Tennessee Restaurant Ordered to Pay More Than $179,000 in Back Wages After Wage Violations
A Mexican restaurant in Williamson County, Tennessee has been ordered to pay over $179,000 in back wages to 40 employees after a U.S. Department of Labor investigation uncovered multiple violations of the Fair Labor Standards Act (FLSA).
The Wage and Hour Division (WHD) determined that the restaurant illegally operated a tip pool, diverted tipped employees’ earnings, and used tips to subsidize the wages of non-tipped workers — all of which are prohibited under federal law.
Overview of the Investigation
According to federal investigators, the employer committed several wage and hour violations, including:
Forcing servers to contribute $7 to $10 per shift into an employer-controlled tip pool
Using those pooled tips to pay the hourly wages of non-tipped employees
Retaining credit card tips earned by hosts and hostesses on takeout orders
Failing to ensure tipped workers received all tips they earned
These actions violate federal protections designed to ensure tipped workers keep the tips customers leave for them.
Illegal Tip Pooling Practices Identified
WHD found that the restaurant’s tip pool violated FLSA rules because:
1. Tipped Employees Paid Into an Invalid Tip Pool
Servers were required to pay $7–$10 each shift into a pooled fund controlled by the employer.
2. Tips Used to Pay Non-Tipped Workers
Federal law prohibits using tip money to pay wages for kitchen staff, dishwashers, or other non-tipped workers.
3. Retained Credit Card Tips
Hosts and hostesses did not receive all the tips they earned on takeout orders, which is unlawful.
4. Employer Benefited Financially From Tips
Any situation where the employer gains from employee tips automatically voids the tip pool and invalidates the tip credit.
Financial Consequences for the Employer
As a result of the violations, the restaurant was ordered to pay:
$179,000+ in back wages
Compensation to all 40 affected employees
Possible civil money penalties depending on repeat violations
Improper tip pooling is one of the fastest ways restaurants end up facing:
Wage theft allegations
Federal investigations
Costly lawsuits
Reputation damage
Why This Case Matters for Restaurant Owners
This Tennessee case highlights the high risk restaurants face when handling tips incorrectly.
Common illegal practices include:
Requiring servers to pay into tip pools
Using tips to cover payroll costs
Diverting credit card tips
Including non-tipped workers in the pool
Retaining portions of tip money
Not providing proper tip credit notice
Even small errors can result in large-scale penalties.
Restaurants that use tip pools but lack proper documentation or training are especially vulnerable.
How Restaurants Can Prevent Tip Violations
To avoid costly enforcement actions like this case, restaurants should:
Review and update all tip pooling policies
Ensure only tipped workers participate in the tip pool
Provide employees with proper written tip credit notice
Implement accurate tip tracking and payroll systems
Ensure managers and supervisors never take part in or control the tip pool
Conduct periodic wage & hour compliance audits
Train managers on legal requirements for tipped employees
Proactive compliance is significantly cheaper than federal penalties.
To understand how these violations happen and how to prevent them, read our Ultimate Guide to Wage & Hour Compliance for Restaurants.”
Protect Your Restaurant Before Tip Pool Violations Become a $179,000 Problem
Most restaurants don’t know they’re violating federal tip laws until it’s too late.
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