Under the Fair Labor Standards Act (FLSA), regardless of whether a tip credit is taken, managers and supervisors cannot keep tips unless they “solely and directly” provide service to a customer. The law further prohibits managers and supervisors from participating in a tip pool arrangement with other employees who directly serve customers.
In Opinion Letter FLSA2025-1, issued January 14, 2025, the U.S. Department of Labor (DOL) restated its position on when managers and employees in non-supervisory positions may receive tips from a tip pool.
First, to classify as a manager or supervisor under the FLSA, an employee must meet the executive employee duties test from the FLSA’s overtime and minimum wage protections. To meet the executive duties test, an employee must:
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have the authority to hire or fire other employees, or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight; and,
An employee’s primary duty is the principal, main, major, or most important duty the employee performs. The primary duty is based on the employee’s duties on a workweek basis or whatever longer period of time is appropriate to capture the character of the employee’s job as a whole.
In the Opinion Letter, the DOL addressed two scenarios involving a “quick service” restaurant: (1) whether a supervisor or manager who clocks in and works a shift in a non-supervisory capacity can participate in the company’s tip pool with non-supervisory employees for that shift, and (2) can an employee who is the highest-ranking employee during a particular shift, but does not otherwise meet the FLSA’s supervisor or manager requirements, participate in the tip pool during that shift.
Scenario One
In response to the first scenario, the DOL affirmed that an employer may not allow managers or supervisors to keep any portion of other employees’ tips, including from a tip pool, even if the manager or supervisor works a shift in a non-supervisory capacity. The Opinion Letter states: “[t]o permit an individual whose primary duty (based on their job as a whole) is management to receive tips from a tip pool because the individual works a shift in a non-supervisory capacity would circumvent the statutory prohibition against allowing managers or supervisors to keep any portion of other employees’ tips.” As long as the manager or supervisor does not participate in the tip pool, they may keep tips that they receive directly from customers based on the service they directly and solely provide to those customers.
Scenario Two
Regarding the second scenario, if an employee does not meet the executive employee duties test and, therefore, does not qualify as a manager or supervisor for purposes of the FLSA, they may receive tips from an employer-mandated tip pool, including for shifts when they are the most senior employee working at the establishment. The Opinion Letter states that if the employee’s “primary duty (based on their job as a whole) is not management, the employee does not meet the executive employee duties test and therefore, is not a manager or supervisor prohibited from receiving tips from an employer-mandated tip pool.” In short, non-managerial and non-supervisory employees are eligible for company-mandated tip pool arrangements.
For questions about tip-pooling policies and who is eligible to participate in a tip-pool arrangement under the FLSA and/or state-specific wage and hour law, Consulting and Enterprise members can reach out to Employers Council’s legal team. All members can access our Tipped Employees whitepaper to learn more.
Drew Hintze is an attorney for Employers Council.