Splish Splash, That’s Not Your Cash! New DOL Guidance Keeps Managers out of the Tip Pool.

noun-kiddie-pool-6926801-1024x1024

Navigating the maze of wage laws can sometimes feel like playing a high-stakes game of “gotcha,” especially for restaurant operators. A recent opinion letter from the Department of Labor (DOL) clarifies when managers and supervisors can participate in tip pools if they perform the same duties and responsibilities as other typically tipped employees.

TLDR: never.

Understanding the Basics

The Fair Labor Standards Act (FLSA) prohibits employers from keeping employees’ tips for any purpose, including allowing managers or supervisors to keep any portion of those tips. This rule applies regardless of whether the employer takes a tip credit.

Manager or Not?

The Department of Labor uses a specific test to determine if someone is a manager or supervisor. To qualify, an employee must:

  • Regularly direct the work of at least two other full-time employees.
  • Have the authority to hire or fire employees, or their recommendations must be given particular weight.
  • Have a primary duty of managing the enterprise or a recognized department or subdivision.

Management duties include interviewing, selecting, and training employees, setting pay rates, planning work, and determining techniques to be used. If these are your primary duties, you’re considered a manager or supervisor.

Can Managers Ever Get Tips?

Managers and supervisors can keep tips they receive directly from customers for their services. However, they cannot participate in a tip pool that includes other employees’ tips, even if they work a shift in a non-managerial capacity. The primary duty test is based on at least a workweek, not shift-by-shift.

What About Shift Leads?

Shift Leads who do not meet the executive employee duties test are not considered managers or supervisors under the FLSA. Therefore, they can participate in tip pools, even if they are the highest-ranking employee during a shift. The key is that their primary duty must not be management.

Takeaways for HR and Operators

  • Know Your Roles: Clearly define who a manager or supervisor is in your establishment. Use the Department of Labor’s criteria and lean on your lawyers to make this determination.
  • Consistency Matters: An employee’s classification doesn’t change based on their work shift.
  • Tip Pool Compliance: Ensure that only non-managerial employees participate in tip pools. Managers and supervisors can keep tips they receive directly from customers for services they provide but cannot share in pooled tips.
  • Train Managers: Educate your leadership team on what they can (and can’t) do with tips.
  • Regular Reviews: Review job duties, classifications, and tip-pool policies to ensure compliance with FLSA regulations.

This opinion letter highlights the importance of implementing tip-pooling policies correctly. Missteps can lead to employee dissatisfaction, compliance headaches, and expensive lawsuits.

“Doing What’s Right – Not Just What’s Legal”
Contact Information