The IWOWA amendment did not change the minimum wage that employers and employees expected to go into effect on February 21, 2025 (at the rate of $12.48 per hour), but did change the minimum wage rates (and effective dates) for future years, and also revised the minimum cash wage rates for tipped employees and corresponding tip credit amounts.

Quick Hits

• On February 21, 2025, Governor Whitmer signed Senate Bill 8, amending Michigan’s minimum wage law, and House Bill 4002, amending the paid sick leave law, both of which became effective immediately.
• The amendments to the Improved Workforce Opportunity Wage Act (IWOWA) did not alter the expected minimum wage increase to $12.48 per hour on February 21, 2025, but adjusted future minimum wage rates and timelines, as well as revised the minimum cash wage rates for tipped employees and corresponding tip credit amounts.
• These changes follow a Michigan Supreme Court ruling on July 31, 2024, which reinstated the original voter initiatives for minimum wage and paid sick leave, set to take effect on February 21, 2025.

Background

In 2018, the Michigan legislature adopted two voter initiatives—one that raised the minimum wage and was to gradually eliminate the tip credit, and another that increased employees’ paid sick time rights. Before they went into effect, the legislature amended and substantially rolled back the minimum wage increases and paid sick leave entitlements, starting in 2019. There have been several developments since that time, including the following:

• On July 31, 2024, the Michigan Supreme Court ruled that the amended (minimized) versions of IWOWA and the Earned Sick Time Act (ESTA) were unconstitutional and reinstated the originally adopted voter initiatives, to become effective on February 21, 2025.
• On October 1, 2024, the Michigan Department of Labor and Economic Opportunity (LEO) clarified that Michigan’s minimum wage would increase twice in 2025:
  • first on January 1, 2025 (to $10.56), following the usual increase schedule, and
  • again on February 21, 2025 (to $12.48) in accordance with the July 31, 2024 decision.

Changes to Minimum Wage and Tip Credit

On February 21, 2025, the Michigan legislature approved Senate Bill 8 to amend the minimum wage and tip credit amounts, and Governor Whitmer signed the bill into law. The main changes include (a) a faster increase to a $15.00 minimum wage (which will take effect by 2027), and (b) a slower increase in the minimum cash wage for tipped employees, which will reach 50 percent of the general minimum wage by 2031 (instead of reaching 100 percent of the minimum wage by 2030)—which also means the tip credit no longer will be phased out completely by 2030, but will be reduced only to 50 percent of the minimum wage.

While the official amendment contains additional details, here are the rate and datechanges in the minimum wage, tipped minimum wage, and tip credit: