Can Managers Take Tips? Federal Law Says No

The Federal Rule, Plainly Stated

Section 3(m)(2)(B) of the Fair Labor Standards Act is the core rule: an employer may not keep tips received by its employees for any purpose. That prohibition extends to letting managers or supervisors take a share. The Department of Labor's own fact sheet puts it in plain language: the FLSA prohibits a manager or supervisor from receiving tips from a tip pool or tip jar, because pools and jars contain other employees' tips, and the rule applies whether or not the employer pays tipped workers with a tip credit.

A January 2025 DOL opinion letter closed the most common loophole people hear about. It clarified that an employee who satisfies the executive duties test, and therefore counts as a manager or supervisor, may not receive tips from an employer-mandated tip pool even if they also performed the same tipped work as the servers during that shift. The example the DOL itself used: a manager who bartends during the shift still may not keep any tips from the pool. Their salary is supposed to compensate them for the shift, and none of that pay can come out of the tip pool.

This rule also catches the indirect versions. An owner who makes servers kick back a percentage of cash tips at the end of a shift is violating the law just as clearly as one who dips into the tip jar. So is deducting vague house fees from pooled gratuities, or routing credit card tips through accounts the owner controls without distributing them promptly. If you want the full mechanics of lawful pools, read our tip pooling rules for tipped employees first.

Who Counts as a Manager Here

The title on the name tag is not what decides it. Under the FLSA executive duties test, a manager is someone whose primary duty is managing the enterprise or a recognized department, who customarily directs the work of two or more full-time employees, and who has the authority to hire or fire, or to make those recommendations. An employee who is not salaried or not exempt can still count as a manager for tip purposes if they perform those duties.

That matters because of the argument managers sometimes make: "I am working the floor, not managing, so I am one of you tonight." The DOL answer is no. Once someone satisfies the manager or supervisor test, they are out of the pool for the whole shift, including the hours they spent pouring drinks alongside everyone else. The job they were doing at 7 p.m. does not erase the authority they hold at 8 p.m.

One related trap sits in the tip credit itself. Whether the employer takes the credit decides who else can be in the pool: with a tip credit, the pool is limited to employees who customarily and regularly receive tips, which excludes cooks and dishwashers. Without a tip credit, the pool can include back-of-house staff. Either way, the manager exclusion does not change. It is the one constant in the whole scheme.

What to Do If Your Manager Is Taking From the Pool

This is one of the most litigated and enforced tip rules, so you are not in uncharted territory. Start by writing things down: dates, shift totals, what the manager took, and who saw it. If the pool is supposed to tie out to the penny, keep your own records of what went in and what came back to you. The shortfall rule interacts here too: if skimming drops your effective pay, the employer may owe back wages on two fronts at once.

Then raise it. Talk to the employer in writing first if that feels safe, and file a complaint with the Department of Labor's Wage and Hour Division if it does not. A written complaint changes the employer's math fast: back pay for the tips taken, liquidated damages, and civil penalties that can reach $1,409 per violation, under a federal rule with almost no gray area.

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