Fact Sheet #15B: Managers and Supervisors Under the Fair Labor Standards Act (FLSA) and Tips

This Fact Sheet provides information about managers and supervisors, including managers and supervisors who perform tip-producing work, and the tip provisions of the FLSA. For more information regarding the tip provisions of the FLSA, see Fact Sheet #15: Tipped Employees Under the FLSA.

Managers and supervisors may not keep employees’ tips.

The FLSA prohibits an employer from keeping tips and from allowing a manager or supervisor to keep any portion of other employees’ tips for any purpose. The FLSA, for example, prohibits a manager or supervisor from receiving tips from a tip pool or tip jar, because tip pools and tip jars include other employees’ tips. This prohibition applies whether or not the employer pays tipped employees with a tip credit.

Who is a manager or supervisor under the FLSA’s tip provisions?

For purposes of the FLSA’s tip provisions, a manager or supervisor includes any employee that meets the “executive” duties test. This is the same duties test used (along with other tests) to determine whether an employee is exempt from the FLSA’s minimum wage and overtime provisions because they are employed in a bona fide executive capacity. Meeting the executive duties test means:

the employee customarily and regularly directs the work of at least two or more other full-time employees or their equivalent;
the employee has the authority to hire or fire other employees, and/or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight; and
the employee has a primary duty of managing the enterprise or a customarily recognized department or subdivision of the enterprise.

Primary duty of managing. An employee’s primary duty is the principal, main, major, or most important duty that the employee performs. An employee’s primary duty is based on the entire workweek or whatever longer period of time is appropriate to capture the character of the employee’s job as a whole—not a day-by-day scrutiny of the tasks the employee performs.

Managing includes but is not limited to:

interviewing, selecting, and training employees
setting and adjusting employee’s rates of pay
setting and adjusting employee’s hours of work
directing the work of employees
handling employee complaints and grievances
disciplining employees
controlling the flow and distribution of materials or merchandise and supplies
planning and controlling the budget

An employee whose primary duty is managing may also perform non-management duties, including tip-producing work, and still meet the primary duties test. For example, restaurant managers who perform work like serving customers during the restaurant’s busiest periods would be exempt if their primary duty is managing the restaurant—the manager typically directs and supervises other employees’ work while performing this customer service work.

Business owners. Business owners who own at least a bona fide 20 percent equity interest in the enterprise in which they are employed and who are actively engaged in its management also satisfy the executive duties test. Under the tip provisions of the FLSA, these employees are managers or supervisors who may not keep other employees’ tips.

For more information regarding the executive duties test, see Fact Sheet #17B: Exemption for Executive Employees Under the FLSA.

Note: To be employed in a bona fide executive capacity and therefore exempt from the FLSA’s minimum wage and overtime requirements, an employee generally must satisfy a salary level and a salary basis test, along with the executive duties test. However, to qualify as a manager or supervisor under the tip provisions of the FLSA, an employee does not need to earn any particular level of compensation or be paid on a salary basis. As a result, not every employee who qualifies as a manager or supervisor for tip purposes is an exempt executive employee.

When a manager or supervisor performs tipped work

Some managers and supervisors perform tip-producing work in addition to their primary duty of management. In these scenarios, the FLSA does not prohibit managers and supervisors from keeping tips that are theirs alone. A manager or supervisor may keep tips that they receive directly from customers based on the service that they directly and solely provide.

Regardless of whether they are engaged in tip-producing work, however, if an employee qualifies as a manager or supervisor, the manager or supervisor cannot keep other employees’ tips, including by receiving them from a tip pool or by sharing tips that were based in part on other employees’ work and which were collected in a tip jar.

An employer may require managers and supervisors who earn their own tips to contribute a portion of those tips to other non-managerial employees through a mandatory tip pool. But the manager or supervisor may not receive any tips from the tip pool.

Examples

Example #1: Dorothea is the supervisor at a pizza parlor who meets the executive duties test. On an evening when there are many delivery orders, Dorothea delivers a pizza to a customer’s home, and the customer gives her a tip. Dorothea may keep the tip, which she received directly from the customer based on the service that she directly and solely provided.

Example #2: Dinesh is the manager of a hotel who meets the executive duties test. When a guest arrives with many bags, Dinesh helps the bellhop load them onto a cart before the bellhop delivers them to the guest’s room. Dinesh may not keep any portion of the tip the customer provides to the bellhop because it is not possible to attribute the tips solely to the service Dinesh provides.

Example #3: Raimondo is a restaurant manager who meets the executive duties test. The restaurant operates an employer-mandated tip pool for servers, bartenders, and bussers. Sometimes Raimondo works a shift as a bartender. Raimondo may not receive any tips from the tip pool, including when he works a shift as a bartender. Raimondo may, however, keep the tips he receives directly from customers based on the service that he directly and solely provides while tending the bar. However, the restaurant may require him to contribute some or all of those tips to the mandatory tip pool, but he cannot receive tips from the tip pool.

Example #4: Cheng is the manager at a café who meets the executive duties test. Often Cheng simultaneously supervises employees and works alongside them to serve customers at the counter. Customers at the café may include a tip when they pay by credit card at the counter or may place cash tips in a common jar. Cheng may not keep any portion of these tips because it is not possible to attribute the tips solely to the service Cheng provides.

Example #5: Taylor is a 30 percent owner of a hair salon who is actively engaged in management of the salon. Taylor also cuts and styles hair for clients. Taylor may keep tips left by customers whose hair they personally cut and style, because they receive these tips based on a service that they directly and solely provide.

Where to Obtain Additional Information

For additional information, visit our Wage and Hour Division Website: http://www.dol.gov/agencies/whd and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243).

This publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations.