Sponsors (7)
The bill clarifies and stabilizes how tip credits are calculated—making compliance and payroll simpler for employers and protecting tipped workers when tips are sufficient—while giving employers discretion over work-periods that could be used to shift income risk onto low-wage workers and increase enforcement complexity.
Low-income tipped workers will be guaranteed that their combined tip + cash pay meets the federal minimum wage when tips over an employer-defined work period are sufficient.
Small-business owners will have a clearer, duties-agnostic standard to determine who qualifies as a tipped employee, reducing ambiguity about eligibility for the tip credit.
Employers (especially small businesses) can simplify payroll administration by using predictable employer-defined work periods (e.g., pay periods) to calculate tip-credit eligibility.
Low-income (and some middle-class) tipped workers could be undercompensated or face greater income volatility if employers set long work periods and lower base cash wages relying on aggregated tips to meet the wage floor.
Low-income workers and small-business owners face increased risk of employer manipulation and disputes because the bill shifts discretion to employers to define work periods and monitor tip eligibility.
Taxpayers and enforcement agencies (DOL) may face higher enforcement and recordkeeping burdens if employers use varied or longer work periods, complicating wage investigations.
Based on analysis of 2 sections of legislative text.
Replaces the $30/month occupation test with an employer-set work-period test requiring combined tips and cash wages in that period to meet the federal minimum wage.
Introduced March 24, 2025 by Steve Womack · Last progress March 24, 2025
Replaces the old $30-per-month occupation test for who counts as a "tipped employee" with a duties-agnostic, employer-defined "work period" test that looks at whether an employee's tips plus cash wage during that work period (together with the cash wage floor) equal at least the federal minimum wage. Employers must pick a work period (for example, a day, a week, two weeks, 28 days, or each pay period) and ensure that tips plus required cash wages in that period meet the minimum wage before treating someone as a tipped employee eligible for the tip credit.