Tips, Gratuities, and Service Charges

While our Legal Center for Restaurant Employees is primarily geared toward the legal rights of waiters and waitresses, however, that certainly does not mean Tip Theft is unique to waiters and waitresses. There are numerous employees in the service industry who are plagued with illegal tip theft. In addition to representing waiters and waitresses, we represent various service industry employees against their employers to recover the wages and tips that their employers illegally retained. Our representation of tipped employees includes, but is certainly not limited to waiters, waitresses, bartenders, valets, chauffeurs, taxi drivers, bellhops, exotic dancers, and any other employees who receive at least $30 month in tips. There is very strict federal law that employers must follow, which governs the payment of wages and tips to tipped employees.

Basics for Tipped Employees

Federal law allows an employer to pay a tipped employee a direct wage that is less than minimum wage – commonly known as “waiter pay.” However, the employer must adhere to all the requirements of federal law, or it loses its ability to pay subminimum wage.

First, if employers are going to pay the subminimum “waiter” wage and rely on tips, they must inform their tipped employees not only of their specific tipping arrangement, but they must also inform employees of the federal laws which govern the tipping policy. Second, employers must permit tipped employees to retain all the tips they earned unless the employer requires employees to tip-out a portion of their tips to a valid “tip pool” – which, again, the employer must have thoroughly explained before hiring. However, these tip pooling arrangements can be invalid or illegal when employers include ineligible participants, such as back-of-house employees, other employees who do not customarily receive tips on their own, or when they include management. Such tipping pools are illegal. It is also illegal and in violation of the federal tipping laws to deduct wages or require tipped employees to pay for various items, such as uniforms. (See section on “Unlawful Deductions).

Illegal Tip Pools

A tip pool is unlawful if the owners, the chef, dishwasher, or managers are sharing in the tip pool. Yes, if you are required to share your tips with the chef, the dishwasher, or a manager, then this is an illegal tip pool; your employer is violating the federal wage laws.

One issue that often arises is when employees aren’t sure about who is sharing in the tip-out of a tip pool. We obtained a sizable award for our clients against a Texas restaurant where the servers were tipped-off (excuse the pun) by the hosts that the tip-out was too low, suggesting that a portion of the tip pool was being skimmed and not redistributed. As it turned out in that case, the owners and managers were skimming from the tip pool for themselves. The practice of owners or managers skimming money from tip pool or failing to redistribute the entire amount of tip pool is illegal.


An employer may deduct the actual cost to process a credit card charge, but nothing more. To illustrate, we successfully represented a group of servers against a restaurant that was deducting a 5% credit card processing fee for tips; however, as it turned out, the restaurant’s credit card processing fee was only 3%. This extra deduction resulted in a large settlement to our clients. Here is another case where we obtained a sizable settlement on behalf of a group of waiters and waitresses who were claiming improper credit card deductions.

Tips belong solely to the server and the employer may not share or skim from a server’s tips, save the actual cost of the credit processing fee. If you have questions about your wages, involving amounts deducted by your employer for credit card processing fees, call us for a consultation 817-479-9229 or submit your case to us online.


An employer may not pass along its cost of doing business to tipped employees, which is true even if an employee authorized the employer to make the deduction. Here is a basic list of various unlawful deductions: a deduction for damage due to a workplace accident, such as, a cash register shortage due to user error, accidentally breaking glassware, wrongly ordered food, getting into a vehicle accident while at work, and any other damage that is a “cost of doing business.”

Whether the deduction is improper or proper is a question that can be better deciphered through legal consultation with one of the unpaid wage lawyers at Herrmann Law.


If you have any questions or if you would like to talk about your specific situation or your rights as a tipped employee, please contact us for a consultation 817-479-9229 or contact us online.

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