Can Managers or Owners Keep Employee Tips?

What changed in 2018

Before 2018, the law was read by some courts to only stop employers from keeping tips at restaurants that took a tip credit; a business paying full minimum wage with no credit was seen by some as free to do what it wanted with tips. Congress closed that reading in 2018: the ban on employers, managers, and supervisors keeping tips now applies to every restaurant, whether or not it takes a tip credit.

Who counts as a “manager or supervisor”

This isn’t about job title. The Department of Labor uses the same three-part test that defines an exempt executive employee under the FLSA:

Someone has to meet all three to count as a manager or supervisor for this rule. A “shift lead” who runs a shift but has no say in hiring or firing usually isn’t one, and can be in the tip pool like anyone else. An “assistant manager” who meets all three tests is one, even on a night they spend mostly bussing tables.

The narrow exception: their own, personally earned tip

A manager who steps behind the counter on a packed Saturday and personally rings someone up can keep the cash that customer hands them directly for that service. What they cannot do is take any share of a shift’s pooled tips, the credit card tip line, or a tip-out another employee gives them, even informally, even once.

States that go further than federal law

California doesn’t carve out any exception at all. Labor Code section 351 says tips belong to the employee, and that “no employer or agent” may collect, take, or receive any part of a gratuity. It carries none of the federal “solely and directly served this customer” allowance. Several other states track federal law closely but are worth checking individually, since a state can always be more protective of employees than the federal floor, never less.