U.S. Labor Department Recovers $85K for Texas Workers in Tip Pool Case

Austin, TX. – Federal labor officials have recovered more than $85,000 in back wages for dozens of workers after uncovering wage violations at a Texas coffee bar and lounge.

The U.S. Department of Labor announced that its Wage and Hour Division recovered $85,197 for 36 employees following an investigation into Nate’s At The Buda Mill & Grain Inc., operating as Nate’s Coffee & Cocktails in Buda.

Investigators found the business violated the Fair Labor Standards Act by allowing a general manager to participate in the employee tip pool. Under federal law, managers and supervisors are prohibited from receiving any portion of employee tips.

Because of this violation, the employer was no longer eligible to claim a “tip credit” toward minimum wage obligations. As a result, the company was required to pay affected workers the full minimum wage, which it failed to do.

“By law, managers and supervisors are not allowed to retain employees’ tips or participate in a tip pool,” said Wage and Hour Division District Director Charles Frasier. “Service workers are entitled to all the tips they earn from customers.”

The Fair Labor Standards Act allows employers to apply a tip credit only if workers’ tips combined with wages meet or exceed federal minimum wage requirements. Violations of tip pooling rules can invalidate that credit entirely.

The department is encouraging employers to seek guidance to ensure compliance and avoid similar violations. Workers who believe they may be owed back wages can contact the Wage and Hour Division or use federal tools to track hours and pay.