Tip Theft and Tipped Employee Protections

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Under the Fair Labor Standards Act ("FLSA"), employers cannot take any portion of an employee's tips for business related expenses including:

• Uniforms,
• TABC certification,
• Food handler certification,
• Register shortages,
• Customers who walk out without paying their bills,
• Issues with customer food or drink orders, 
• Inventory losses, and
• Full menu price for employee meals (only the actual cost of the meal can be charged, and not the price that adds profit/menu price).

The FLSA also prohibits employers from sharing employee tips with owners, managers, or supervisors.

If an employee is paid on a tip credit basis (e.g. $2.13 per hour with tips increasing the average hourly rate to at least $7.25 minimum wage), the employer cannot: 

• Operate a tip pool with customarily non-tipped employees, such as cooks, dishwashers, managers, or supervisors,
• Require the employee to pay out of their own pocket for uniforms, TABC certificates, food handler certificates, and other expenses the law assigns to the employer.
• Make the employee use their own vehicle or pay for fuel and maintenance (without reimbursement) to deliver customer orders.

The employer must give a tip credit paid employee advance notice of use of a tip credit pay system. .

If your employer violates the FLSA tip law, then they may owe you significant money. If the employer illegally keeps some or all of your tips, you may be owed double the amount of tips improperly kept by the employer. Also, if your employer uses a tip credit for the FLSA minimum wage law (e.g. pays you $2.13 per hour and relies on tips to make up the $5.12 difference to meet the $7.25 per hour FLSA minimum wage) and improperly keep tips, charges you for certain costs, or does not provide you with the required FLSA tip-credit notice, they will generally have to pay you double the amount of the tip credit taken (e.g., $10.24 per hour) for all hours worked during covered workweeks. 

Overtime wages for tip credit paid employees must be calculated based on time and one half the minimum hourly wage less the tip credit claimed by the employer. So, for a tip credit paid employee paid $2.13 per hour (i.e. $5.12 per hour tip credit), the overtime hourly rate is $5.87 per hour (($7.25 minimum hourly wage * 1.5) - $5.12 tip credit = $5.76 overtime hourly rate).  If the employer is calculating overtime at time and one-half a tip credit paid employee's hourly rate (e.g. $2.13 * 1.5) = $3.20 overtime hourly rate), then that employee is not being paid all overtime wages owed. 

The FLSA also requires an employer who violates the tip protection law to pay legal fees and costs to the prevailing employee's attorney. The FLSA does not require an employee to pay legal fees to the employer.

Contact Dallas attorney Allen Vaught to learn more about your tip law rights.