A federal judge in Texas ordered Perry’s Steakhouse and Grille and its owner to pay more than $21 million to roughly 750 current and former servers in March 2026, ending the main phase of a lawsuit against Perry’s Steakhouse over an illegal tip pool. The court in Paschal v. Perry’s Restaurants Ltd. found that the Houston-based chain required servers to share their tips with employees who worked morning shifts while the restaurants were closed to the public, in violation of the Fair Labor Standards Act. The company and its sole owner, Christopher V. Perry, were held jointly liable and have said they will appeal.
What Perry’s Did With Server Tips
Servers at Perry’s earned the federal tipped minimum wage of $2.13 an hour. Under a company-wide policy, each server had to contribute 4.5% of their total food and alcohol sales into a mandatory tip pool at the end of every shift. The pool was then distributed to hosts, food runners, bussers, and server assistants.1GovInfo. Paschal et al. v. Perry’s Restaurants Ltd. et al., Findings of Fact and Conclusions of Law
The FLSA lets an employer pay tipped workers below the $7.25 standard minimum wage only if the tips stay with the servers or are shared with employees who “customarily and regularly” receive tips. Many of the recipients at Perry’s worked morning shifts when the restaurants were not open to guests and had little or no contact with customers. Judge Robert Pitman found that morning bussers, morning server assistants, food runners, and morning hosts did not qualify as tipped employees because their customer interaction was less than trivial.1GovInfo. Paschal et al. v. Perry’s Restaurants Ltd. et al., Findings of Fact and Conclusions of Law
Perry’s argued at trial that the pool was designed to “even out wages between roles and shifts with varying degrees of busyness,” and that the money went only to other hourly non-management staff rather than back to the company. The court rejected that defense, holding that the FLSA bars employers from retaining tips “for any purposes,” including redirecting them to workers who are not eligible to receive them.2Houston Chronicle. Perry’s Steakhouse Ordered to Pay $21 Million in Tip Pool Lawsuit
How the $21 Million Breaks Down
Because the tip pool was unlawful, the court stripped Perry’s of its right to claim the FLSA tip credit for the entire period. The company owed every affected server the difference between the $2.13 hourly wage they received and the $7.25 federal minimum. The final judgment entered on March 24, 2026 included:
- $3,444,129.48 in unpaid minimum wages, plus an equal amount in liquidated damages
- $7,066,889.98 in misappropriated tips, plus an equal amount in liquidated damages
- $263,475.90 for the employer’s share of FICA taxes
The collective covered roughly 750 servers who worked at Perry’s Texas locations between January 2019 and January 2022. Attorneys’ fees were still being worked out as of June 2026.3People. Perry’s Steakhouse Ordered to Pay Over $21 Million to Employees Over Unlawful Tipping Pool4PACER Monitor. Paschal et al v. Perry’s Restaurants LTD et al – Docket
Why the Judge Called the Violations Willful
A willful finding under the FLSA extends the limitations period from two years to three, which enlarged both the group of affected servers and the damages window. Judge Pitman pointed to a long history of warnings the company did not act on:
- A 2003 Department of Labor investigation that found Perry’s operating an unlawful tip pool
- At least seven prior FLSA lawsuits since 2009 in federal courts in Texas, Illinois, and Colorado involving similar tip credit issues
- A 2022 NLRB complaint filed by a server who questioned the tip pool’s legality; Perry’s terminated that employee
Perry’s corporate representative testified that prior lawsuits involved the same issues, yet the company never modified its policy. Chief Operating Officer Rick Henderson testified that when Perry’s added morning hosts to the tip pool in 2021, the company did not seek legal advice, saying he was “not aware that that would be a question that needed to be asked.”1GovInfo. Paschal et al. v. Perry’s Restaurants Ltd. et al., Findings of Fact and Conclusions of Law
Christopher Perry Held Personally Liable
The judgment was entered against both the company and Christopher V. Perry as individuals, making them jointly and severally liable for the full amount. The court found that Perry qualified as an “employer” under the FLSA based on his direct involvement in the business. He is the sole owner, CEO, and president. He attended senior leadership meetings, set restaurant operations policies, personally established the 4.5% tip-share rate, and made hiring and compensation decisions for managerial positions. Employees at multiple levels reported to him on everything from staffing to floor-cleaning procedures.1GovInfo. Paschal et al. v. Perry’s Restaurants Ltd. et al., Findings of Fact and Conclusions of Law
A Parallel Case in Colorado
Perry’s is fighting a second tip pool case in federal court in Colorado. In Green v. Perry’s Restaurants Ltd., filed in January 2021, servers Lance Green and Anderson Khalid brought similar claims on behalf of workers at Perry’s Colorado location.5CourtListener. Green v. Perry’s Restaurants – Court Document
In February 2026, Judge William J. Martínez granted partial summary judgment to the plaintiffs, ruling that Perry’s violated both the FLSA and the Colorado Wage Claim Act by paying tip pool money to employees working morning shifts when the restaurant was closed. He held that regardless of job title, someone working in a closed restaurant has at most trivial customer interaction and cannot legally be paid from a tip pool. The court also found that Perry’s violated Colorado law by failing to notify customers about its tip-sharing policy from August 2019 to May 2024.6Clark Hill. Colorado Federal Court Rules Workers Don’t Qualify for Tip Pools When Restaurant Is Closed
By December 2025, the Colorado class had been expanded to cover all servers who worked at Perry’s Colorado location since January 5, 2018 and were paid a subminimum hourly wage. That case was headed toward trial.7GovInfo. Green v. Perry’s Restaurants Ltd. – Order on Motion to Enforce
The Appeal
Perry’s plans to take the Texas judgment to the Fifth Circuit. Henderson said in a statement: “We respectfully disagree with the trial court’s decision. We will continue the judicial process with an appeal to the Fifth Circuit Court of Appeals and are confident the appellate process will provide a full and fair review.” He added that the company is “committed to treating employees fairly and maintaining transparent, lawful compensation practices that are commonplace in the industry.” No store closures, layoffs, or restructuring tied to the judgment have been reported.3People. Perry’s Steakhouse Ordered to Pay Over $21 Million to Employees Over Unlawful Tipping Pool