House Bill 326 by Rep. Canales part of statewide measures designed to increase the minimum wage for working Texans, including more than 67,000 in Hidalgo County

House Bill 326, which would prohibit an employer from keeping any portion of a gratuity paid to or left for a tipped employee, has been filed by Rep. Terry Canales, D-Edinburg, as part of a series of proposals by Texas lawmakers designed to increase the minimum wage in Texas.

A gratuity, also known as a tip, is generally defined as a gift of money, over and above payment due for service, as to a waiter or bellhop.

The federal minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009, according to the U.S. Department of Labor. The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). Many states also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.

HB 326 would benefit thousands of such employees whose hard work still leave them in poverty.

“Every time a business is paid with a debit card or credit card, that firm must pay a fee for that financial service,” Canales explained. “But for waitpersons in restaurants – those professionals who provide excellent service and depend on gratuities to make a living – it is unfair if employers pay that fee from the worker’s tips.”

The U.S. Department of Labor defines a tipped employee as any employee working in an occupation in which he or she regularly receives more than $30 a month in tips. But the U.S. Department of Labor leaves it up to the states to prohibit that deduction from the waitperson’s gratuity.

In Texas, federal law permits restaurants to pay tipped workers a base wage of $2.13 an hour as long as their weekly total of their the equivalent of a week’s salary at the federal minimum wage of $7.25 an hour.

If not, employers are supposed to make up the difference, although this requirement is difficult to enforce and there is considerable abuse, according to the Economic Policy Institute, which according to its website (, is a 501(c)(3) non-profit American think tank based in Washington, D.C. that carries out economic research and analyzes the economic impact of policies and proposals. The EPI advocates for policies favorable for low- to moderate-income families in the United States.

Canales said HB 326, which is similar to HB 1215 that he filed in 2015, is needed because of concerns that employers are deducting from the workers’ tips the processing transaction fees involved when a customer pays with a credit card or a debit card.

“Two years ago, it was first brought to my attention that when gratuity (tip) is left with a credit or debit card, the whole tipped amount was sometimes not being given to the employee,” said the South Texas legislator. “With the growing trend by American consumers to use credit cards for purchases of more than $10, more Texas waiters and waitresses face an increased risk that they will lose more money by having the debit or credit card transaction fee taken from their tips.”

While these transaction fees are a small percentage of the overall bill, they quickly add up for employees who often rely on such tips for a significant portion of their income, according to a bill analysis of Canales’ HB 1215.

HB 1215 wound up being approved by the House Committee on Business and Industry on April 30, 2015, but the measure, like hundreds of proposals by all other lawmakers, had time run out before the full House of Representatives could schedule action on it.

The House District 40 lawmaker added when he filed his HB 1215 in 2o15, 15 percent of the nation’s 2.4 million waiters and waitresses lived in poverty, compared with seven percent of all other employees.

“Waiters and waitresses, who have many responsibilities which require multi-tasking skills, play a key role in the success of a restaurant, and they have my utmost respect,” Canales said. “I do not know how many Texas restaurants are taking money away from tips using this practice, but when my legislation becomes law, this injustice will be put to an end.”

The economic problems faced by tipped workers are explained in a series of short, easy-to-understand videos on tipped workers facts produced by Economic Policy Institute and available online at:


Canales in 2015 voted for House Joint Resolution 26, which proposed an amendment to the Texas Constitution that would establish the minimum wage in Texas at $10.10 an hour, or the federal minimum wage, whichever is higher.

House Joint Resolution 26 was defeated by Republicans in the House of Representatives on May 15, 2015.

However, for the current five-month legislative session, which began in early January 2017, similar measures have been filed.

On Thursday, January 12, 2017, in the Speaker’s Committee Room at the Texas Capitol, the Texas AFL-CIO, led by its president, John Patrick and who was joined by other key lawmakers, hosted a news conference on raising the minimum wage in Texas.

As of that date, bills filed that would directly raise the minimum wage include HB 285 by Rep. Roberto Alonzo, D-Dallas ($15 an hour), HB 475 by Rep. Ron Reynolds, D-Missouri City, HB 937 by Rep. Senfronia Thompson, D-Houston ($10.10 an hour), Senate Bill 229 and Senate Joint Resolution 22 by Sen. José Menéndez, D-San Antonio ($10.10 an hour) and HB 924 and House Joint Resolution 56 by Rep. Chris Turner, D-Arlington ($10.10 an hour).

Other related bills were supported that would protect the ownership of tips (HB 326 by Canales), and allow cities or counties to raise the minimum wage (HB 840 by Rep. Evelina Ortega, D-El Paso, and SB 427 by Sen. José Rodríguez, D-El Paso). Other wage-related bills that would help low-income Texans, including a measure by Rep. Justin Rodríguez, D-San Antonio, are pending.

Twenty-nine states and the District of Columbia have minimum wages that are higher than the federal floor of $7.25 an hour.

According to the Center for Public Policy Priorities (CPPP), if legislation to increase the minimum wage is approved by the Texas Legislature later this spring and not vetoed by Gov. Greg Abbott, more than 67,000 workers in Hidalgo County, or about 43.1 percent of the labor force, would get a pay increase, Canales noted.

Of those who in Hidalgo County would would benefit from an increase in the minimum wage, according to CPPP:

  •  65 percent are in their prime working years;
  •  57 percent live in households with children; and
  •  96 percent of those workers are Hispanic or Latino.


On its website, the U.S. Department of Labor provides more information on the minimum wage, titled “Minimum Wage Mythbusters”:

Myth: Raising the minimum wage will only benefit teens.

Not true: The typical minimum wage worker is not a high school student earning weekend pocket money. In fact, 89 percent of those who would benefit from a federal minimum wage increase to $12 per hour are age 20 or older, and 56 percent are women.

Myth: Increasing the minimum wage will cause people to lose their jobs.

Not true: In a letter to President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, “In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.”

Myth: Small business owners can’t afford to pay their workers more, and therefore don’t support an increase in the minimum wage.

Not true: A July 2015 survey found that 3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12. The survey reports that small business owners say an increase “would immediately put more money in the pocket of low-wage workers who will then spend the money on things like housing, food, and gas. This boost in demand for goods and services will help stimulate the economy and help create opportunities.”

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would hurt restaurants.

Not true: In California, employers are required to pay servers the full minimum wage of $9 per hour before tips. Even with a 2014 increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace all but only a handful of states in 2015.

Myth: Raising the federal tipped minimum wage ($2.13 per hour since 1991) would lead to restaurant job losses.

Not true: As of May 2015, employers in San Francisco must pay tipped workers the full minimum wage of $12.25 per hour before tips. Yet, the San Francisco leisure and hospitality industry, which includes full-service restaurants, has experienced positive job growth this year, including following the most recent minimum wage increase.

Myth: Raising the federal minimum wage won’t benefit workers in states where the hourly minimum rate is already higher than the federal minimum.

Not true: While 29 states and the District of Columbia currently have a minimum wage higher than the federal minimum, increasing the federal minimum wage will boost the earnings for nearly 38 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families’ pockets, which will be spent on goods and services, stimulating economic growth locally and nationally.

Myth: Younger workers don’t have to be paid the minimum wage.

Not true: While there are some exceptions, employers are generally required to pay at least the federal minimum wage. Exceptions allowed include a minimum wage of $4.25 per hour for young workers under the age of 20, but only during their first 90 consecutive calendar days of employment with an employer, and as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive the current federal minimum wage or the state minimum wage, whichever is higher. There are programs requiring federal certification that allow for payment of less than the full federal minimum wage, but those programs are not limited to the employment of young workers.

Myth: Restaurant servers don’t need to be paid the minimum wage since they receive tips.

Not true: An employer can pay a tipped employee as little as $2.13 per hour in direct wages, but only if that amount plus tips equal at least the federal minimum wage and the worker retains all tips and customarily and regularly receives more than $30 a month in tips. Often, an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage. When that occurs, the employer must make up the difference. Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, he or she is entitled to the provisions of each law which provides the greater benefits.

Myth: Increasing the minimum wage is bad for businesses.

Not true: Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Myth: Increasing the minimum wage is bad for the economy.

Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised.

Myth: The federal minimum wage goes up automatically as prices increase.

Not true: While some states have enacted rules in recent years triggering automatic increases in their minimum wages to help them keep up with inflation, the federal minimum wage does not operate in the same manner. An increase in the federal minimum wage requires approval by Congress and the president. However, in his call to gradually increase the current federal minimum, President Obama has also called for it to adjust automatically with inflation. Eliminating the requirement of formal congressional action would likely reduce the amount of time between increases, and better help low-income families keep up with rising prices.

Myth: The federal minimum wage is higher today than it was when President Reagan took office.

Not true: While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s. That’s why President Obama is urging Congress to increase the federal minimum wage and give low-wage workers a much-needed boost.

Myth: Increasing the minimum wage lacks public support.

Not true: Raising the federal minimum wage is an issue with broad popular support. Polls conducted since February 2013 when President Obama first called on Congress to increase the minimum wage have consistently shown that an overwhelming majority of Americans support an increase.

Myth: Increasing the minimum wage will result in job losses for newly hired and unskilled workers in what some call a last-one-hired-equals-first-one-fired scenario.

Not true: Minimum wage increases have little to no negative effect on employment as shown in independent studies from economists across the country. Academic research also has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Myth: The minimum wage stays the same if Congress doesn’t change it.

Not true: Congress sets the minimum wage, but it doesn’t keep pace with inflation. Because the cost of living is always rising, the value of a new minimum wage begins to fall from the moment it is set.


John Patrick contributed to this article. House District 4o includes portions or all of Edinburg, Elsa, Faysville, La Blanca, Linn, Lópezville, McAllen, Pharr, San Carlos and Weslaco. He may be reached at his House District Office in Edinburg at (956) 383-0860 or at the Capitol at (512) 463-0426.

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