Time Is Money: A Quick Wage-Hour Tip on … DOL Confirms Managers Are Blocked from Tip Pool Even When Working in Non-Supervisory Capacity

Section 3(m)(2)(B) of the FLSA prohibits employers, including managers or supervisors, from keeping any portion of an employee’s tips.

Accordingly, the law has been clear that a manager or supervisor cannot participate in a general employee tip pool, since tip pools including tips of other employees. 

Although this appears clear at first blush, the blurred lines of restaurant staffing creates ambiguity as to who is exactly a manager or supervisor.  Non-exempt employees often work in a certain supervisory capacity as team or shift leads.  Conversely, it is also common for managers and supervisors in restaurants to perform a certain amount of non-supervisory duties.  So, when are employees with minor supervisory responsibilities treated as managers for tip pooling?  And can managers participate in tip pools when they perform non-supervisory duties?

The DOL recently tackled these questions in Opinion Letter FLSA2025-1.  In its analysis, the DOL reiterated its position that the definition of a manager or supervisor is an employee that meets the executive employee duties test at 29 C.F.R. §§ 541.100(a)(2)-(4).  Therefore, in order to be considered a manager or supervisor, an individual must meet several standards, including having the ability to customarily and regularly direct the work of at least two or more other full-time employees, etc. 

The upshot of this analysis is two-fold.

First, it is unlikely that non-exempt employees would be considered managers if they have very limited supervisory capacity.  Therefore, employers do not have to be overly concerned about shift leads errantly becoming managers and therefore ineligible to participate in tip pools. 

Second, managers and supervisors can, effectively, never participate in a tip pool.  In order to be able to participate in a tip pool, the managers would have to perform a high quantity of non-supervisory work that would essentially convert them to a non-exempt employee.  Shift-to-shift variations are immaterial and such deviations would need to occur on at least a workweek basis. 

So what is a restaurant to do?  Practical guidelines include:

• Err on the side of caution and keep anyone who is arguably a manager or supervisor out of any tip pooling or sharing arrangement.
• Do not create a separate tip pool of just managers and supervisors. This would continue to run afoul of tip-pooling prohibitions. 
• Managers can contribute to employee tip pools, but they cannot receive any monies from a tip pool, even if they have contributed to it.
• Managers and supervisors can keep their personal tips. However, this must be limited to tips received directly from customers based on the service the manger or supervisor directly and solely provides.