Understanding Tip Laws: Rights for Workers and Supervisors

The Fair Labor Standards Act (FLSA) draws a firm line when it comes to tips: managers and supervisors are not allowed to keep tips earned by other employees. This applies to individual tips, tip pooling arrangements, and even shared tip jars.

Let’s start by clarifying what the law means when it refers to a “manager” or “supervisor.”

What Counts as a Manager or Supervisor?

Under federal law, simply having a “manager” or “supervisor” title doesn’t automatically qualify someone as a manager for tip purposes. For example, if a worker mainly performs the same tasks as other staff but happens to hold a key or has been given the title of “supervisor,” they may not count as management under the FLSA. On the other hand, roles like general managers or assistant managers usually do meet the legal definition of a manager.

Common Managerial Tasks Include:

• Interviewing and onboarding new hires
• Creating or approving staff schedules
• Handling employee complaints or conflicts
• Managing budgets or overseeing payroll
• Making decisions about promotions, raises, or discipline

Note for business owners: If you own at least 20% of the business and are actively involved in management, you also count as a supervisor under tip regulations—even if you don’t meet the salary threshold for other FLSA exemptions. 

Tip Rules for Managers and Supervisors

Under the Fair Labor Standards Act (FLSA), managers and supervisors are prohibited from keeping any portion of tips earned by other employees. This holds true whether the business takes a tip credit or pays the full minimum wage.

That means managers can’t take money from a tip jar, receive a share from a tip pool, or collect tips earned through the efforts of other staff, even if you pitch in during a busy shift.

When Managers Can Keep Tips

There’s only one exception:

If a manager or supervisor directly and solely serves a customer, and that customer tips them for that service, they can keep that tip.

For example:

If you’re a restaurant manager who fills in as a bartender for a shift and a customer tips you directly for mixing their drink, that tip is yours.

However, if the tip was based on shared service, like a team effort in a dining room, or came from a tip pool, you can’t keep any part of it, even if you contributed.

It’s also legal for your employer to require you to contribute any tips you earn to a valid tip pool. But you can’t receive money from that pool in return.

Summary: What Managers Need to Know About Tips

If you’re a manager or supervisor under the FLSA:

• You can’t take tips from tip jars, pools, or team-based service.
• You can keep tips given directly to you for services you alone performed.
• You can’t receive tips from a pool, but you can be required to contribute to one.
• You don’t need to meet salary thresholds to be subject to these rules. Your actual duties define your status.

Even if you're helping during a rush, that doesn’t entitle you to a cut of other workers’ earnings. The law is clear: tips belong to the employee who earned them.

Think Your Tips Are Being Mishandled? Contact Morgan & Morgan

The laws surrounding tips in service industries can be quite complex and confusing. Even more, some states have additional laws that these establishments must follow. Legal action is one way to solve this issue if you believe your employer isn’t paying you fairly. 

To learn more about how Morgan & Morgan might be able to help in such a situation, please fill out our free, no-obligation case evaluation form today.

Disclaimer: This information is based on fact sheets the DOL provides.