Can Managers Take Tips in Texas? FLSA Rule and Your Remedies

No. In Texas, a manager cannot legally take any share of an employee’s tips. Texas has no tip law of its own, so the federal Fair Labor Standards Act controls, and it is unambiguous: tips belong to the employee who earned them, and employers, managers, and supervisors are all prohibited from keeping any portion.¹ A worker whose tips have been skimmed can recover the stolen amount plus an equal sum in additional damages.

The Federal Rule That Governs Texas Workplaces

The FLSA bars an employer from keeping tips received by its employees for any purpose, and that bar explicitly includes allowing managers or supervisors to keep any portion.¹ The prohibition applies whether or not the employer uses a tip credit.²

A tip credit is the common Texas restaurant setup where the employer pays a direct cash wage as low as $2.13 per hour and counts tips toward the $7.25 federal minimum. Employers that skip the tip credit and pay straight wages of at least $7.25 are also forbidden from letting managers dip into tips. There is no pay structure that unlocks a manager’s access to employee tips.²

Who Counts As a Manager

Job titles don’t settle it. A “shift lead” might be a manager under the law; someone whose name tag says “manager” might not be. The Department of Labor uses an executive duties test, and an employee qualifies as a manager only if their primary duty is running the business or a department, they regularly direct the work of at least two full-time employees, and they have real authority (or real influence) over hiring and firing.³

Salary status doesn’t matter, and the test looks at the whole workweek rather than any single shift. A manager who covers a server shift one night is still a manager that night. Her status is based on the overall character of her job, not what she happened to do for three hours.³

The One Narrow Exception

A manager may keep a tip only when the manager personally and solely serves a customer, with no help from other staff, and that customer leaves a tip for that service.⁴ If a restaurant manager steps behind the bar alone, mixes a drink, and the customer tips on that transaction, she can pocket it.

The word that matters is “solely.” If a tipped employee was involved in any part of the service, the exception falls apart. And this exception never gives a manager a cut of the tip pool. It covers direct, solo service only.⁵

Tip Pools Don’t Change the Answer

Mandatory tip pools are legal in Texas, and many restaurants use them. Managers and supervisors are shut out of every tip pool, no matter who else is in it.⁶ When the employer takes a tip credit, the pool is limited to employees who customarily receive tips. When the employer pays full minimum wage without a tip credit, back-of-house staff like cooks and dishwashers can be included.⁵ Either way, if a manager is pulling money out of the pool, that is a violation.

Service Charges Are Not Tips

An automatic charge added to a bill, like the 18% applied to large parties, is not a tip under federal law even if the receipt calls it a “gratuity.” The IRS treats a payment as a true tip only when it is voluntary, the customer controls the amount, the amount isn’t dictated by employer policy, and the customer generally decides who gets it.⁷

When any of those factors is missing, the money is a service charge, and service charges belong to the employer. The employer can split them however it wants, including giving a portion to managers or keeping all of it. So if the money your manager is taking comes from automatic charges rather than tips, the FLSA tip rules don’t reach it.⁷

What You Can Do and What You Can Recover

You have two routes, and you can use both.

File a Complaint With the Department of Labor

The Wage and Hour Division investigates tip theft at no cost to you. Call 1-866-487-9243 or contact the nearest local office.⁸ Complaints are confidential. The WHD will not share your name or the substance of your complaint with your employer unless a court orders it and you consent.⁹ If the investigation confirms the violation, the WHD can order the employer to pay back the stolen tips.

Sue the Employer Directly

You can also file a private lawsuit. An employer that violates the tip rules is liable for the full amount of tips unlawfully kept, plus any tip credit the employer claimed, plus an equal amount in liquidated damages.¹⁰ That doubles the recovery. If a manager skimmed $3,000 from your tips over a year, you can seek $6,000.

You generally have two years to file, or three if the violation was willful, meaning the employer knew it was breaking the law.¹¹ The clock runs separately from each paycheck in which tips were improperly withheld, so ongoing theft keeps generating fresh claims.

Your Employer Cannot Retaliate

It is illegal for an employer to fire you or punish you for filing a wage complaint, cooperating with an investigation, or testifying in a related proceeding.¹² If retaliation happens anyway, you can bring a separate claim seeking reinstatement, back pay, and additional liquidated damages.¹⁰

1
Office of the Law Revision Counsel. 29 U.S. Code 203 – Definitions
2
U.S. Department of Labor. Fact Sheet 15 Tipped Employees Under the Fair Labor Standards Act
3
U.S. Department of Labor. Fact Sheet 15B – Managers and Supervisors Under the Fair Labor Standards Act and Tips
4
eCFR. 29 CFR 531.52 – General Restrictions on an Employers Use of Its Employees Tips
5
U.S. Department of Labor. Tip Regulations Under the Fair Labor Standards Act (FLSA)
6
eCFR. 29 CFR 531.54 – Tip Pooling
7
Internal Revenue Service. Revenue Ruling 2012-18
8
U.S. Department of Labor. How to File a Complaint
9
U.S. Department of Labor. Frequently Asked Questions: Complaints and the Investigation Process
10
Office of the Law Revision Counsel. 29 U.S. Code 216 – Penalties
11
Office of the Law Revision Counsel. 29 U.S. Code 255 – Statute of Limitations
12
Office of the Law Revision Counsel. 29 U.S. Code 215 – Prohibited Acts