compliance with the law.

Background

Last year, with encouragement and support from Governor Jennifer Granholm and U.S. Senator Debbie Stabenow, the Michigan Democratic Party (MDP) and the Michigan AFL-CIO launched a petition drive to amend the State Constitution to substantially increase and index the state minimum wage. This highly partisan proposal also contained provisions that would have imposed more stringent penalties on any employer who failed to comply with the law and would have negatively impacted the hospitality industry by ending the tip credit.

As the business community and Republican legislative leaders monitored the progress of the MDP/AFL-CIO petition drive, it became increasingly apparent in February and March of this year that the effort would gather more than enough signatures to qualify for the ballot. Recent experience with minimum wage ballot proposals in other states and private sector sponsored public opinion polling in Michigan showed that the MDP/AFL-CIO proposal was almost certain to be overwhelmingly approved by voters if it was on the ballot this November.

Faced with this public policy dilemma, Senate Majority Leader Ken Sikkema and House Speaker Craig DeRoche decided to take action to pre-empt the MDP/AFL-CIO petition drive by passing a bill to raise the minimum wage that did not contain the other harmful provisions included in the ballot proposal. Legislation passed to increase the minimum wage from the current $5.15 per hour to $6.95 per hour effective October 1, 2006, to $7.15 per hour effective October 1, 2007, and to $7.40 per hour effective July 1, 2008. The Governor signed the more moderate legislative proposal and the petition drive was halted. These minimum wage increases will be costly and will have a significant economic impact on many employers unless corrective legislation is approved before October 1, 2006.

Please see the attached April 2006 Legal Alert from the Butzel Long law firm for a more detailed explanation of the impact the minimum wage increase will have on overtime pay.