Quarterly Compass 10/1/24
Welcome back to “The Quarterly Compass,” the email newsletter of True North Legal Group. This resource is designed for entrepreneurs, small business owners, executives, and business-minded professionals in Northern Michigan.
Every quarter, we’ll head in four directions. First, the “East” section (directly below) will be dedicated to legal updates from TNLG that may be relevant to your venture. Then head “South,” where we’ll highlight a local business or entrepreneur doing great things in Northern Michigan. Out “West,” you’ll find information about future events or developments that may soon impact you, your business, or your employees. Finally, True “North” will include a short, actionable insight for personal or business growth.
No matter your bearing, we hope you’ll find “The Quarterly Compass” to be a helpful resource along the way.
Michigan Supreme Court on Wages and Paid Sick Leave
In a landmark ruling at the end of July, the Michigan Supreme Court impacted minimum wage, tipped worker compensation, and paid sick leave. This ruling has wide-reaching implications, particularly for small businesses and entrepreneurs in Northern Michigan, who may face higher labor costs, tighter margins, and shifting employee expectations.
Quick Background
In 2018, rather than putting the issues of paid sick leave and minimum wage to voters for approval, the Michigan legislature adopted as law two proposed ballot measures on the issues. These ballot measures effectively expanded paid sick time, requiring an employee to be provided one hour of earned sick time per thirty hours worked, and increased the minimum wage in the State of Michigan annually until 2030. During a lame-duck session of the legislature a few months later, lawmakers enacted two bills that amended the original ballot measures, more or less invalidating them. Legal challenges followed, and the Supreme Court eventually took up the case. In its July 2024 ruling, the Court overturned the lame-duck amendments and reinstated the laws as originally written.
Key Aspects of the Supreme Court Decision
The Court ruled that the legislature's amendments to both the minimum wage law and paid sick leave were unconstitutional, essentially reverting these laws to their 2018 versions, which are more worker-friendly.
This means:
- Minimum Wage Increases: The state’s minimum wage is set to rise, with tipped workers seeing their wage floor rise significantly over time. Employers will need to ensure that tipped workers meet minimum wage requirements without relying heavily on tips. The overall minimum wage is set to gradually increase above $12.00 per hour through 2030.
- Paid Sick Leave Expansion: Businesses will be required to provide more paid sick leave to employees. Employers with one to ten employees must permit accrual and use of up to 40 hours of paid sick time annually. Employers of ten or more employees must allow up to 72 hours annually. Importantly, the sick leave law will apply to all employees, not just those who are non-exempt.
While these changes aim to benefit workers, they pose substantial challenges for small business owners, particularly those in industries like hospitality, retail, and food service, which are foundational to Northern Michigan’s economy.
Recent Clarification and Legislative Action
Following the Supreme Court decision, the Attorney General sought clarification on certain aspects. The Supreme Court then responded with three key clarifications: (1) that the law’s “tip credit” will slowly phase out until 2030, when tipped workers must receive the same minimum wage as other employees; (2) that minimum wage increases will become effective starting February 21, 2025, and increase annually on February 21 thereafter; and (3) that the minimum wage increase must be adjusted for inflation across time. On September 11, 2024, new legislation was introduced that would effectively rescind the Supreme Court’s decision and maintain the status quo. Thus, if the new Senate bills passed, no changes would occur on February 21, 2025. However, it appears unlikely those bills will pass in time, if at all.
Impact on Small Businesses in Northern Michigan
For small businesses in Northern Michigan, these changes could mean increased labor costs at a time when many are still recovering from the economic impact of the COVID-19 pandemic and rising inflation. With the increased cost of wages and benefits, maintaining profitability without raising prices significantly or cutting staff may become more difficult. Furthermore, businesses that rely on a part-time, seasonal workforce—common in the tourism-driven economies of towns like Traverse City and Petoskey—may face additional challenges in providing mandated benefits like paid sick leave. The hospitality industry, in particular, will feel the immediate effects. Tipped workers, such as waitstaff in restaurants, have historically been compensated with a lower base wage due to the tipping system. The wage increase for these employees, while beneficial for workers, will force employers to re-evaluate pricing, staffing, and operational strategies to remain competitive.
Best Practices for Adapting to the Decision
To navigate these changes effectively, Northern Michigan businesses should consider the following practices:
- Evaluate Staffing and Operational Efficiency: Review your workforce and streamline operations where necessary. Consider cross-training employees, which may help balance the increased labor costs by maintaining a leaner staff without sacrificing service quality.
- Revisit Your Pricing Strategy: With higher labor costs on the horizon, it may be time to adjust your pricing structure. However, it’s important to balance these changes carefully to avoid alienating customers. A small, incremental increase over time may be more palatable than a sudden price hike.
- Improve Employee Retention and Productivity: Investing in your employees by offering incentives, professional development, and a supportive work environment can increase retention, reduce turnover costs, and improve productivity. With the new paid sick leave requirements, showing employees that their health and well-being are valued can pay off in terms of loyalty and performance.
Final Thoughts The Michigan Supreme Court's decision brings significant changes that small businesses must swiftly adapt to in order to stay compliant and competitive. For Northern Michigan business leaders, careful planning, operational adjustments, and smart financial strategies will be key to thriving in this new legal landscape. By staying informed and proactive, businesses can manage the impact of these changes while continuing to contribute to the region's vibrant economy.
Feel free to contact our office if your business has questions moving forward.
Read the Michigan Supreme Court decision here. The clarifying order may be accessed here.
Perennial Wealth: Promising Trust in Financial Services
Jeff Spencer knows Northern Michigan. The Traverse City native was born, raised, and educated here before heading off to the University of Michigan for college and a brief life out west. He’s a “boomerang” in the truest sense, returning to his hometown in 2010 to raise a family and build a future. Earlier this month, alongside his father, Mark, Jeff launched Perennial Wealth Management with a vision of delivering goodwill and trust in financial services.
Enjoy this brief Q&A with Jeff:
1. What motivated you to return to Northern Michigan and Traverse City in particular?
I was born and raised here. Both of my grandparents moved up to Traverse City in the 1950’s. My maternal grandfather, Dr. Stephen Kozelko, was a dentist (his son, Tom, was the first professional athlete to come from TC, playing in the NBA for the Washington Bullets). My paternal grandfather, Dr. John Spencer, was a practicing physician, avid outdoorsman, and leader in many local organizations such as the Olson Foundation, the Grand Traverse Regional Land Conservancy, and others. My wife, Judy, and I met at the University of Michigan and spent our 20s out west. But we were always called to return home, and we eventually did in 2010. We’ve been here ever since and don’t plan on ever leaving. Traverse City has changed so much over the course of my life. With the evolution of remote work, there are so many families that have come from all parts of the country over the last 5-10 years, which has enriched the community. That said, what I appreciate most about Traverse City is its longstanding and strong sense of community.
People take great pride in the region, especially its natural resources. In addition, I feel incredibly lucky to live in a town where my kids are not only provided opportunities but are able to thrive in a safe and supportive environment.
2. What are the key characteristics of our community that inspired you to start a new venture?
Our community takes great pride in supporting local businesses. My Dad and I have been in business together for fifteen years, with his experience in the financial industry going all the way back to 1982. We have always believed that our clients work with us because of the service, results, and trust we’ve built over multiple decades with them. Our decision to go to an independent advisory model and rename ourselves Perennial Wealth Management stems from the strong belief that the goodwill, trust, and reputation we’ve built in the community over many decades and generations is something that matters much more than working with some Wall Street firm that does not share or reflect our community’s values.
3. What excites you about the next twelve months of your business?
From a client perspective, I am very excited about being able to offer better tools, resources, and technology. While these are not the foundations of our business, in the 21st century, you need to have a strong offering in these areas. As a business owner, I’m excited to build the Perennial Wealth Management brand in the community as a family business that’s been around for more than 40 years. In our world, not only does experience matter, but the people who you entrust matter. I look forward to the day where when a client of ours says “I work with the Perennial Wealth Management team,” and it means something to people in our community. Jeff Spencer believes in fostering goodwill, trust, and a strong reputation. Perennial Wealth Management is built from that image.
To work with Jeff or learn more about his business, feel free to connect with him via email at jeff.spencer@pwmmi.com.
Reporting Requirements Impact Small Business Lending
After much debate and litigation, the Consumer Financial Protection Bureau (CFPB) has finally implemented its data reporting requirements for small business lenders from the 2010 Dodd-Frank financial reform law. The new rule requires lenders to report certain data to the CFPB when businesses seek a new loan or wish to refinance an existing debt. This data includes method of credit application, credit purpose, the amount sought, details about applicants’ business, and demographic information. Although the rule most directly impacts banks and other financial institutions that lend to small businesses, the net effect on entrepreneurs will likely be increased time and cost when seeking institutional financing. The rule imposes substantial administrative burdens on lenders, and compliance could prove costly, challenging, and time-consuming, especially for community and local institutions. Be prepared for longer wait times and higher costs when seeking small business loans in the coming years.
The rule goes into effect in mid-2025 and early 2026.
Finding True North — Featured in The Boardman Review
This month, our Founding Attorney Josh Traeger will be featured in The Boardman Review, the creative culture and outdoor lifestyle journal of Northern Michigan. Here’s an excerpt from Josh’s piece:
“As I stood on that rocky edge of Oahu’s southern shore, I wanted nothing more than for someone to reach out a hand and help me along the way. I had been alone. Successful, blessed, and decorated -- yes. But alone nonetheless.
There are countless members of our community who feel the same way. I am here -- and True North Legal Group is here -- to offer them a hand.
We are here to help you climb away from the rising tides, to lead you in the direction of a clearer path, and to find, along with you, everyone else who will join us along the way.
As for you, all I ask is for you to keep your eyes on the horizon, willing and able to spot that lonely hiker who may seem to be heading in the wrong direction. And when you come upon him or her, offer a smile, a guiding hand, or a kind word.
It may change his or her course for good.”
Join us for the Boardman Review Fall Issue Release Party on October 9 at 6:00p at Loco Boys Brewing Company, where Josh will read an excerpt from his piece. If you can’t make the party, find out where you can get a copy of the issue by following this link.
Thank you for reading “The Quarterly Compass,” the email newsletter of True North Legal Group designed to help small business owners, entrepreneurs, executives, and business-minded professionals in Northern Michigan.