Dive Brief:
- A person who manages or supervises tipped workers cannot participate in a tip pool because they qualify as an “employer” under the Fair Labor Standards Act, Jessica Looman, administrator of the U.S. Department of Labor, clarified in a Dec. 18 opinion letter. This applies even if the supervisor also performs tipped work, she said.
- Looman was responding to a question regarding a bartender who owns a 20% equity interest in a brewery and taproom. While the individual manages and supervises employees, they also tend bar to “regularly engage with the customers.”
- “Under the FLSA, a business owner may be considered a manager or supervisor,” Looman wrote. “A business owner who owns at least 20-percent equity interest in the enterprise and is actively engaged in its management [...] is a manager or supervisor who may not keep other employees’ tips.”
Dive Insight:
While the specified individual may not engage in tip pooling, Looman noted there are some ways the person may be entitled to tips.
“A manager or supervisor may [...] keep tips that they receive directly from customers based on the service that they directly and solely provide,” Looman wrote. For example, she said, if the worker is the sole person tending bar during a certain part of the day, they may keep customers’ tips, as they could only be intended for that person.
On the other hand, an employer may also “require a manager or supervisor to contribute some of their own tips into a mandatory tip pool, even though the manager or supervisor is prohibited from receiving any tips from the tip pool.”
Employers have run afoul of the FLSA in the past by including salaried managers in tip pools, as in the case of a New Albany, Ohio, country club, which owed nearly $90,000 in back wages and damages to workers for this offense in December 2022.
While tip pooling is generally allowed under the FLSA, it is not a popular form of compensation among the public, a Pew Research Center survey from 2023 found. Seven in 10 U.S. adults told Pew each restaurant server should keep all the money they receive in tips, with only 13% saying it should be split among all the servers and 14% saying it should be split among the entire staff.
