For those who work in the service industry, the importance of tips cannot be overstated. Many service employees work primarily for tips, meaning that their employer only provides them with a minimal level of base hourly compensation. Thus, for many service employees, their lives literally depend on the amount of tips they bring in.
On its face, the concept of tipping seems to only benefit the employee receiving the tip. However, over the years, employers have also found ways to benefit from society’s expectation that an employee will be tipped for the services they provide. For example, under Texas law, an employer is able to pay a tip-eligible employee less than those employees who do not receive tips by taking a “tip credit.”
A tip credit is an adjustment that employers can make to a tipped employee’s wage, assuming that the employee will make up the difference in tips. For example, the minimum wage in Texas is $7.25/hour. However, an employer only needs to pay a tip-eligible employee $2.13/hour. The remaining $5.12/hour is considered a tip credit. If, however, the employee does not bring in at least an additional $5.12/hour, the employer will be required to pay the difference. Thus, tipping allows for an employer to pay its tipped employees less than they pay non-tipped employees.
Another way employers can benefit from tipping is through “tip pools.” A tip pool is when an employer requires tipped employees to contribute some portion of their tips to a general pool, which is then split among employees. This allows for employers to give employees who would normally receive fewer tips a higher salary without actually paying them anything out-of-pocket.
In Texas, tip pools are permitted. However, they are subject to certain rules. For example, an employee must still make at least the minimum wage after contributing to the tip pool. Additionally, an employer cannot require that a tipped employee share their tips with employees who do not customarily participate in tip-pooling arrangements, such as dishwashers or cooks. Similarly, management cannot receive any portion of the proceeds of a tip-pool.
When it comes to determining the percentage or amount of an employee’s tips that must be contributed to the tip pool, courts look to what is “customary and reasonable.” The Texas Workforce Commission notes that a tip-pool arrangement requiring an employee to contribute 15% of an employee’s tips is reasonable.
Are You Being Forced to Unfairly Share Your Tips?
If your employer is requiring you split your tips in a way that is unfair or unpredictable, you should contact the employment lawyers at Rob Wiley, P.C. Our committed attorneys help employees stand up for their right to be fairly compensated for the work that they do. We help enforce Texas minimum wage requirements through zealous advocacy at every step of the way. For those employees making more than minimum wage, employers still must respect the rules when it comes to tipping and fair pay. To learn more, call 214-528-6500 to schedule your consultation today.
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The Intersection Between Title VII and the Equal Employment Opportunity Commission’s Rules Regarding Accent Discrimination, Dallas Employment Lawyer Blog, July 6, 2018.
Can Texas Employers Make Compensation Decisions Based on Race?, Dallas Employment Lawyer Blog, August 9, 2018.