Don’t waste your hard-earned tips!

For many people working in the service industry, tips represent the lion’s share of their take-home pay. More often than not, service employees have to work for low wages and no benefits on the promise that they will be compensated by appreciative customers with generous tips. Sometimes this works out, but it’s becoming increasingly (and unfortunately) more common for business owners to engage in subtle “wage theft” by manipulating the state and federal minimum wage laws to their advantage.

Playing games with these laws can be a huge liability for employers under the unpaid wages provisions of the Fair Labor Standards Act (FLSA), so it’s important that employees know their rights. There’s no two ways about it: Your tips belong to you! Theft doesn’t just mean taking something from someone’s home or car – it can also mean withholding something that rightfully belongs to another person. And yet employees often go home with fewer tips than they deserve without ever realizing that their property has been stolen from them. How can this happen? Through shady tip pooling / tip sharing practices ...

1. Wait, aren’t tip pooling and tip sharing legal?

Yes, it’s legal to share and pool tips under federal and Texas law. An employer can take what’s called a "tip credit" that counts against the minimum wage threshold for tipped employees, as long as the employer maintains a valid sharing arrangement or tip pool. The problem is that most employers ignore the "valid" part. Only certain employees can be considered "tipped employees" and can participate in a tip pool that counts against their minimum wage threshold; but if any "non-tipped employees" participate in the same pool, then the whole thing becomes invalid and illegal.

2. So who can participate in a valid tip sharing pool?

An employer can only keep a valid tip pool with employees who regularly receive tips, such as:

  • Bartenders
  • Servers and bussers
  • Valets, bellhops, attendants, etc.
  • Counter staff

However, other employees in the same business do not count toward the tip credit benefit for employers, and cannot legally be included in a tip sharing pool. These employees are typically non-customer-facing and do not customarily receive tips, such as:

  • Chefs, cooks and kitchen staff
  • Janitors and cleaning staff
  • Laundry staff
  • Dishwashers

3. But I thought my tips belonged to my employer if I participated in a tip pool?

This is absolutely not true: Your tips are 100% yours. Tips are always the legal property of the employee, regardless of whether or not an employer takes a tip credit under Section 3(m) of the FLSA. The only time that an employer can use an employee’s tips is under the statutory provisions of Section 3(m) of the FLSA, which includes a credit against the legal minimum wage threshold, and the furtherance of a valid tip pool that can only include the employees who “customarily and regularly” receive tips, as listed above.

It is very important that employees understand that a valid tip pool is the only way that an employer can use an employee’s tips; under no circumstances can an employer deduct or withhold tips from a tip pool to cover any unexpected or additional expenses, such as register shortages, breakages, walkouts, or any other business-related expenses or losses. The bottom line is that tips are always the employee’s property; they never belong to the owner of the business, regardless of whether the employee is participating in a tip-sharing arrangement or not.

How to Make Sure Your Tips Go to Where They Belong

Employees have a right to know where their tips are going and who is participating in a tip-sharing arrangement or tip-sharing pool. Employers cannot withhold this information, because as we’ve already established, tips are the legal property of the employee. Every employee should be educated on what does and what doesn’t constitute a legal and valid tip-sharing arrangement so that they can protect their hard-earned tips. In particular, if an employee has a reduced minimum wage, it is of the utmost importance to ensure that they get all of the tips that they are entitled to.

So how can you tell if your tip pool is valid or not? Look out for these signs:

  • Are the owners or managers dipping into the tip pool? If so, this is a big red flag. Management and ownership are not entitled to any tips!
  • Are employees getting paid only in tips? If so, then the pool isn’t valid. All employees are guaranteed a minimum wage of $2.13 per hour plus all of their earned tips.
  • Are other non-tipped employees included in the tip pool? If so, this makes the tip pool illegal. Although many restaurants do it, no kitchen staff (including chefs, preppers, line cooks and dishwashers) can be legally included in a tip pool, because these employees do not "customarily and regularly" receive tips.
  • Is anything being deducted from the tip pool? If so, it’s another red flag. Employers can never deduct charges for any business expenses or losses, including breakages, walkouts or register shortages.

Fair wage labor laws are designed to protect employees and ensure that they are paid a fair wage for their work, whether or not they are tipped employees. Unfortunately, employees that rely heavily on tips for their wages can fall victim to business owners who attempt to circumvent these laws through the creation of invalid tip sharing pools and practices. In these cases, employers often owe their employees a huge amount of back pay.

If you have questions about a tip pool or deductions, or other questions concerning your pay or employment issues, call the attorneys at Herrmann Law to discuss (817-479-9229); or submit your case online and we will contact you to discuss.

Original article posted on the Herrmann Law website at: