On January 14, 2025, the U.S. Department of Labor (DOL) issued Opinion Letter FLSA2025-1 pertaining to managers’ participation in a tip pool at a “quick service restaurant.” In the letter, the DOL reiterates its position, which was published in a final rule in September 2021, that managers and supervisors cannot keep tips unless they “solely and directly” provide service to customers, regardless of whether or not a tip credit is taken.
Quick Hits
- On January 14, 2025, the DOL issued an opinion letter reiterating that managers and supervisors cannot keep tips unless they “solely and directly” provide service to the customer, regardless of whether a tip credit is taken.
- The DOL clarified that even if a manager or supervisor works an entire shift in a nonsupervisory role, they cannot participate in a tip pool, as the primary duty test is based on duties performed over at least the workweek, not shift-by-shift.
The opinion letter responded to two questions from the quick service restaurant. The first question focused on whether the assistant team lead and the team leaders, whom the quick service restaurant deemed were supervisors or managers under 203(m)(2)(B) of the Fair Labor Standards Act (FLSA), can receive tips when they work a shift in a nonmanagerial or nonsupervisory role.
Without analyzing the functions of the assistant team lead and team leaders, the DOL explained in the opinion letter that the regulations define a manager or supervisor who may not keep tips as one who meets the executive employee duties test, which is the same duties test used to determine whether an employee is exempt under the FLSA. “To meet this duties test, an employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; the employee must have the authority to hire or fire other employees, or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight; and the employee must have a primary duty of managing the enterprise or a customarily recognized department or subdivision of the enterprise. 29 C.F.R. §§ 541.100(a)(2)–(4).” Determining an employee’s “primary duty” is a fact-intensive inquiry but requires an analysis of the employee’s duties worked in at least a workweek. Performing some nonmanagerial work does not make the employee a nonmanager or nonsupervisor.
In fact, the opinion letter explains in response to the quick service restaurant’s question that even where a supervisor or manager clocks in and works an entire shift in a nonsupervisory capacity, that employee may not participate in a tip pool because the primary duty test is based on the employee’s duties performed in the workweek (or longer period of time) and not shift-by-shift. The DOL also noted in a footnote that even if shifts are staffed exclusively by managers and supervisors, the regulations “do not permit tip pools composed solely of managers and supervisors, as this would by definition result in managers and supervisors keeping portions of employees’ tips, since managers and supervisors themselves are employees under the FLSA.”
Conversely, the opinion letter explains in response to the second question that a nonmanagerial and nonsupervisory employee who does not meet the executive duties test is not converted to a manager or supervisor simply because the employee is the most senior or highest-ranking employee on a particular shift. As a result, employees in these circumstances are not prohibited from receiving tips from a tip pool.
The opinion letter does not offer any surprising guidance but does emphasize there are only rare circumstances in which a manager or supervisor can receive tips.