DOL Opinion Letter Clarifies When Supervisors Can Keep Tips And When They Cannot

DOL Opinion Letter Clarifies When Supervisors Can Keep Tips and When They Cannot

The U.S. Department of Labor (DOL) recently issued Opinion Letter FLSA2026-13, providing important guidance for restaurants and other hospitality employers regarding supervisors, tip pools, and tip-sharing arrangements. The opinion letter reinforces a rule that often surprises employers: a supervisor generally cannot keep tips received from other employees or participate in a tip pool, even when the supervisor is performing tipped work such as bartending alongside staff.

Supervisors Cannot Generally Accept Tips From Other Employees

The Fair Labor Standards Act (FLSA) prohibits employers from allowing managers or supervisors to keep tips received by other employees. According to the DOL, this prohibition applies regardless of whether the employer takes a tip credit.

In the opinion letter, the DOL addressed a restaurant “shift supervisor” who performed managerial duties but also worked bartending shifts and assisted hosts and bussers. The restaurant required servers to “tip out” bartenders, hosts, and bussers. The question was whether the shift supervisor could receive a share of those tip-outs when performing bar or support work.

The DOL’s answer was clear: if the employee qualifies as a manager or supervisor under the FLSA, that employee may not keep any portion of tips that originated in part from other employees through a tip pool or tip-sharing arrangement. This remains true even when the supervisor is working side-by-side with tipped employees and performing the same customer-facing duties.

When Can a Supervisor Keep Tips?

The opinion letter highlights a narrow exception. A supervisor may keep tips that are: 1) Given directly by customers to the supervisor; and, 2) Earned solely and directly from services the supervisor personally provided.

For example, a supervisor who independently tends a bar and receives tips directly from customers may keep those tips because they were earned from services the supervisor alone performed.

Similarly, if a restaurant manager personally and solely waits on a table because a server called off work, the manager may retain tips left by customers at those tables.

However, a supervisor cannot keep tips that are pooled with other employees’ tips or otherwise cannot be attributed solely to the supervisor’s own service. If bartender tips are combined and shared among all bartenders working a shift, a supervisor cannot participate in that distribution.

Who Qualifies as a Supervisor?

One of the most important aspects of the opinion letter is the DOL’s reminder that job titles do not control. An employee does not become a supervisor simply because the employer calls them one, and an employee may be considered a supervisor even without a management title. 

Instead, the DOL applies a duties-based test borrowed from the executive exemption regulations. An employee generally qualifies as a manager or supervisor if the employee: 1) Has a primary duty of managing the business or a recognized department; 2) Customarily and regularly directs the work of at least two full-time employees (or the equivalent); and, 3) Has authority regarding hiring, firing, promotion, or other personnel decisions, or makes recommendations that are given particular weight.

Business owners with at least a bona fide 20% ownership interest who actively manage the business also qualify as managers or supervisors under the rule.

Significant Penalties for Violations

The consequences of allowing supervisors to improperly keep employee tips can be substantial. Employers who improperly allow supervisors to participate in tip pools or otherwise share in employee tips face: 1) disgorgement of the tips that the supervisor improperly retained; and
2) loss of the tip credit for affected tipped employees, where the employer claimed a tip credit. The disallowance of the tip credit can significantly increase potential wage-and-hour liability because employers may become responsible for paying the full minimum wage rather than taking advantage of the tipped employee credit for the entire period in the violation occurred.

Key Takeaways

Employers should carefully review tip pooling and tip-sharing policies to ensure that managers and supervisors are not receiving any portion of tips that originate from other employees. A supervisor may keep only tips received directly from customers for services the supervisor alone provided. Participating in tip pools, tip-outs, or shared distributions of employee tips can create significant FLSA exposure and potentially result in both tip repayment obligations and loss of the tip credit. Employees who have been required to share tips with supervisors through tip pooling or otherwise, should seek legal advice or contact DOL for assistance.