Labor Department clarifies when restaurant managers cannot keep tips

A restaurant supervisor can jump on expo, bus tables, or pour drinks in the middle of a rush and still be barred from taking a share of tips. That is the Labor Department’s core message, and it matters because restaurants are full of blurred lines: shift leads who close tabs, assistant managers who seat guests, and salaried supervisors who spend half the night in the weeds with everyone else.

What the Labor Department says now

The Department of Labor’s guidance makes one thing plain: managers and supervisors may not keep employees’ tips. That ban applies whether the employer takes a tip credit or pays full minimum wage, and it covers tip pools and tip jars alike. A manager cannot skim part of the house’s gratuities just because they are also helping cover tables or jumping behind the bar.

The practical lesson for the floor is simple. If a person has management status, their hands-on service work does not erase the rule. A shift lead covering a few tables during a dinner rush is still not automatically entitled to the servers’ tips. A supervisor who runs food or clears plates is still not entitled to keep money from a pooled system set up for hourly tipped staff.

How to tell who counts as a manager

The law does not stop at a job title. The Department uses the executive duties test, which asks whether the employee regularly directs at least two other employees, has authority over hiring or firing decisions, and has a primary duty of managing the enterprise or a recognized department. That matters in restaurants because titles can flatter or confuse: assistant manager, key holder, and shift lead can all sound casual enough to blur the line.

The department’s examples of management work are the jobs that usually separate a true supervisor from an hourly peer. Interviewing, training, scheduling, handling complaints, disciplining workers, controlling supplies, and budgeting all count as management duties. So when a person spends part of the night on the floor, the question is not whether they can carry plates. The question is what the job is really built around.

That is why a busy supervisor on expo or a bartender with a management title still has to be treated differently from the tipped staff around them. The law looks at the whole role, not the moments when the room is slammed and everybody is filling gaps.

When managers can be in the tip pool and when they cannot

The newest wrinkle in the rule is easy to miss if you only hear the shorthand version. Managers and supervisors may contribute to mandatory tip pools or tip-sharing arrangements, but they may not receive tips from them. That distinction matters in restaurants that try to get through staffing shortages by folding supervisors into the rush.

Think of the common floor scenarios. A shift lead clocks in, starts seating guests, and then jumps back to the pass to help fire tickets. A manager pours beers and runs salads because the line is short-staffed. A floor supervisor covers a section when two servers call out. None of that makes the manager’s share of the pool legal. The law allows contribution into the system, not collection from it.

That is also where some restaurants still get it wrong. They treat service work as a kind of side payment, as if helping on the floor earns a right to tips. The Labor Department’s position says otherwise. If the person is a manager or supervisor, their service labor does not open the door to keeping workers’ tips.

Why this hits restaurants harder than most industries

The issue lands with extra force in restaurants because tips are not a bonus on the edge of the paycheck. For many workers, they are the paycheck. Under the federal system, an employer can claim a tip credit of up to $5.12 per hour against the $7.25 federal minimum wage, which is why a tipped worker can be paid a direct cash wage of $2.13 an hour.

That structure makes the division between front-of-house pay and management pay even more combustible. The U.S. Bureau of Labor Statistics shows how much of the industry depends on tipped and service jobs: in food services and drinking places, waiters and waitresses account for 21% of industry employment, and combined food preparation and serving workers account for 23%. In a business with high turnover, thin staffing, and constant pressure to keep service moving, the temptation to blur roles is built into the model.

That is exactly why the guidance is useful on a real restaurant floor. It gives servers, bartenders, and hosts a concrete test when a manager reaches toward the tip jar or gets folded into a pool. The fact that leadership is short-staffed does not change the law. The fact that a supervisor is helping during a rush does not change the law either.

The legal line has been tightened, not softened

This is not a loose custom that the department is now fussing over. Congress added section 3(m)(2)(B) to the Fair Labor Standards Act in the Consolidated Appropriations Act of 2018, and the Labor Department completed rulemakings in 2020 and 2021 to update its tipped-worker regulations after that change. Those updates were meant to make clear that employers cannot keep employees’ tips for any purpose and cannot allow managers or supervisors to keep any portion of them, whether or not the business takes a tip credit.

The department also clarified in 2021 that managers and supervisors may contribute to mandatory tip pools or sharing arrangements, even though they may not receive from them. That is an important line for operators who keep trying to turn every extra hand into a reason to dip into the gratuity jar. The rule does not work that way.

Enforcement shows the risk is real

The department has not treated this as a paper problem. It has brought enforcement actions in restaurants over illegal tip pools and tip withholding, including cases that produced more than $230,000 in back pay for workers at Black’s Barbecue Inc. in Texas, $117,710 for workers at D.K. Restaurant Group in Hawaii, and a $1.3 million judgment involving La Tolteca Authentic Mexican Restaurant in Pennsylvania. Those numbers are a warning to any operator still treating tips as flexible house money.

For workers, the message is blunt: if the person touching the tip jar is a supervisor, the question is not whether they were in the weeds with you tonight. The question is whether they are legally allowed to keep a piece of what the rest of the team earned. Under the Labor Department’s guidance, the answer is no.