Minimum Wage workers in Michigan saw an increase in their paychecks beginning in 2026, with another increase expected in 2027. The new rate, effective January 1st of 2026, is $13.73. Tipped employees will also see an increase in their base rate to $5.49.
The full directive from the Michigan Department of Labor and Economic Opportunity can be found here. These changes were put in motion after the most recent amendments to Michigan’s Improved Workforce Opportunity Wage Act (“IWOWA”) came into effect as of February 21, 2025. By 2027, the Michigan Minimum wage will stabilize at $15/hr in 2027, with guaranteed adjustments for inflation thereafter.
Michigan is not alone in the move toward a fair minimum wage. Across the US over 68 States, Cities and Counties have adopted minimum wage increases for 2026, according to a recent report from the National Employment Law Project. “Policies increasing the minimum wage have been a lifeline for low-paid workers — especially those who have been the most impacted by a growing affordability crisis —and they must be paired with strong enforcement mechanisms that make it easier for workers to assert their rights, including their right to get paid the full minimum wage” said NELP Senior Policy Analyst Yannet Lathrup.
Most every Michigan employee has a right to be paid at least a minimum wage under Michigan state law (currently $13.73/hr). However, for food service and other customarily tipped occupations, Michigan employers are still legally permitted to take a “tip-credit” as long as the employee still meets minimum wage with tips included. This exemption is only permitted in narrow circumstances. Michigan has protections for employees around tip pooling, tip stealing, overtime, non-tipped side work, and other common payroll malpractice, which is particularly common in the food industry.
Restaurant violations of the tip-credit rule disqualify employers from taking a tip-credit and require full minimum wage be paid. The most common violations include:
- Invalid tip pools – Tip pooling is common in the restaurant industry – where servers and bartenders pool tips together and share all or some of their tips in a common pot. However, when managed incorrectly, tip-pooling policies can violate federal law. The FLSA prohibits restaurants from requiring tip-credit employees who customarily and regularly receive tips (like servers) to turn over those tips to other employees who do not ordinarily receive tips (like cooks and dishwashers). When restaurants violate the law, they are not only responsible to repay the illegally taken tips, but also liable to pay their tip-credit workers at least a full minimum wage.
- Tip stealing – Public tipping habits have become supercharged in recent years. Customers feel generous and want to make sure workers are appreciated. Unfortunately, many cafes and restaurants have also taken note of the customer generosity upswing and used the opportunity to redirect tips to pad their own pockets. The FLSA (Fair Labor Standards Act) prohibits tip stealing to pay management. Because business owners control the point-of-sale systems, it provides an attractive opportunity for tip stealing from workers. Some owners illegally take a portion (or sometimes all) of credit card tips, or for online ordering, or in-app tips are illegally redirected to management. It is against the law for any restaurant to take any portion of tips, even for workers who earn above the Michigan minimum wage.
- Refusal to pay overtime wages – Even tipped restaurant workers are still entitled to receive overtime pay for all hours over 40 in a week. For all workers (tipped and non-tipped), wages plus tips must add up to one and a half times the regular hourly rate. Many restaurants may overlook this requirement.
- Non-tipped side work – Another common tip-credit violation involves paying servers on the tip credit for non-tipped work (a/k/a “side work” such as filling condiments and folding napkins). Restaurants are required to pay a full minimum wage to servers for non-tipped work.
Restaurant employers who utilize a tip-credit system are still required to follow many rules and regulations that protect tipped employees and guarantee a minimum wage in all but narrow circumstances. State and Federal Department of Labor enforcement is only one piece of the wage and hour compliance system. The federal DOL is also limited to enforcing federal law and can’t seek additional wages guaranteed under state law. Many employees who suspect they have been illegally deprived of wages and overtime turn to private attorneys to discuss their rights and consider enforcement options. State and federal laws depend on those in the private bar for enforcement.
How do I find out more about tip-credit law, minimum wage and overtime?
- DOL Fact sheets
- LEO Fact sheets
- Consult with a knowledgeable wage and hour attorney
How do I report a restaurant tip-credit or overtime violation?
- Contact the DOL local office in Michigan
- Contact the state wage and hour division at www.michigan.gov/wagehour or toll free at 1-855-4MI-WAGE (1-855-464-9243).
If you’re not sure where or when to report wage theft, start by contacting an employment attorney with wage theft enforcement experience. Michigan employers who violate the law are liable to pay employees their full minimum wage of 13.73/hour, and potential penalties, liquidated damages and covered attorneys’ fees.