Fair Labor Standards Act & Texas Payday Law and Tipped Employees
Tipping is a form of employee compensation in which employees receive wages from the employer and customers, who have no legal relationship with their the employer or the tipped employee. The Fair Labor Standards Act (FLSA) and Texas Payday Law both recognize tips as wages to the tipped employee. They are subject to minimum wage requirements, overtime pay and several unique wage rules. Both Dallas and Fort Worth have a large number of service industry employees so this can be a substantial issue. Dallas employment lawyers like Adam Kielich help clients in Texas with tipping issues under federal and Texas employment laws.
Tipping & Minimum wage in Fort Worth and Dallas
Tipped employees receive $7.25 minimum wage UNLESS the employer notified the employee in writing that it intends to take the tip credit on minimum wage. The tip credit allows the employer to pay $2.13 so long as tips make up the additional $5.12 per hour. If the employee does not earn enough tips to reach minimum wage with the $2.13 hourly rate then the employer makes up the difference.
Any employee may receive tips but eligibility for the tip credit requires the employee work in a position that regularly receives at least $30 in tips. This usually includes wait staff in restaurants, bellhops in hotels and similar service positions. A cart clerk at a grocery store who receives an occasional dollar or two for assisting customers probably does not make enough tips to qualify.
A tipped employee may perform work normally performed by non-tipped employees. (Such as a restaurant asking its waitresses to make coffee or help out cleaning the restaurant.) These tasks are normally performed by employees who do not receive tips. An employer generally can count this time under the tip credit as long as the employee reaches minimum wage for the workweek. An exception to this rule is when the tipped employee spends a significant amount of time performing non-tipped work. The Department of Labor limits the amount of non-tipped work an employee can perform with tip credited pay at 20% of the employee’s total hours in the workweek. Once 20% is reached the employer must pay the full $7.25 minimum wage for hours spent performing non-tipped duties and only applies the tip credit to the remaining hours spent performing tipped work.
Overtime Pay & Tipped Employees in Texas
Tipped employees are entitled to overtime when they work more than forty hours in a work week. Overtime pay for a tipped employee receiving the tip credit is one and a half times the full minimum wage of $7.25. Even if the employee’s hourly rate exceeds minimum wage through a combination of tips and the employers $2.13 hourly contribution the employer is only required to calculate overtime based on $7.25 hourly.
Your employer may not change the work week to prevent paying overtime by shortening the week or changing the start and end dates of the week. (Such as moving from a Sunday-Saturday week to a Wednesday-Tuesday week.) Your employer also cannot roll hours over from week to week to cap pay at forty hours. The employer cannot give you paid time off in a different week or some other benefit instead of overtime pay. If your employer takes these unlawful steps you should speak with a Dallas employment lawyer right away.
Tip Pooling & Tipping Out in Dallas-Fort Worth
By law, tips are compensation solely to the employee receiving the tip. Both federal and state wage laws recognize that sometimes service is the product of multiple employees and permit mandatory tip pooling or tipping out. Tip pooling occurs when tipped employees pool some or all of their tips and then split them among themselves and/or with other employees. Tipping out occurs when the tipped employees give a percent of tips to other tip-eligible employees who assist service. (Such as a waiter who must give 10% of tips to the bar staff for making the drinks.) Not all tip pooling or tipping out is permitted by law although employees are always free to give other employees a share of their tips.
Texas law on tip pooling
In Texas, employers can require tipped employees to join a mandatory tip pool or tip out other employees. An employer can only require tip pooling or tipping out on tips exceeding the amount necessary to reach minimum wage. So for example an employer may not require you to tip out a flat 10% of tips if you do not reach minimum wage with the remaining 90%. In a different example, say you receive enough tips to reach minimum wage and then an extra $100. The employer requires you to tip out 10% to the bartender. You would tip out on the entire amount of your tips unless you would then fall below minimum wage. Employees can voluntarily agree to pool tips in any percentage they wish even if it brings them below minimum wage.
An employer may only require a tipped employee to pool a reasonable amount of tips. The Department of Labor suggests 15% is a reasonable amount to pool; but an employer can set a higher percentage when the employer can show it is reasonable. For example, a restaurant may divide labor where employees at the counter take orders, prepare drinks and assemble orders. Other employees run orders out to customers and collect tips left at the table. Under the FLSA those tips belong to the runners because they receive them from the customers. The employer could argue counter employees perform more service to the customer and should receive a greater portion of tips.
Who can participate in a tip pool in Texas
Only certain employees can participate in a tip pool. Employees in positions that normally and customarily receive tips can share in the pool. This includes wait staff, hosts, bartenders, food runners, barbacks and busboys in a restaurant setting. It would not include chefs, dishwashers and other back of house employees. Managers and owners cannot share in the tip pool even if they perform the same duties as tipped employees.
This same rule applies even if the tipped employees do not receive pay less the tip credit. At places such as coffee houses, where employees usually receive minimum wage or higher, there is often a tip jar. Employees split tips at the end of the day. Only employees in positions that would normally and customarily receive tips can share in the pool. Supervisors and drink preparers who do not normally interact with the customers are not entitled to share in the pool.
What to Do If You Believe Your Rights to Your Compensation are Violated
If you believe your employer failed to pay minimum wage, overtime pay, or improperly requires you to tip out or pool tips, you should talk to an employment lawyer. The law protects these rights to your compensation. If your employer violated the law you can recover the wages owed. You should contact my Bedford law office to discuss your case.
Adam Kielich is an employment attorney, divorce lawyer and principal attorney at The Kielich Law Firm in Bedford, Texas. The Kielich Law Firm represents clients in employment law and family law matters across the Dallas and Fort Worth area. Attorney Adam Kielich helps clients with employment discrimination, wrongful termination, overtime pay, FMLA, contested and uncontested divorce, modifications, QDROs and more.