Major news outlets today are covering today’s strikes by fast food workers demanding higher pay. Although those workers demand an increase in the minimum wage, there are other food service workers subject to minimum wage laws that often do not receive minimum wage, even at today’s legal minimum wage rate: tipped employees. Tipped employees receive pay in a unique manner. Rather than receiving all wages, they receive a blend of money from their employer and directly from customers. Although tipped employees in Texas receive most pay from tips, employers are still responsible for ensuring employees receive minimum wage. Unfortunately, many employers take advantage of their tipped employees in ways that reduce their pay below minimum wage. Today’s post will highlight three key ways employers rip off their tipped employees in Texas.
1. Tipped employees do not receive the proper tip credit
When employees regularly receive $30 or more per month in tips an employer may apply the minimum wage tip credit under the Fair Labor Standards Act and Texas Payday Law. The minimum wage tip credit allows employers to pay tipped employees $2.13 per hour for each hour of work and allow tips to offset the remaining FLSA minimum wage rate so that tipped employees will receive minimum wage at $7.25 (or more) between the $2.13 rate and their tips. (Employers do not have to pay tipped employees in this manner. They could pay the full minimum wage and let the employees keep tips above that amount.)
Employers have a duty to record tips and ensure the employee receives minimum wage. If any tipped employee is not receiving $7.25 for each hour of work across the pay period then the employer is required by law to make up the difference. The problem is that not all employers perform their duties and make sure their employees are receiving minimum wage. Tipped employees working slow nights may not reach minimum wage even after working a busy weekend shift. If that happens, the employer still has an obligation to cough up the rest of the cash. Not all employers are doing their job.
2. Tip pooling can result in sub-minimum wage pay
Employers love the tip pool because it increases the number of employees they can pay $2.13/hour. Tips are pooled with certain employees, like barbacks and hostesses, who do not themselves receive tips from customers although they are involved in the service provided to customers. Employers must calculate the tip credit based on what tipped employees receive after the pool is distributed, not beforehand.
If employers do not carefully monitor what tipped employees are receiving at the end of each pay period then they may find that the employees are receiving less than minimum wage because the employer is not paying the correct amount of minimum wage to make up what the tip credit has not. Tipped employees should keep their own records both before and after the tip pool to make sure the employer is paying minimum wage as well as not violating FLSA tip pooling regulations.
3. Employer makes impermissible deductions from the tipped employee’s pay
Tipped employees are filing lawsuits and wage claims against their employers on an increasing basis due to employers taking illegal deductions from the employee’s pay. Under the Fair Labor Standards Act and Texas Payday Law, an employer can only take deductions for taxes and anything the employee has consenting in writing to permit and the employer is legally permitted to deduct. Often employers try to take illegal deductions from tipped employees by deducting the cost of a walked check from the employee’s pay or taking a share of a tip pool.
Employers cannot force employees to pay for walked checks. Nor can employers take a piece of the tip pool for owners, managers, or to cover business costs. These violations can be independent of minimum wage requirements; but can also reduce the employee’s pay below minimum wage.