Managers may not receive pooled tips
Just because someone tends a bar does not necessarily mean that person may receive pooled tips.
In a recent opinion letter, the U.S. Department of Labor (DOL) reminded employers that managers may not keep pooled tips under the Fair Labor Standards Act (FLSA). The letter described a situation where bartenders at a brewery and taproom received a direct cash wage of at least $7.25 per hour (the federal minimum wage). Bartenders also regularly received tips from customers, which were pooled and distributed among the bartenders.
One employee at the brewery held at least a 20 percent equity interest in the business and managed and supervised the bartenders. This employee also tended the bar regularly to engage with customers. The employer wondered if that particular employee could receive pooled tips while working as a bartender.
The DOL responded with a “no.”
Managers and tips
If employees qualify as managers or supervisors, even if they also perform tipped work, they may not keep other employees’ tips. This includes, for example, taking them from a tip pool or getting tips based in part on other employees’ work, which were collected in a tip jar.
Managers may, however, keep tips that they received directly from a customer based on the service that they directly and solely provided. If, for example, this manager is the only one tending bar during a certain period of the day, they may keep tips during that timeframe because the tips are for the service that the manager directly provided.
If, however, the employer can't attribute a tip solely to the service the manager provides, the manager may not keep any portion of the tip. If, for example, the taproom pools all of the bartending tips together, the manager may not take any portion of the tips from the pool even if the manager also tends bar.
Manager defined
A manager or supervisor includes any employee who meets the FLSA “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.
Business owners who own at least a bona fide 20 percent equity interest in the enterprise in which they work and who are actively engaged in its management also satisfy the executive duties test.
Because the manager in question was a part business owner and was actively engaged in its management, the employer may not allow him to keep other employees’ tips.
Key to remember: Managers and supervisors may keep direct tips but may not take tips from a tip pool.