As reported last week, on March 23rd, President Trump signed into law a massive spending bill that, among other things, amended the Fair Labor Standards Act (FLSA) to clarify that a manager or supervisor may not keep his employees’ tips. The amendment, however, did not define the term “manager” or “supervisor.” Further, although the March 23rd amendment eliminated a 2011 Department of Labor (DOL) regulation that prohibited an employer from requiring a tip pool with employees other than those who “customarily and regularly receive tips” even if it paid the employee at least the minimum wage, the amendment did not state that the business practice was acceptable.

On April 6th, in response to the ambiguity left by the March 23rd amendment, the DOL released an internal Field Assistance Bulletin (FAB). In this FAB, the DOL provided guidance concerning its enforcement of the tip credit rules after the amendment. It stated:

  • Employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped – such as cooks and dishwashers – to participate in tip pools.
  • The FAB reiterated that the FLSA prohibits “managers” and “supervisors” from ever participating in tip pools and defined these terms using the Executive Exemption under the FLSA. More specifically, a “manager” or “supervisor” is someone:
    • whose primary duty is management of the company or of a customarily recognized department or subdivision thereof;
    • who customarily and regularly directs the work of two or more other employees; and
    • who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.