It was a busy Saturday night at a luxury resort restaurant. Short-staffed and overwhelmed, the Assistant Restaurant Manager, Alex, rolled up his sleeves and started bussing tables, taking orders, and running drinks. Guests were happy, and the team appreciated Alex’s effort—but when tips were pooled at the end of the shift, a server hesitated: “Can Alex really take part of the tips? Isn’t he management?”

This scenario isn’t unique. In the hospitality industry, where staffing shortages are common and managers often jump in to help, it’s critical to understand when supervisors and managers can legally share in tip pools.

The Department of Labor – Wage and Hour Division (WHD) recently issued an opinion letter that addresses this very issue, clarifying who is eligible to participate in tip pools under the Fair Labor Standards Act (FLSA). Here’s what hotel and resort managers need to know to stay compliant.

Key Takeaways from the Department of Labor Opinion

The WHD’s Opinion Letter answers a common hospitality question: Can someone with a supervisory title, like an Assistant Manager or Shift Lead, legally participate in a tip pool? The answer: It depends on how the employee is classified and what their primary duties are.

Different Employee Classifications

1. Hourly, Non-Exempt Supervisors Can Participate
   Supervisors or shift leads who are paid hourly and perform primarily non-managerial tasks (e.g., taking orders, cleaning tables) can participate in tip pools—even if they’re the most senior employee during a shift.
2. Exempt/Salaried Managers Cannot Participate
   Managers classified as exempt—those whose primary duties include managing staff, scheduling, and decision-making—cannot take tips from a tip pool, no matter how much non-supervisory work they perform during a shift.
3. Job Titles Don’t Determine Eligibility
   Job titles like “Manager” or “Lead” don’t matter—what matters is what the employee actually does during the workweek. Their classification under the FLSA is based on their primary duty over time, not the tasks they perform in one specific shift.
4. No Manager-Only Tip Pools
   Tip pools composed solely of managers and supervisors are prohibited, as they would violate the FLSA rule that managers cannot keep portions of other employees’ tips.

Practical Implications for Hotels and Resorts

We have all seen it…F&B operations often involve managers stepping into non-supervisory roles during high-pressure times. To ensure compliance, here’s what Managers and HR teams should do:

• Audit Classifications: Review the roles of managers and supervisors to ensure they’re correctly classified as exempt or non-exempt based on their primary duties.
• Clarify Tip Pool Policies: Communicate clear guidelines about who is eligible to participate in tip pools.
• Train Supervisors: Educate your leadership team about these rules so they don’t inadvertently violate FLSA regulations.

Alex’s Dilemma: Can the Restaurant Manager accept tips?

Let’s revisit Alex, the Assistant Restaurant Manager. While he spent his Saturday shift performing line-level tasks, his primary duty over the workweek involves managing staff and overseeing operations. Under the FLSA, Alex is classified as an exempt manager, meaning he cannot legally take tips from the pool—even if he worked just as hard as the servers that night.

On the other hand, if Alex were an hourly Shift Lead and his role focused mainly on customer service, he could participate in the tip pool. The distinction hinges on his FLSA classification, not the tasks he performed that evening.

Why This Matters; It is more than Compliance

For hospitality leaders, this is more than just a compliance issue—it’s about fairness and protecting your team from potential disputes. Missteps in tip pool policies can lead to financial penalties and hurt employee trust.

About the author

Chuck is an Expert HR Consultant & Trainer specializing in transformative HR strategies, interim leadership for hospitality, and comprehensive HR audits and policy development. His HR expertise covers the full HR lifecycle including specializing in HR audits for compliance, developing policies and systems for diverse business needs such as Policy Manuals and Employee Handbooks tailored for all states. He is adept in handling sensitive areas like sexual harassment, through training and investigations. As a SHRM Approved Recertification Trainer, Chuck designs and delivers training in HR and Employment Law, Supervisory Skills, and Management Leadership, using platforms like Zoom and Teams for both in-person and virtual sessions. Chuck’s approach is pragmatic, focused on practical solutions and fostering a culture of HR compliance and excellence. He is an active member of Cayuga Hospitality Consultants.

This article originally appeared on Cayuga Hospitality Consultants.