FLSA Tip Regulations: A Manager's Guide

As a restaurant or bar manager, you're on the front lines of ensuring fair pay and compliance. The Fair Labor Standards Act (FLSA) has very clear rules about how tips are handled, and violations can lead to significant penalties. Here are two of the most critical rules every manager must know.

1. Managers and Supervisors Cannot Keep Tips

This is one of the most straightforward rules in the FLSA. The law explicitly prohibits employers, managers, and supervisors from keeping any portion of an employee's tips. This includes:

• Participating in a Tip Pool: Even if you are performing service duties, as a manager, you are not eligible to receive money from a tip pool. Tips are the property of the tipped employees.
• "Voluntary" Contributions: You cannot ask or pressure employees to give you a portion of their tips, for any reason.

The only exception is for managers who receive tips directly from customers for a service they personally and solely provide. For example, if a manager also acts as a bartender for a private event and is tipped directly by the client for that service, they may keep those specific tips.

2. Tips Cannot Be Used to Cover Business Expenses

An employer cannot use an employee's tips for any reason other than as a credit against its minimum wage obligations (a "tip credit") or in a valid tip pool. This means you cannot use tips to cover business costs, such as:

• Register Shortages: If the cash register is short at the end of a shift, you cannot take money from the tip jar or an employee's tips to cover the difference.
• Breakages: Costs for broken glasses, plates, or other equipment cannot be deducted from tips.
• Customer Walk-Outs: If a customer dines and dashes, the lost revenue cannot be covered by employee tips.

These rules are designed to protect employees and ensure they receive the full compensation they have earned. Adhering to them is not just good management—it's a legal requirement.

For more detailed information, please refer to the official Department of Labor resources on the Fair Labor Standards Act.

Visit the DOL FLSA Information Page →

Disclaimer: This article provides general information and is not a substitute for professional legal advice. Consult with a legal professional to ensure your policies are compliant with all federal, state, and local laws.