With a diverse culinary scene and a booming population, Texas can be a great place to own a restaurant. However, if you do operate a restaurant in the Lone Star State, you need to be aware of Texas labor laws.
Not sticking to those laws could land your restaurant in hot water, like two Houston-area Sharky’s locations that had to pay almost $47,000 in back wages and damages after the U.S. Department of Labor (USDOL) discovered they weren’t paying proper overtime rates—and charging employees for uniforms.
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Texas labor laws: An overview
Texas’s employment laws are a little more business-friendly than other states. For example, Texas follows at-will employment, meaning employers in Texas can fire an employee at any time, with or without cause. Texas also follows the federal minimum wage of $7.25 per hour, which is lower than many states’ minimum wages.
Other Texas labor laws that apply to the service industry include:
Safe and sanitary workplace
Under the Texas Occupational Safety Act, employers must provide employees with a safe, sanitary workplace, and free of hazards. This means keeping a clean workspace, using proper safety protocols, and providing necessary safety equipment.
Discrimination and harassment
Chapter 21 of the Texas Labor Code prohibits discrimination based on race, color, disability, religion, sex, national origin, or age. These discrimination laws apply to all aspects of employment, including hiring, promotions, and terminations.
Additionally, Texas employers must also ensure that the workplace is free of harassment. Employers are responsible for preventing and promptly addressing instances of harassment, whether verbal or physical.
According to Dallas employment lawyer Rob Wiley, “It is illegal for an employer to retaliate against an employee for exercising workplace rights".
In other words, if an employee files a complaint about workplace safety or discrimination, tries to organize a union, or practices or any other right they have under state and federal law, it’s illegal to retaliate.
What constitutes retaliation?
- Termination or firing
- Salary reduction or withholding of benefits
- Negative performance review
- Failure to promote
- Reassignment to undesirable locations
While there are times when all of these actions are necessary and valid, doing any of these things to punish employees for exercising their rights is against the law.
Texas follows federal child labor laws. These laws prohibit anyone under 14 from working, except child actors or performers. 14- and 15-year-olds can work in specific, non-hazardous jobs, but they aren’t allowed to work during school hours, and they can’t work more than eight hours a day.
For teens between the ages of 16 and 17, there are no restrictions on the days or hours they can work. However, it’s still illegal for anyone under 18 to work in a hazardous position.
As you might imagine, violating these laws can be extremely costly. In 2023, the DOL found 16 McDonald’s locations in Texas and Louisiana violated child labor laws after allowing 17 workers between the ages of 14 and 15 years old to work longer and later than permitted. These violations cost the businesses several thousand dollars in penalties, and one of the locations closed.
Minimum wage and overtime pay in Texas
Texas follows the federal minimum wage, meaning employers must pay a minimum of $7.25 per hour for non-tipped work. Subminimum wage is allowed for roles that earn tips, like servers and bartenders.
Subminimum wages are also allowed for workers with competitive or productive challenges due to a disability. But to do this, employers must apply for a subminimum wage certificate from the U.S. Department of Labor's Wage and Hour Division.
Per federal and state law, employees in Texas who work more than 40 hours per week must be paid overtime pay at 1.5 their hourly rate, commonly referred to as time-and-a-half. For example, if your normal pay rate is $10 per hour, you’d earn $15 per hour for overtime.
Employers can also compensate for overtime hours with paid time off (PTO). In Texas, employees get 1.5 hours of paid time off for each hour of overtime. For example, an employee who works 10 overtime hours may receive 15 hours of PTO as compensation versus time-and-a-half pay.
Tipping laws in Texas
Per the DOL, any employee who typically receives more than $30 per month in tips qualifies as a tipped employee. However, tipped employees (like servers) have different compensation laws than hourly employees, who are paid an hourly rate at or above the $7.25/hour minimum wage (like managers or chefs).
Tips belong to the employee, not the employer
This principle is the foundation on which the rest of Texas’s tipping laws are based. Employers can implement practices like tip-sharing or taking a tip credit (more on that in the next section), but what they can’t do is claim tips as company revenue.
Employers may take a tip credit
Claiming a tip credit is a way to count an employee’s tips toward the employer’s obligation to pay the employee minimum wage.
Employers do not deduct tip credits directly from the employee’s earnings. Instead, tip credits allow employers to pay tipped employees a lower hourly rate—as long as they earn enough tips to make up the difference.
For example, let’s say an employee works an eight-hour shift and earns $80 in tips. In Texas, their employer can count a portion of that $80 toward their $7.25/hour minimum wage obligation.
Employers must pay tipped employees at least $2.13 per hour
It’s expected that tipped employees make the bulk of their wages through tips and, therefore, don’t have to be paid the same minimum wage as non-tipped employees.
However, employers in Texas still have to pay tipped workers at least $2.13 per hour. If an employee doesn’t make enough tips to bring them up to the federal minimum wage of $7.25 per hour, it’s the employer’s responsibility to make up the difference.
Employers cannot withhold tips from employees to cover other costs
Tips belong to the employee, not the employer. Employers aren’t allowed to use employees’ gratuities to cover other expenses—like credit card processing fees or cash register shortages.
Tip pooling is allowed in Texas
A tip pool is a way for employers to distribute tips among a group of tipped employees. With a tip pool, the employer collects tips and then redistributes them among a designated pool of workers. Employers can create rules for distributing tips, but the Fair Labor Standards Act (FLSA) prohibits non-tipped employees like dishwashers and cooks from being included in the pool.
Recommended Reading: Restaurant Tip Outs Guide: Methods, Tip Splitting, Pooling, and More
Breaks and meal periods
Texas has no state laws requiring an employer to provide meal or rest breaks, so Texas employers must default to federal laws. Federal law states that if an employer does choose to provide rest breaks, they must be paid.
On the other hand, meal and lunch breaks do not have to be paid—as long as they meet a few requirements:
- The break has to be longer than 30 minutes.
- The employee must be allowed to leave the premises.
- The employee must be completely off duty during the break.
More resources for Texas restaurateurs
Compliance isn’t set-it-and-forget-it—it requires ongoing attention. Check out these additional resources for new and established Texas restaurateurs that will help you stay on the right side of the law:
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