Tipped Worker Protection Act

Summary#

This bill would change rules about tipped workers in the Fair Labor Standards Act. It would repeal the separate, lower minimum wage for tipped employees and set rules to phase in paying tipped workers the regular minimum wage. During a transition, the bill sets a cash-wage floor of $3.60 per hour for the first year after enactment and increases that floor by $1.50 each year until it equals the regular minimum wage. The bill says employees must keep all tips and makes it illegal for employers or managers to keep or use employees' tips except to run an approved tip pool. It sets rules for tip pools, including a written vote by at least 51 percent of non-supervisory employees to establish or change a pool, recordkeeping, and anti-retaliation protections. The bill requires employers to disclose when they add mandatory service charges, to tell customers and employees what portion, if any, will be paid to employees, and to promptly pay that portion to employees. It also treats certain portions of mandatory service charges as tips for Social Security tax credit purposes and updates penalties for improper use of tips. Some parts take effect when the law is enacted; the repeal of the separate tipped minimum wage takes effect under the transition schedule described in the bill.

What it means for you#

• Tipped employees: If the bill becomes law, tipped workers would eventually be entitled to the same minimum wage as non-tipped workers. During the transition, their required cash wage would start at $3.60 per hour, then increase $1.50 each year until it reaches the regular minimum wage. Workers would have a legal right to keep tips they receive.
• Employers: Employers could no longer keep employees' tips for their own use or allow managers to keep tips. Employers who want a tip pool must get a written vote from a majority (51%) of non-supervisory employees, keep records of the vote, run the pool at their expense, and follow record and disclosure rules. Employers must disclose and promptly pay any mandatory service charges that go to employees.
• Customers: Businesses that add mandatory service charges must disclose the reason for the charge and say what portion, if any, will be paid to employees. Charges claimed to be discretionary may not be added to a customer’s bill unless the customer asks.
• Payroll and taxes: Portions of mandatory service charges identified as payable to employees are treated as tips for the employer credit under Social Security tax rules.

Expenses#

No publicly available information on federal cost estimates or budgetary effects appears in the bill text or metadata. The bill does create administrative and recordkeeping requirements for employers, but it does not include official cost figures.

Proponents' View#

No publicly available information in the bill text or metadata contains statements from supporters. The bill's text shows its aims: to end the separate tipped minimum wage, require employees to retain tips, set rules for tip pools and mandatory service charges, and align service-charge treatment with tax rules.

Opponents' View#

No publicly available information in the bill text or metadata contains statements from opponents. The bill text itself does not present counterarguments or alternative views.