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Another month, another Houston restaurant sued for not paying employees

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By Alex Wukman

Earlier this month we here at Free Press Houston called attention to the recent trend of Houston restaurants being sued for failing to pay their employees. We tried to be understanding about it-hell, we even tried to be funny about it-and we hoped that a little public shaming would be the end of it. This isn’t rocket science after all: if a person works for you you pay them. End of story. Now we know that payment isn’t always an option in some businesses, that’s why tech start-ups use things like stock shares to attract employees. The problem is restaurants aren’t tech companies, there aren’t any stock shares to cash in after the big IPO and get back the deferred wages plus interest. We also know that in restaurants expectations are high and profit margins are incredibly thin and any attempt to increase the margins-like say cutting corners on the quality of ingredients-can lead to staff defections, loss of customers and closure.

We also know that, unlike retail stores, restaurants can’t reduce the amount of man hours to reign in costs. After all, you have to have x number of servers and cooks to keep up with dinner service. So how does a cash strapped small business owner make it through the lean times? It seems that more and more are turning to the idea of not paying employees, or alternately playing games with the money they pay employees. And it’s not just newcomers and celebrities that are making this consistently bad decision either. National food blog Eater has a post up about Houston dining landmark Tony’s being hit with a class action lawsuit claiming that for the last two years Tony’s management illegally required waiters to participate in a tip pool and then tried to claim a “tip credit”, the legal loophole that allows restaurants to pay waiters $2.13 an hour and claim that tips make up the difference.

The thing about a tip credit is that it’s tricky as Lisa Guerin at the legal blog Nolo.com explains: “Under federal law and in most states, employers may pay tipped employees less than the minimum wage, as long as employees receive enough in tips to make up the difference. This is called a “tip credit.” The credit itself is the amount the employer doesn’t have to pay, so the applicable minimum wage (federal or state) less the tip credit is the least the employer can pay you per hour. If you don’t earn enough in tips during a given shift to bring your total compensation up to at least the applicable minimum wage, your employer has to pay the difference.” Emphasis added.

Sadly, since many Houston restaurants don’t make up the difference in employee wages we expect 2024 to be a year filled with lawsuits. That is unless one of two things happen: the State of Texas passes some form of “tort reform” that will make it harder for waiters to sue their employers or  someone pressures Congress into finally getting around to closing that pesky loop hole that, you know, requires restaurants to pay waiters more than sweatshop wages-don’t laugh either is completely possible.