Texas Tip Laws and Requirements
Texas tip laws generally follow federal Fair Labor Standards Act (FLSA) regulations, including the $2.13 minimum hourly wage for tipped employees, the tip credit system, and tip pooling rules, with the most recent updates in August 2024, while recognizing that tips are the property of employees and that employers can only take tip credits for hours worked in tipped occupations, though some Texas cities may have higher minimum wages than the federal standard.
Under the Fair Labor Standards Act (FLSA), tips are regulated. Employers who meet certain criteria are permitted to take a partial credit against minimum wage obligations for tipped employees. Tipped employees include those engaged in jobs in which they regularly and customarily receive tips.
The tip credit was created by Congress in 1966, and adjustments occurred on December 28, 2021, when the 2021 Dual Jobs Final Rule went into effect. A federal court vacated portions of the final rule in October 2024, which effectively reinstated the original dual jobs regulation (29 C.F.R.531.56(e)). It recognizes that an employee may work in tipped and non-tipped occupations, and employers are only permitted to take the tip credit against minimum wage obligations for hours worked in the tipped occupation.
The FLSA mandates that a tipped worker must be paid at least $2.13 per hour. The FLSA tip credit can be equal to the difference between the direct (or cash) wage paid to the employee and the federal minimum wage. Only tips actually received by an employee count when making the determination of a tipped employee and applying the credit.
The FLSA also permits employees to “pool” or share tips with other eligible employees, although it doesn’t impose a limit on the amount or percentage of the contribution of each employee in a valid tip pool.
State law may differ from the federal FLSA standards. Review what tip laws apply in Texas.
When Were the Tip Laws Last Updated in Texas?
Tip laws in Texas were last updated in August of 2024.
Does Texas Have Tip Laws That Differ from Federal Tip Laws?
Texas generally adheres to federal laws regarding tips. However, some cities have higher minimum wage rates than the federal rate, which the state of Texas uses.
Who Holds the Ownership of Tips in Texas?
Under federal law, any gratuities paid to employees are their property. Employers are not permitted to require employees to hand in their tips, although they are allowed to count the tip toward the hourly rate.
What are the Rules for Distribution of Credit Card Processing Tips in Texas?
Federal law states that all tips paid by credit card must be issued to employees no later than the next regular payday, even if the employer is awaiting reimbursement from the financial provider.
What are the Tip Pooling Rules in Texas?
Employers are permitted to establish mandatory tip pools, but they may only be distributed between tipped employees.
Who Can and Can’t Participate in Tip Pools in Texas?
Tipped employees may participate. Supervisors, managers, owners, and non-tipped employees may not.
Is there a Difference Between Tips and Service Charges in Texas?
Yes, a mandatory service charge is not considered a tip. Therefore, it would belong to the employer.
To be considered a tip instead of a service charge, a customer must give money voluntarily in an amount of their own choosing. The customer must also be able to determine who receives it, and it can’t be set by employer policy.
Can Employers Deduct Credit Card Fees from Tips in Texas?
Yes, employers may deduct credit card fees from tips.
Do Tips Count Toward the Minimum Wage in Texas?
Yes, tips may count toward the minimum wage in Texas.
Do Tips Factor Into Regular Rate Calculations for Overtime Pay in Texas?
Yes, tips can factor into rate calculations for overtime pay. Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage), and the employer is allowed to include the tip credit in that calculation.
Are There Cities and Municipalities in Texas That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?
Yes, cities in Texas with a higher minimum wage require employers to pay employees that hourly wage. These include:
- Austin
- Dallas
- Fort Worth
What Are the Record-Keeping Requirements for Employers Regarding Tips in Texas?
Employers must keep detailed records of all tips reported by employees, including amounts and dates of service. If tip pooling is in effect, the record should also include the arrangements and the distribution of tips to eligible staff members.
What Options Do Employees Have for Remuneration if Their Tips are Withheld in Texas?
An employee may take legal action against an employer who violates state tip laws.
What are the Penalties for Employers for Not Complying with Texas Tip Laws?
Violating Texas tip laws can subject an employer to civil and/or criminal penalties. Employees may also be permitted to recover the unpaid wages in damages.
Related
Wyoming Tip Laws and Requirements
Wyoming adheres to federal Fair Labor Standards Act (FLSA) tip laws last updated in 2013, which allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, require tipped employees to be paid at least $2.13 per hour plus tips, recognize that tips belong to employees and cannot be confiscated by employers, and permit tip pooling among eligible employees without federal limits on contribution amounts.
Virginia Tip Laws and Requirements
Virginia's tip laws, last updated in September 2021, generally align with federal Fair Labor Standards Act (FLSA) regulations—allowing employers to take a tip credit against minimum wage for tipped employees who earn at least $2.13 per hour, permitting tip pooling among eligible employees, and recognizing that tip credits apply only to hours worked in tipped occupations—while also adhering to Virginia's higher statewide minimum wage, with ownership of tips governed by federal standards.
Montana Tip Laws and Requirements
Montana's tip laws, updated in 2021, differ from federal FLSA regulations by prohibiting employers from using a tip credit and requiring payment of the full state minimum wage—which is higher than the federal rate—to tipped employees, who retain ownership of their gratuities.
South Carolina Tip Laws and Requirements
South Carolina adheres to federal Fair Labor Standards Act (FLSA) tip laws, which regulate tipped employees' wages, allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, mandate a minimum cash wage of $2.13 per hour for tipped workers, permit tip pooling among eligible employees without limits on contributions, and recognize that tips are the property of employees, with the state's tip laws last updated in September 2021 and no deviations from federal standards.
Pennsylvania Tip Laws and Requirements
Pennsylvania's tip laws, updated in August 2022, align with federal Fair Labor Standards Act regulations by allowing employers to take a tip credit against minimum wage for tipped employees who earn at least $135 per month in tips, requiring a base hourly wage of at least $2.83, while recognizing that tips are the property of employees and that tip pooling is permitted without federal limits on contribution amounts.
Minnesota Tip Laws and Requirements
Minnesota's tip laws, updated in August 2024, differ from federal FLSA regulations by prohibiting employers from taking a tip credit—requiring tipped employees to receive the full state minimum wage plus tips—and affirm that tips are the sole property of employees, with employers unable to claim or require sharing beyond valid tip pooling among eligible staff.