Like many other Texas restaurant owners, you were probably shocked when a Dallas barbecue joint was ordered to pay their employees nearly $900,000 in stolen tips and overtime. It may have even sparked a bit of anxiety about your own tipping policies and practices.
Illegal and unethical tipping practices not only decimate your restaurant financially, but can also tank your reputation. Avoid losing your business and the community’s trust by freshening up on Texas tipping laws.
Who Can Participate in Tip Pools?
In Texas, mandatory tip pools are perfectly legal, so long as you follow the guidelines laid out by the Fair Labor Standards Act (FLSA).
For one, only employees who “customarily and regularly receive tips”— namely servers, bartenders, hosts, and expos — can participate in a tip pool, and back-of-house employees cannot.
Owners, managers and supervisors are also barred from participating in tip pools. Tips belong expressly to the tipped employee, so an owner cannot take a cut of the tip pool, and neither can their agents in the form of managers. If you’re caught distributing tips to owners or managers, it will be considered wage theft, and you will be ordered to pay back the tips and subject to hefty fines by the DOL.
Learn to Properly Calculate the Tip Credit
The tip credit allows employers to pay tipped employees a lower hourly wage, with the idea that the server will earn at least minimum wage or more in tips. In Texas, employers can take up to $5.12 per hour in tip credit. But if used incorrectly, you could end up owing your employees back pay.
In order to take the tip credit, your employee’s hourly wages must be greater than or equal to the minimum wage for their hours worked — at least $7.25 per hour in Texas. Employees also must earn more than $30 per month in tips for the tip credit to apply.
And head’s up — the tip credit can still apply when your employees are earning overtime. Ensure that you’re properly compensating employees when their work hours exceed 40 per week.
Using the tip credit requires a good bit of math (especially when overtime is involved), and there’s room for human error in your calculations. Check out our primer on calculating the tip credit and then go double-check your math.
How to Protect Your Business & Employees
You don’t want to jip your employees — nor do you want to risk your entire business. Now that you’re more familiar with Texas tipping laws, here are a few ways you can comply with them.
Hire an Attorney
It’s best practice to consult with a lawyer with any legal questions. An attorney can give you detailed, personalized advice about what’s best for your business and how to stay on the right side of the law.
Choose Vendors that Protect You
At Kickfin, we partner with restaurants to revolutionize everything about their gratuity management systems — including setting up guardrails to comply with tipping laws. Request a demo of Kickfin today.
