Staff Report
(Editor's note: This story was updated as of 1:48 p.m. Tuesday, April 14, to reflect new information provided by the U.S. Department of Labor)
BUDA — An investigation conducted by the United States Department of Labor found that Nate’s Coffee & Cocktails in Buda operated an illegal tip pool, resulting in the recovery of $85,197 in back wages for 36 employees.
The investigation, conducted in January 2025 for a period between Feb. 16, 2023, to Feb. 15, 2025, by the department’s Wage and Hour Division, determined that the business violated the Fair Labor Standards Act (FLSA) by allowing its general manager to participate in the employee tip pool, according to the U.S. Department of Labor. In doing so, this invalidated the employer’s use of the tip credit and required the employer to pay full minimum wage to affected workers, which the company failed to pay.
A tipped employee is one that is engaged in an occupation in which they customarily and regularly receive more than $30 per month in tips, as stated under the FLSA.
According to a U.S. Department of Labor news release, the act “permits an employer to take a tip credit toward its minimum wage obligations for tipped employees if employees receive enough tips from customers and direct wages per workweek to equal at least the minimum wage compensation required under federal law.” It also allows employers to require employees to share or “pool” tips with other eligible employees.
However, employers, including managers and supervisors, may not keep any portion of employees’ tips for any purpose.
“By law, managers and supervisors are not allowed to retain employees’ tips or participate in a tip pool. Service workers are entitled to all the tips they earn from customers and managers are not permitted to take away those rewards given for employees’ hard work,” stated Wage and Hour Division District Director Charles Frasier in Houston. “Employers are encouraged to contact us for any questions about their obligations under the law. We are here to provide assistance.”
Additional findings in the investigation also include minimum wage, tip retention, record keeping and poster violations, the department shared with the Hays Free Press.
“A former manager received tip pool tips while bartending. Unbeknownst to ownership he should not have pooled in with the other bartenders — at all times Nate’s management and ownership believed we were actually looking out for our employees best interest — that is the point of a pool system in general,” the owners of Nate’s stated in a comment to the Hays Free Press. “Since then, the issue and policies have been rectified.”
According to the U.S. Department of Labor, some back wages were paid directly to employees by the employer, while some were paid to the department to pay the employees. The department is currently in the process of paying some employees.
While there was no other fine or punishment for the business, aside from paying the affected employees what they are owed, the department stated that the employer could be subject to a reinvestigation and possibly assessed civil money penalties if repeated or willful violations are found.
Workers and employers can call the Wage and Hour Division with questions and requests for compliance assistance at 866-4US-WAGE (487-9243).
Employers are encouraged to use the agency’s industry-specific compliance assistance toolkits to learn about their responsibilities under the laws enforced by the division. The agency’s PAID program offers employers an opportunity to self-report and resolve potential minimum wage and overtime violations under the FLSA, as well as certain potential violations under the Family and Medical Leave Act.
More information can be found at www.dol.gov/agencies/whd.
