Is Your Tip Pool Legal? What to Know After the Perry’s Steakhouse Ruling

Had a good steak lately? What about Pork Chop Friday at Perry’s? Steakhouses in Dallas are a scene and usually best attacked with an expense account. We recently reported how several Dallas steakhouses — Al Biernat’s and Nick and Sam’s — sell more than $500,000 a month in booze alone. That’s not including the meat. (For the record, Perry’s reported just over $244,000 in alcohol sales in October 2025, according to the Texas Comptroller’s Mixed Beverage Gross Receipts.) It’s big business.

In 2022, 750 servers filed a lawsuit, claiming Perry’s took a portion of their tips each week and dispensed it to morning staff workers. The plaintiffs in the case filed a motion to enter judgment for a total of $21,022,039. Perry’s responded with its own calculations for $7,746,388. In November, U.S. District Judge Robert Pitman ruled against Perry’s Steakhouse and its owner, Christopher Perry, for running an illegal tip pool. The judge has yet to rule on the monetary damages.

What the Law Says About Tip Pools

According to the Fair Labor Standards Act, employers are allowed to require employees to share or “pool” tips with other eligible employees, specifically those who regularly receive tips, such as waiters, bellhops, counter personnel, bussers and service bartenders. Perry’s got in trouble because it distributed tips to the morning crew who did prep work.

Perry’s Restaurants’ Chief Operating Officer Rick Henderson issued a statement stating that they respect and value their employees and strongly disagree with the recent filings. “These are the latest steps in the legal process, and our response will present the facts, especially the many steps Perry’s has taken to fairly and lawfully compensate our employees. We will continue to vigorously defend our position and the Perry’s good name as the legal process continues.”

So, apparently, this isn’t over.

Houston lawyer Michael James posted a video explaining the decision, and the comment section is full of questions, accusations and commentary. positively.jake wrote:

“I’m actually glad this happening [the outcome of the case], companies have started getting a lot more frivolous with taking money from tipped employees to help pay their hourly employees instead of company paying higher wages out of pocket. 1 win against corporate greed”

We sent James some questions to clear up some questions about tip pools in Texas.

We Ask a Lawyer About Perry’s High-Stakes Tip Pool

It seems like the Wild Wild West out there when it comes to tip-pooling. In layman’s terms, what exactly did Perry’s do wrong? Was it about who or how tips were distributed? 
Wild West is right. Everyone thinks they are doing things correctly, but so many aren’t. Perry’s messed up because they were giving a portion of the tip pool to employees who were not eligible to receive tips. A dishwasher isn’t really able to be tipped by the customers, so they aren’t eligible for the tip pool. Perry’s was giving tips to prep staff who were working before the restaurant even opened.

Why is tip-pooling against the law? Why can’t restaurants and servers just do what they want with the tip jar?
Tip pooling isn’t against the law so long as the rules are followed. In Texas, tip pooling can only include tips that exceed the first $5.12/hour (tip credit is $2.13/hour) and can’t reduce an employee’s total wages below $7.25/hour. This protects employees from getting shortchanged from the tips they have earned because a customer, for the most part, gets to decide how much to tip and who receives the tip.

Perry’s argued their practice was an “industry standard.” Is that a valid legal defense?
Perry’s can argue whatever they want, but the “industry standard” is actually set by the Department of Labor and governed by the Fair Labor Standards Act (FLSA) — in fact, Perry’s had already been through litigation and DOL investigations before this lawsuit for other FLSA violations. As long as a restaurant is staying with the framework established by the DOL and their state labor laws, they can tip share all day long.

Did the fact that Perry’s had prior DOL investigations influence the judgment?
Yes, absolutely. Prior investigations/lawsuits mean Perry’s knew or should have known that they were operating an unlawful tip pool. This exposed them to additional damages since their violation was “willful.”

What Servers Need to Know

What should a Dallas server do right now if they suspect the restaurant they are working at is skimming tips or including managers in the pool?
A server who believes an unlawful tip pool is being used at their restaurant should contact an employment lawyer who handles these types of cases to have their suspicions reviewed. Most employment lawyers offer free consultations and will be able to tell if something is amiss.

Are tip pools really just a sneaky way for ownership to get customers to cover payroll?
Sometimes. Owners will supplement non-tippable employees’ hourly rate with money from the tip pool, which isn’t allowed but saves ownership money on payroll — generally any businesses largest expense.

How should restaurants adjust their tip pooling practices? 
Restaurants need to review their tip pool procedures to make sure they are in line with the FLSA, especially since this case decision. This case has received a lot of traction in the news, and Texas servers are paying attention. If ownership isn’t in compliance, there could be a hefty bill coming due.

In this case, Christopher Perry was held personally liable along with the company. What precedent does that set? Can a server get their owner tossed in the slammer?
Unfortunately, or luckily, depending on your perspective, all of this is a civil violation, not criminal, so no one is getting put in the clink. Money is the only thing at stake here (pun intended). Since the FLSA has a broad definition of “employer,” the owner/director/CEO of a restaurant can be held personally liable. This is good for the employees because there is a better chance of having the judgment paid if two separate entities, the owner and the business, are on the hook to pay the entire judgment.

Does this judgment help or hurt servers in the long run?
I think this helps servers in the long run because they are able to keep more of their hard-earned tip money, and since the Trump administration instituted a “No Tax on Tips” policy, even more of that tip gets to stay in the servers’ pockets.

Ever been to Perry’s for Pork Chop Friday?
Perry’s is a stone’s throw from my office, so we are frequent participants of Pork Chop Friday!