(September 20, 2022) In 2020 and 2021, the U.S Department of Labor made updates to the Wages and Fair Labor Standards Act of 2009, which prevented managers and company owners from receiving employee tips. This seemingly minor change had a big impact on family-owned small businesses in Texas this year. In April of this year, a Dallas-based and operated barbeque chain was ordered to return nearly 900,000 USD to employees in tips that had been illegally distributed to managers via the company’s tip pooling practices. Then yesterday, on September 19, 2022, the Department of Labor recovered nearly 230,000 USD of withheld wages from Black’s BBQ for the exact same reason. Both restaurants claim to have not known about the change in the law and immediately complied with the order. Small businesses can sometimes misunderstand the law, so it’s important that you know the law if you receive tips.
Did you know?
Texas corporations paid out nearly 581 million USD in legal penalties from 2000 to 2018 due to wage law violations.
What Are Texas Laws for Tipped Employees?
The minimum wage at the federal and state level is currently $7.25 an hour, regardless of whether or not you are a tipped employee. Under Texas law (and in several other states), tip credit laws apply to the minimum wage standard. This means that if employees make less than minimum wage, as many waitstaff do, then the employer may use tips to make up the difference, as long as the employee makes at least minimum wage by the end of the week. However, employers are required to pay a minimum of $2.13 per hour if they apply this method. Additionally, the amendment to the Fair Labor Standards Act now restricts tip collection from tip pools to only non-managerial staff, meaning employers and managers are not permitted to withhold employee tips.
What Counts as an Official Tip in Texas?
Tips fall into two categories under Texas law: mandatory service charges and credit card charges. Texas law does not directly address the issue of exactly how much of a credit card tip an employee is entitled to keep. However, in order for mandatory service charges to be counted as tips, they must meet the following criteria:
- The amount of the charge cannot be set by employer policy or subject to negotiation by employer policy
- The payment must be entirely voluntary
- The customer must have the full right to determine the amount
- The customer must be given the right to determine whether the employer or the employee receives the payment.
For more information on tip laws in Texas, please visit the U.S. Department of Labor.
Do you believe that your employer has withheld your wages?
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