WHAT MICHIGAN RESTAURANT OWNERS SHOULD CONSIDER WITH TIP POOLING POLICIES
As a Michigan restaurant owner, you may consider implementing a tip pooling policy. Tip pooling is where all employees who receive tips pool the tips together and divide them amongst themselves. This can be a great way to ensure that all employees are fairly compensated for their hard work.
However, you should consider a few things before implementing a tip-pooling policy. First, while Michigan does not strictly prohibit tip pooling, there are restrictions. For example, suppose you take a tip credit (which is where tips count towards meeting minimum wage obligations). In that case, you cannot require employees to contribute all or a portion of their tips to a tip pool that will be shared with employees who do not receive tips. That means that back-of-the-house employees (chefs, dishwashers, etc.) should generally not be a part of a tip pool whenever there is a tip credit. You must also remember that management and ownership should never participate in a tip pool.
Second, you need to decide how you will distribute the tips. There are a few different ways to do this. You could evenly divide the tips among all tip-eligible employees. Or you could give a more significant share of tips to employees who work in certain positions. The goal should be incentivizing employees while ensuring a healthy workplace culture.
Third, you must ensure your employees understand the tip pooling arrangement by providing them with a clear, concise, well-written tip pooling policy. You should encourage employees to reach out to you if they have any questions about the policy and make sure employees know they can report tip-pooling problems to you without fear of retaliation.
A common tip-pooling problem is management attempting to take part in a tip pool, which is unacceptable. A well-written tip policy should strictly prohibit this kind of behavior. It should also clearly establish for your employees where and how they can report these issues and let employees know that such reports can be made without fear of retaliation. Putting this kind of policy in place has two main advantages. First, it will help prove that your restaurant took good faith measures to comply with the law in case of a lawsuit or audit. Second, it will allow your restaurant to fix mistakes before a lawsuit or governmental audit, which is always preferable and much more cost-effective.
Tip pooling can be a great way to ensure that employees are fairly compensated. But before you implement a policy, you need to make sure how you implement your restaurant’s policy is legal, written, transparent, and fair. Bad tip-pooling policies and practices are one of the top sources of liability for restaurant owners. But with a few simple steps working with an employment attorney, restaurant owners can dramatically reduce their liability.
