Michigan Tip Laws and Requirements
Michigan tip laws, governed under the Fair Labor Standards Act with recent amendments effective February 2025, allow employers to apply a tip credit against minimum wage for tipped employees only during hours worked in tipped occupations, require a minimum cash wage of $2.13 per hour, permit tip pooling without federal limits, and include state-specific provisions that differ from federal standards as clarified by a recent Michigan Supreme Court ruling.
Under the Fair Labor Standards Act (FLSA), tips are regulated. Employers who meet certain criteria are permitted to take a partial credit against minimum wage obligations for tipped employees. Tipped employees include those engaged in jobs in which they regularly and customarily receive tips.
The tip credit was created by Congress in 1966, and adjustments occurred on December 28, 2021, when the 2021 Dual Jobs Final Rule went into effect. A federal court vacated portions of the final rule in October 2024, which effectively reinstated the original dual jobs regulation (29 C.F.R.531.56(e)). It recognizes that an employee may work in tipped and non-tipped occupations, and employers are only permitted to take the tip credit against minimum wage obligations for hours worked in the tipped occupation.
The FLSA mandates that a tipped worker must be paid at least $2.13 per hour. The FLSA tip credit can be equal to the difference between the direct (or cash) wage paid to the employee and the federal minimum wage. Only tips actually received by an employee count when making the determination of a tipped employee and applying the credit.
The FLSA also permits employees to “pool” or share tips with other eligible employees, although it doesn’t impose a limit on the amount or percentage of the contribution of each employee in a valid tip pool.
State law may differ from the federal FLSA standards. Review what tip laws apply in Michigan.
When Were the Tip Laws Last Updated in Michigan?
A recent ruling by the Michigan Supreme Court resulted in an amendment that includes changes to tip laws and is slated to go into effect in February of 2025. Tip laws were previously included in the Improved Workforce Opportunity Wages Act (Public Act 337 of 2018).
Does Michigan Have Tip Laws That Differ from Federal Tip Laws?
Yes, Michigan has tip laws that differ from federal laws. Employers are permitted to apply the tip credit to an employee’s hourly wage, but the amount depends on the current minimum wage. Since Michigan has a higher statewide minimum wage than the federal rate, employers must adhere to the current rate. As of February 21, 2025, the tip credit must be no more than 48% of minimum wage, with annual adjustments planned in accordance with rising wage rates.
The changes going into effect in February 2025 begin the phase-out of the tip credit.
Who Holds the Ownership of Tips in Michigan?
Under federal law, any gratuities paid to employees are their property. Employers are not permitted to require employees to hand in their tips, although they are allowed to count the tip toward the hourly rate.
What are the Rules for Distribution of Credit Card Processing Tips in Michigan?
Federal law states that all tips paid by credit card must be issued to employees no later than the next regular payday, even if the employer is awaiting reimbursement from the financial provider.
What are the Tip Pooling Rules in Michigan?
Employers may establish mandatory tip pools, but the tips must be distributed between service employees. They also must notify participating employees in advance.
Who Can and Can’t Participate in Tip Pools in Michigan?
Tipped workers can participate in tip pools. Supervisors, managers, and owners/employers may not.
Is there a Difference Between Tips and Service Charges in Michigan?
Yes, a mandatory service charge is not considered a tip. Therefore, it would belong to the employer.
To be considered a tip instead of a service charge, a customer must give money voluntarily in an amount of their own choosing. The customer must also be able to determine who receives it, and it can’t be set by employer policy.
Can Employers Deduct Credit Card Fees from Tips in Michigan?
Yes, employers are permitted to deduct processing fees from tips made on credit cards. However, the deduction cannot take the hourly wage below the state minimum.
Do Tips Count Toward the Minimum Wage in Michigan?
Yes, the tip credit can count toward minimum wage.
Do Tips Factor Into Regular Rate Calculations for Overtime Pay in Michigan?
Yes, tips can factor into rate calculations for overtime pay. Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage), and the employer is allowed to include the tip credit in that calculation.
Are There Cities and Municipalities in Michigan That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?
No, there are no cities or municipalities in Michigan with different tip laws.
What Are the Record-Keeping Requirements for Employers Regarding Tips in Michigan?
Employers must keep detailed records of all tips reported by employees, including amounts and dates of service. If tip pooling is in effect, the record should also include the arrangements and the distribution of tips to eligible staff members.
What Options Do Employees Have for Remuneration if Their Tips are Withheld in Michigan?
An employee may take legal action against an employer who violates state tip laws.
What are the Penalties for Employers for Not Complying with Michigan Tip Laws?
Violating Michigan tip laws can subject an employer to a penalty of up to $1,000. Employees may also be permitted to recover the unpaid wages in damages.
Related
Rhode Island Tip Laws and Requirements
Rhode Island's tip laws, updated in June 2022, generally follow federal Fair Labor Standards Act regulations—including the allowance of tip credits and tip pooling—but differ by applying a higher state minimum wage and new tip protections for employees earning over $30 monthly in tips, while federal rules permit employers to take tip credits only for hours worked in tipped occupations and require tipped employees to be paid at least $2.13 per hour.
North Dakota Tip Laws and Requirements
North Dakota's tip laws, last updated in September 2021, align with federal standards under the Fair Labor Standards Act by allowing employers to take a tip credit against minimum wage obligations for tipped employees—who must be paid at least $2.13 per hour—with the state permitting a tip credit of up to 33% of the minimum wage and recognizing that tips are the property of employees, while also adhering to federal rules on tip pooling and the dual jobs regulation reinstated in 2024.
Missouri Tip Laws and Requirements
Missouri's tip laws, updated in September 2021, differ from federal FLSA regulations by allowing employers to count tips as part of wages but limiting the tip credit to no more than 50% of the state's higher minimum hourly wage, while also adhering to federal rules that require tipped employees to be paid at least $2.13 per hour and permit tip pooling among eligible employees.
Montana Tip Laws and Requirements
Montana's tip laws, updated in 2021, differ from federal FLSA regulations by prohibiting employers from using a tip credit and requiring payment of the full state minimum wage—which is higher than the federal rate—to tipped employees, who retain ownership of their gratuities.
South Carolina Tip Laws and Requirements
South Carolina adheres to federal Fair Labor Standards Act (FLSA) tip laws, which regulate tipped employees' wages, allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, mandate a minimum cash wage of $2.13 per hour for tipped workers, permit tip pooling among eligible employees without limits on contributions, and recognize that tips are the property of employees, with the state's tip laws last updated in September 2021 and no deviations from federal standards.
Maine Tip Laws and Requirements
Maine's tip laws, updated in June 2023, differ from federal FLSA regulations by limiting employers to count tips as no more than 50% of the state's higher minimum wage, requiring adherence to Maine's wage rates, and recognizing that only tips actually received by employees count toward wage calculations, while also allowing tip pooling without federal limits on contribution amounts.