Opinion | Paid sick leave may leave Michigan ill

Each of two upcoming employer mandates — paid sick leave and tip credit elimination — would have plenty of economic consequences for Michigan small businesses and their employees. Put together, they will wreak havoc on the state’s economy.

On Feb. 21, two long-running efforts are scheduled to take effect: one to impose a costly paid sick leave mandate on Michigan job providers, and a second to upend the current preferred tipped wage system in restaurants. 

The Michigan Supreme Court last summer reinstated the “Earned Sick Time Act.” A previous Michigan Legislature had adopted this initiative into law but amended it to soften the blow of this new mandate on businesses. The Michigan Supreme Court said these amendments were unconstitutional, which forced the original initiatives into statute starting in February.

Paired with the Court’s reinstatement of a measure to eliminate the tipped wage system preferred by restaurant employees, this would be a one-two punch for employers and their workers. An overwhelming amount of economic evidence shows the individual policies alone will slash jobs and force businesses to close. Paired together, the two will be a disaster.

On paid sick leave laws, economists have found mandated policies to be a cure worse than their related diseases. This includes doing little to keep workers at home when they’re sick, adding to employer compliance hassles, and reducing hours worked and related pay or other benefits of employees.  

Surveys by proponents of paid leave often reveal that many employers already offer paid sick leave policies on their own. For businesses that don’t, the mandates have distinct negative consequences that have already played out in places that have tried similar laws.

A review of studies on state and local paid leave mandates by the Washington State-based Freedom Foundation found businesses with the largest expansion of paid sick leave requirements were most likely to experience lower profitability and reduced employee benefits.

In surveys of businesses impacted by paid sick leave laws in Connecticut and Seattle, the costs associated with compliance meant employers had to limit other benefits for their employees, raise prices or even downsize staff. Others reported they would have to limit future hiring or raises for their employees.

Sure enough, University of Kentucky economist Thomas Ahn found Connecticut’s paid sick leave law impacted younger employees the most: 20-34-year-old employees experienced schedule reductions by 24 hours, slashing their annual income by up to $850 a year.

Even a survey of affected San Francisco employers by the Institute for Women’s Policy Research (IWPR) — an advocate for paid leave laws — found the city’s paid leave mandate brought layoffs or schedule reductions for its lowest-wage workers. 

All these negative consequences for businesses and their employees, and no real positive impact: A Seattle city audit of the impacts of a similar mandate found it had almost no effect on the frequency of employees coming to work sick. In fact, the report found businesses offering paid leave policies voluntarily were more likely to have employees working while sick than businesses not offering the policy.

Several states across the country have experimented with paid sick leave mandates — but the economics paint a bleak picture of the effects in Michigan. Yet the forthcoming mandate here appears far more stringent than in most other states. For example, one of the more insidious parts of the new act is that it allows employees to take private legal action against their employers, with little recourse for employers under the “rebuttable presumption” standard.

This means employees can sue businesses for perceived retaliation in response to taking sick leave time, and courts will make employers prove personnel actions unfavorable to the employee were not retaliation for a worker taking time off – guilty until proven innocent.  And this is not the only thing wrong with the new legislation.

On Michigan’s tipped wage system, the Court’s ruling threatens to dismantle the state’s tip credit, which would do away with the current compensation system preferred by tipped servers and bartenders in restaurants. Currently unfolding in the nation’s capital, eliminating the tip credit would slash Michigan restaurant jobs, force them to raise their prices, and drive down Michigan’s tipping percentage down to the likes of California, which is the lowest in the nation.

Michigan’s unprecedented paid leave mandate paired with the rapid elimination of the tip credit is a perfect storm slashing jobs, shuttering businesses, and leaving employers and workers alike in their wake.

The Michigan Legislature must act. Failure to do so will likely raise the cost of providing jobs and of finding them in the first place.