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Featured, from left: Rep. Terry Canales, D-Edinburg, and former Rep. Mary Ann Pérez, D-Houston, on the floor of the House of Representatives in 2013.

Photography By HOUSE PHOTOGRAPHY

A proposal by Rep. Terry Canales, D-Edinburg, would prevent Texas restaurant owners from deducting from the tips of waiters and waitresses the transaction processing fees that businesses must pay when customers use credit cards to pay for their purchases. When his measure, House Bill 1215 – which was filed on Monday, February 9 – is considered by a House committee, Canales said he will add language to his proposal to forbid restaurants from deducting from the tips the processing transaction fees involved when a customer pays with a debit card. “Most Texans have no idea that when they include a tip on a credit card, some or all of that tip could be used by the restaurant owner to pay the transaction processing fees that are the responsibility of the business,” Canales said. “I was astounded when I found out that when I tipped my waiter or waitress, they may not have been receiving the full amount.” A tip, also known as a gratuity, is given to one who provides services and added to the cost of the service provided, generally as a reward for the service provided and as a supplement to the service provider’s income. “Every time a company is paid with a debit or credit card, the 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 tips to make a living – it is unfair that they cover the restaurant’s cost of doing business.” The House District 40 lawmaker added that 15 percent of the nation’s 2.4 million waiters and waitresses live 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.” Canales is featured here in 2013 on the floor of the Texas House of Representatives with former Rep. Mary Ann Pérez, D-Houston.

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Waiters/waitresses would be protected from having restaurants’ credit card transaction fees taken from employees’ tips under legislation by Rep. Canales

By DAVID A. DÍAZ
Legislativemedia@aol.com

A proposal by Rep. Terry Canales, D-Edinburg, would prevent Texas restaurant owners from deducting from the tips of waiters and waitresses the transaction processing fees that businesses must pay when customers use credit cards to pay for their purchases.

When his measure, House Bill 1215 – which was filed on Monday, February 9 – is considered by a House committee, Canales said he will add language to his proposal to forbid restaurants from deducting from the tips the processing transaction fees involved when a customer pays with a debit card.

When a consumer makes a purchase using a debit card or credit card, the merchant is assessed fees associated with processing the transaction, according to the U.S. Federal Reserve System.

“Most Texans have no idea that when they include a tip on a credit card, some or all of that tip could be used by the restaurant owner to pay the transaction processing fees that are the responsibility of the business,” Canales said. “I was astounded when I found out that when I tipped my waiter or waitress, they may not have been receiving the full amount.”

A tip, also known as a gratuity, is given to one who provides services and added to the cost of the service provided, generally as a reward for the service provided and as a supplement to the service provider’s income (http://legal-dictionary.thefreedictionary.com/gratuity).

If approved by the Texas Legislature and the governor, HB 1215, as to be amended by Canales, would make it illegal for any restaurant to take the debit card or credit card transaction processing fee from an employee’s tip.

“Every time a company is paid with a debit card or credit card, the 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 tips to make a living – it is unfair that they cover the restaurant’s cost of doing business.”

Federal law allows restaurants to take credit card fee from tips, as long as the worker’s pay does not drop below the U.S. minimum wage, which currently is $7.25 per hour.

“Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage,” according to the U.S. Department of Labor. “For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA (Fair Labor Standards Act).”

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.

As filed on January 9, Canales’ HB 1215 defines a “restaurant” as “an establishment that derives 75 percent or more of its gross revenue from the sale of food and beverages, not counting alcoholic beverages, for on-premise consumption. That term does not include a hotel or motel, except that a restaurant operated at a hotel or motel is included in the term.”

HB 1215 further states “an employer may not collect or receive any portion of a gratuity paid to or left for a tipped employe employed at a restaurant, including for the purpose of compensation a credit card company for any financial services rendered on account of the gratuity. The gratuity is the property of the tipped employee.”

As of 2011, only a few states in the country prohibited restaurant owners from charging their serving staff for processing fees on credit or debit card tips, according to eHow.com.

“Some that do are Oregon, Colorado, Montana, Nevada, Alaska and California,” reports the popular eHow.com website. “The state of Washington allows the practice but enforces a disclosure law. In Washington, restaurant owners who deduct tip processing fees from employee wages are required by law to disclose this information to patrons, giving them the option to tip in cash.”

Canales added that 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.

“According to the U.S. Federal Reserve System, credit card and debit card purchases now are more common than paying with cash,” Canales said.

The House District 40 lawmaker added that 15 percent of the nation’s 2.4 million waiters and waitresses live 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.”

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Rep. Terry Canales, D-Edinburg, represents House District 40 in Hidalgo County. HD 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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