July 11, 2014

bigtexan.jpgA recent news release in Amarillo, Texas, illustrates what can happen if employers do not carefully monitor and observe DOL regulations on how they are paying tipped employees.

The Big Texan Finds Itself In A Wage And Hour Investigation

The Big Texan Steak Ranch in Amarillo, which has a national reputation, has agreed to pay $650,000 in minimum wage back wages and $150,000 in liquidated damages to 279 current and former wait staff following an investigation by the U.S. Department of Labor's Wage and Hour Division. The DOL found violations of the Fair Labor Standards Act's minimum wage and record-keeping provisions arising from a tip pooling arrangement by the restaurant.
A DOL regional administrator in the Southwest Wage and Hour Division stated, "Through investigations such as this one, the Wage and Hour Division continues to combat widespread labor violations among restaurants to protect workers and to ensure a level playing field for law-abiding employers."

DOL Has Been Targeting Tipped Employee Pay Violations

DOL’s Wage and Hour Division had found that the Big Texan improperly retained money from the restaurant workers' tips to pay business costs, such as menus, glassware, trays and contest prizes, and made deductions for uniforms and as a disciplinary tactic. As a result, those workers' hourly wages fell below the required federal minimum wage.

The FLSA requires that a tipped employee be paid no less than $2.13 an hour in direct wages, provided that amount plus the tips received equals at least the federal minimum wage of $7.25 an hour. However, the employer must monitor tips and if the employee's tips combined with the employer's direct wages do not equal $7.25 an hour for the time worked, the employer must make up the difference.

Additionally, employers must give employees notice of the FLSA tip credit provisions, and maintain accurate time and payroll records. This requires vigilance and good record-keeping by the employer. Failure to meet the law’s requirement can prove very costly, as the Big Texan Steak Ranch found out.

To learn DOL’s rules on pay to tipped employees, see DOL Fact Sheets on payment of tipped employees. If you want to review your pay practices for tipped employees to ensure your business is in compliance contact Adair Buckner at

Adair M. Buckner, Attorney at Law, is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. Her other areas of practice include business law, business disputes, commercial litigation, estate planning, and probate. You can reach Adair at (806)-220-0150 or This material is not intended to be legal advice. The contents are intended for general information purposes only.

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