Managers and Tip Pools

By Stephanie Dorning, JD, Employment Law Counsel
Published February 4, 2025

On January 14, 2025, the Wage and Hour Division of the U.S. Department of Labor (DOL) recently issued an Opinion Letter regarding manager participation in tip pooling arrangements. This letter clarifies that managers and supervisors are barred from receiving tips, even when they work a shift in a nonsupervisory role. 

The letter responds to a question from a quick service restaurant where employees pool tips left in a tip jar or on customer receipts. The restaurant does not take a tip credit, with all employees receiving at least minimum wage for all hours worked. On occasion, team leads work entire shifts alongside regular line employees with no supervisory duties. Even though these lead employees are performing the same tasks as non-managerial employees for an entire shift, they are not eligible to participate in the tip sharing arrangements. 

Whether an employee is eligible to participate in a tip pool is based on the “primary duty” test, which analyzes the employee’s duties on a workweek-by-workweek basis. An employee who qualifies as a supervisor under the Fair Labor Standards Act (FLSA) for any part of the workweek is ineligible to receive tips for that entire workweek. This means that if a manager covers a shift at a coffee shop, restaurant, or any other business, they may not receive any share of the tips from a tip jar, tip pool, or other arrangement. In this case, these tips should be divided among non-supervisory employees. The DOL clarifies that this is true even when an entire shift is staffed by managers and supervisors.

The opinion letter also clarifies that this prohibition does not apply to all employees who take a leadership role simply because they are the most senior worker on shift. An employee is not converted to a management position merely by being the highest-ranking employee on shift. Only those employees who would be considered exempt under the executive exemption test of the FLSA are barred from accepting tips. This means employees who are paid a guaranteed salary of at least $684 per week, whose primary duty is management, has hiring and firing authority, and who customarily and regularly directs the work of two or more full-time employees. If an employee does not meet this definition, they are not considered a manager for purposes of this rule and may participate in an employee tip pool.

If your employees regularly receive tips from customers, whether via a tip jar or touch screen, now is a good time to review your tipping practices to ensure you are following this guidance. HR Source members with questions about tipping practices, exemptions, or any other HR issue can reach out through the HR Hotline Online or at 800-448-4584.