Can Managers Take Tips in Michigan? Rules, Tip Pools, and Exceptions

In Michigan, managers and supervisors generally cannot take tips. Both the state’s Improved Workforce Opportunity Wage Act and the federal Fair Labor Standards Act treat gratuities as the property of the employee who earned them, and both bar managers and supervisors from keeping any share. The one narrow exception: when a manager personally and solely serves a customer, that manager may keep the tip left for that specific service.¹²

Tips Belong to the Employee Who Earned Them

Michigan law is direct. Gratuities are the property of the employee who receives them, regardless of whether the employer pays the full minimum wage or claims a tip credit against it.¹ Federal law reinforces that rule. Section 3(m)(2)(B) of the FLSA prohibits employers from keeping tips received by their employees for any purpose, including allowing managers or supervisors to keep any portion.² An employer who pays well above minimum wage still cannot claim employee tips.

Michigan’s statute also protects you from being pressured to share with the wrong people. You may voluntarily share your tips with coworkers who are part of the chain of service, but only if those coworkers’ duties are not primarily managerial or supervisory.¹ You can choose to tip out a busser or food runner. You cannot be required to tip out a shift manager.

The One Time a Manager Can Keep a Tip

A manager or supervisor may keep a tip when the customer left it based on a service the manager directly and solely provided.² This situation comes up in smaller places where a manager might be the only bartender on a slow afternoon, or the only person running a delivery.

The Department of Labor’s example: if a restaurant manager delivers a pizza to a customer’s home and the customer tips, the manager keeps that tip because no other employee was involved in the service.³ If a server took the order and the manager only carried the food to the table, the tip belongs to the server or the shared tip pool. The requirement is total separation. The manager has to be the customer’s only point of contact for that transaction.

Managers and Tip Pools

Managers and supervisors cannot receive any money from a tip pool, even during shifts where they do tipped work alongside other employees.² This rule applies whether or not the employer takes a tip credit. The DOL illustrates it with a restaurant manager who sometimes works a bartender shift. That manager may keep tips given directly to them by individual customers at the bar, but may not draw from the mandatory tip pool that covers servers, bartenders, and bussers.³

The flow runs one direction. A manager can contribute their own directly earned tips into a pool for the service staff, but nothing comes out of the pool to the manager. An employer who requires managers to receive a share of pooled tips risks losing the ability to take a tip credit at all, which would mean paying every tipped employee the full minimum wage.

Who Actually Counts as a Manager

Job titles do not settle this. For the FLSA’s tip rules, a “manager” or “supervisor” is any employee whose duties match the executive duties test, which has three parts.⁴ All three must apply:

The employee’s primary duty is managing the business or a recognized department within it.
The employee regularly directs the work of at least two full-time employees, or the part-time equivalent.
The employee can hire or fire other employees, or their recommendations on those decisions carry significant weight.

Salary level does not matter for this test. A salaried worker and an hourly worker are judged by the same duties criteria when it comes to tip eligibility.⁵ A “shift lead” who does the same work as other servers but has no authority to discipline or hire likely falls outside the manager definition and is still eligible to receive tips.

Other Ways Employers Illegally Reduce Tips

If a manager cannot keep your tip directly, they also cannot shrink it on the back end. Michigan’s statute requires that the “entirety” of gratuities be retained by the employee who receives them, and that gratuities are “in addition to, and do not count toward, wages due the employee.”¹ That language effectively bars employers from deducting the 2 to 3.5 percent credit card processing fee from an employee’s tip when a customer pays by card.

Mandatory service charges are a separate category and worth knowing about so you aren’t misled. A service charge added automatically to a bill is not a tip. The IRS treats a payment as a true tip only when it is given voluntarily, the customer sets the amount freely, the amount is not dictated by employer policy, and the customer chooses who gets it.⁶ Fixed service fees and automatic gratuities on large parties fail that test, so they are wages rather than tips, and management’s share of them is governed by payroll rules rather than the tip-ownership rules above. Michigan law does require that both employees and customers get written notice explaining how service charges are distributed.¹

What to Do If a Manager Is Taking Your Tips

You can file a wage complaint at the state level, the federal level, or both.

In Michigan, the Department of Labor and Economic Opportunity, Wage and Hour Division, handles claims under the Improved Workforce Opportunity Wage Act. The deadline to file is three years from the date of the violation.⁷
At the federal level, the U.S. Department of Labor’s Wage and Hour Division investigates FLSA violations. The deadline is two years from the violation, or three years if the employer’s conduct was willful.⁸

Under the FLSA, an employer that unlawfully keeps employee tips is liable for the full amount of tips taken, plus any tip credit the employer claimed, plus an equal amount in liquidated damages, which roughly doubles the recovery.⁹ A successful employee is also awarded reasonable attorney’s fees and court costs, so you do not pay for representation out of pocket if you win. Separately, businesses that violate the FLSA’s tip rules can face civil money penalties of up to $1,409 per violation, paid to the government.¹⁰

Federal law also protects you against being punished for speaking up. It is illegal for an employer to fire, demote, cut hours, or otherwise retaliate against an employee for filing a wage complaint, cooperating with an investigation, or testifying in a related proceeding.¹¹ If an employer retaliates, you can recover lost wages, an equal amount in liquidated damages, and attorney’s fees and court costs.⁹ The protection takes hold the moment you file.

1
Michigan Legislature. Michigan Compiled Laws Section 408-934D
2
eCFR. 29 CFR Part 531 Subpart D – Tipped Employees
3
U.S. Department of Labor. Fact Sheet 15B – Managers and Supervisors Under the FLSA and Tips
4
eCFR. 29 CFR 531.52 – General Restrictions on an Employer’s Use of Its Employees’ Tips
5
eCFR. 29 CFR 541.100 – General Rule for Executive Employees
6
IRS. Interim Guidance on Rev. Rul. 2012-18
7
Michigan Legislature. Michigan Compiled Laws Section 408-1117
8
Office of the Law Revision Counsel. 29 USC 255 – Statute of Limitations
9
Office of the Law Revision Counsel. 29 USC 216 – Penalties
10
eCFR. 29 CFR Part 578 – Tip Retention, Minimum Wage, and Overtime Violations
11
Office of the Law Revision Counsel. 29 USC 215 – Prohibited Acts