Can a shift supervisor who also tends bar share servers’ tips? Does the time employees spend walking to a designated break area shorten their unpaid lunch enough to make it compensable? The Department of Labor’s (DOL’s) Wage and Hour Division answered both questions in opinion letters released on September 7. These responses are specific to scenarios submitted by employers, employees, and other organizations, but the answers can help you comply with the federal Fair Labor Standards Act (FLSA). Here’s what the DOL said in these two situations and what it all means for retail and hospitality employers.
A Quick Refresher on Opinion Letters
Opinion letters are formal, written guidance from DOL officials explaining how the agency would apply the law to a specific set of facts. While the letters are not binding on courts, they do serve as a powerful compliance tool and can be used as persuasive authority in defending a claim under the FLSA or to demonstrate good faith to avoid liquidated damages. We covered four letters the agency issued in late May and a pair on commuter and remote worker travel pay issued in July.
NOTE: Don’t forget that DOL guidance is limited to interpretation of the FLSA and does not impact state law in jurisdictions that have more robust wage and hour laws.
Can a Shift Supervisor Share in the Tip Pool?
- Question: Can a restaurant shift supervisor who periodically works bartending shifts and assists hosts and bussers keep a portion of other employees’ tips through the restaurant’s “tip out” arrangement?
- DOL Answer: No. The FLSA prohibits a supervisor who meets the “executive duties” test from keeping any portion of other employees’ tips, regardless of whether the supervisor also works as a bartender or assists other employees, according to the opinion letter. But the DOL declined to address the reverse scenario, where an employee who principally bartends or serves picks up occasional managerial shifts.
Facts of the Inquiry: A server wrote to the DOL about a restaurant tip pool in which servers “tip out” a percentage of sales to bartenders, hosts, and bussers. One employee, who was described as a “shift supervisor,” primarily performs management duties, such as creating schedules and deciding when employees’ shifts end. That employee also works periodic bartending shifts with all the usual bartending duties, takes a tip out from the servers during those shifts, and also takes a share of the tip out for hosts and bussers when helping them out.
DOL’s Call: To determine whether an employee is a “manager or supervisor” in this context, the regulations borrow the “executive duties” test from the FLSA’s white-collar exemptions, even though the full executive exemption is not in play here. If the employee’s responsibilities meet that definition, they can’t receive any portion of other employees’ tips, including through a tip out or a pool the supervisor is otherwise required to contribute to. Notably, the Wage and Hour Division said it lacked sufficient information to determine conclusively whether the employee in this scenario satisfies the executive duties criteria without any details about the employee’s role in hiring, firing, or promoting workers. But it assumed the criteria were met for purposes of this letter.
Who counts as a manager or supervisor? The Department’s regulations define the phrase to cover any employee whose duties match those of an exempt executive under the FLSA. The DOL looks at an employee’s actual responsibilities rather than the job title to determine the answer. These duties include:
- A primary duty of managing the enterprise or a customarily recognized department or subdivision of it.
- Customarily and regularly directing the work of two or more other full-time employees or their equivalent.
- Authority to hire or fire, or make suggestions and recommendations about hiring, firing, advancement, promotion, or other changes of status that are given particular weight.
The definition also covers anyone with at least a bona fide 20% equity interest in the enterprise who is actively engaged in its management.
The salary requirements don’t apply here. An employee can be nonexempt and earning overtime and still qualify as a manager or supervisor who’s barred from receiving other employees’ tips. So, leads, shift captains, and key holders across hospitality and retail businesses can fall into this category.
A supervisor may keep tips that a customer leaves for services the supervisor directly and solely provided. When a shift supervisor tends bar, they can keep the tips customers leave for them during that period. But if their tips get consolidated with the other bartenders’ tips and split across everyone working the shift, the agency said the supervisor can’t take any portion. An employer can also require a supervisor who receives tips directly from customers to contribute some of those tips to a pool for eligible employees.
Risks: An employer can be liable for the tips the supervisor kept and can also lose the tip credit for any affected tipped employee whose tips were improperly given to the supervisor. If you take a tip credit, you could owe those tipped employees the full minimum wage for those hours.
Key Employer Takeaway
Review each employee’s tip eligibility against the executive duties criteria rather than their job title or overtime classification. If a supervisor works tipped shifts, ensure your system only allows supervisors to take tips for service they directly and solely provide.
Can a Lunch Break Be Unpaid Even with Required Walking Time?
- Question: Is a 60-minute unpaid lunch break a bona fide meal period even when employees spend six to 14 minutes total walking to and from an employer-designated break area?
- DOL Answer: In this case, yes. The employees are relieved from duty and the time remaining after the required walk is long enough to use the break for its purpose, so it can be unpaid, according to the opinion letter.
Facts of the Inquiry: An employee wrote to the DOL about a 60-minute unpaid meal period. Employees can’t bring food to or eat in their work area, so they walk three to seven minutes each way to a designated break area and have 46 to 54 minutes for lunch. The employee argued that employees aren’t fully relieved of duty until they can access their food in the break area.
DOL’s Call: The FLSA generally does not require you to provide rest or meal breaks (though some state laws do). Although not strict requirements, 30 minutes or more is typically long enough for a bona fide meal period, while rest breaks of up to 20 minutes are generally compensable because they promote efficiency and primarily benefit the employer. The main issue in most meal break cases is whether the employees were relieved from their duties or required to work. The analysis also focuses on whether sufficient time remains after mandatory travel to eat a meal. Even at the maximum 14 minutes of walking in this case, the employees had about 46 minutes to eat.
The DOL also confirmed which standard applies. The Wage and Hour Division and most federal appellate courts evaluate whether a meal period should be paid under the “predominant benefit” test rather than a “complete relief from duty” standard. The agency said yet again that employees don’t need “absolute freedom” from every limitation or condition during an unpaid meal break. The 9th and 11th Circuits, however, are outliers that apply the “complete relief from duty” test.
Key Employer Takeaway
The DOL came to the same conclusion in May when it said time employees spent walking through a large facility or going through security to take a meal break off premises didn’t have to be paid. You should generally focus on whether employees have sufficient time to eat when they get to the meal area. In this scenario, the break was a full hour, but the outcome could be different for a 30-minute break, depending on the circumstances. Don’t forget to check your state and local wage and hour laws, too, which can be stricter than federal requirements.
Conclusion
If you have any questions about these opinion letters, contact your Fisher Phillips attorney, the author of this Insight, or any attorney in our Wage and Hour Practice Group for assistance. Fisher Phillips will continue to monitor this area and provide updates as appropriate. Make sure you are subscribed to Fisher Phillips’ Insight System to get the most up-to-date information.
Frank Martinez is a partner in the firm’s New York office and Co-Chair of the Retail Industry Team. With more than 25 years of experience in-house and in private practice, Frank Martinez advises businesses on all aspects of workplace law, including managing and resolving individual and class litigation and disputes, policies and handbooks, talent management, investigations, employee classifications, executive compensation, reductions-in-force, disability issues, discrimination and harassment claims, non-competition, and wage and hour matters. His recent experience as General Counsel and a C-Suite member provides him with valuable insight, enabling him to deliver practical and effective business solutions on complex employment matters involving senior leadership, strategic public relations and communications, brand protection and crisis management.