Are tip pools legal? Am I allowed only to be paid $2.13 per hour? Can my manager or the owner share in the tip pool? Who can share in a tip pool? If I am a tipped employee, am I owed overtime?
These and many other questions I often receive regarding the minimum wage for restaurant workers and tip pools. As seen below, restaurants (and other employers that use the tip credit) are often violating the law and shorting employees their proper pay.
LAWS REGARDING THE TIP CREDIT AND TIP POOLS
Federal and Texas law allow an employer to take a tip credit towards the minimum wage requirements for tipped employees.
A tipped employee is someone who customarily and regularly receives more than $30 in tips.
In simple terms, an employer is allowed to pay its employees as little as $2.13 an hour as long as the employee makes at least $5.12 per hour in tips to meet the minimum wage of $7.25 per hour.
An employer is allowed to maintain a valid tip pool or sharing arrangement among people who customarily and regularly receive tips, such as waiters, waitresses, bellhops, bussers, and hostesses.
An employer cannot include in its tip pools management or those who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs, and janitors.
REQUIREMENTS FOR A VALID TIP POOL
Only employees can participate in the tip pool; managers and owners cannot pocket money from the tip pool.
Only those employees who customarily and regularly receive tips can be included in the tip pool.
In addition to tips, employees must be paid the minimum wage of $2.13 per hour; employers cannot only pay employees tips.
Employers must notify employees of the following about tip pools before they can take the tip credit:
- the amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour
- the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 per hour
- the tip credit claimed by the employer cannot exceed the amount of tips actually received by the employee
- the employee must retain all tips except for a valid tip pool arrangement
- the tip credit won’t apply to any employee unless the employee has been informed of all of the above
COMMON TIP POOL AND TIP CREDIT VIOLATIONS
- Payment of only tips; i.e., failure to pay $2.13 per hour in addition to tips
- Not paying minimum wage ($7.25 per hour) even when tips are included
- Improper deductions for walk-outs, breakage, or cash register shortages
- Tip pools that include the owner, management, or other improper employees
- Failure to pay overtime
Lastly, please remember that this post and the posts in this blog are not legal advice, and can’t be for the reasons posted in my disclaimer on my website. If you need legal advice for your employment situation, you should contact an employment attorney who can discuss your case and provide you with advice that applies to your situation.
As seen in my website, I am an Austin employment attorney who regularly represents employees in overtime, minimum wage, and tip pool cases. If you believe your rights to overtime, minimum wage, or the tip credit have been violated, feel free to contact my office for a case review.