Tipped Employee Protection Act

Who is affected and how:

• Workers in tipped occupations (servers, bartenders, bartenders, baristas, salon workers, valets, hotel staff, etc.): The amendment changes the test used to determine whether they are legally a "tipped employee." With the $30 monthly exclusion removed, some workers who previously would not have been treated as tipped (because they received only occasional small tips) may now fall within the tipped-employee category if their combined cash wage and tips during the chosen period meet the federal minimum wage. That can affect how employers calculate pay and tip-credit applicability.

• Employers (restaurants, bars, hotels, salons, retail establishments, and other businesses that rely on tipped labor): Employers gain flexibility in choosing the measurement period for tips and cash wages, but they must track tips and cash wages over the chosen interval and apply that rule consistently. The choice of a shorter or longer period can influence whether a worker qualifies as a tipped employee for that interval, which in turn affects payroll liabilities, potential tip-credit use, and compliance risk.

• Payroll and HR/payroll administrators: Payroll systems and processes will likely need updates to aggregate tips and cash wages according to the employer-selected period and to produce documentation for audits or wage‑and‑hour compliance reviews.

• Wage-and-hour enforcement agencies and courts: Enforcement officers and adjudicators will interpret and apply the new definition and the employer-selected measurement period when evaluating compliance with minimum-wage and tip-credit rules. The change may give rise to disputes and litigation over appropriate measurement periods, whether employers applied the rule consistently, and whether workers were paid lawfully in specific pay periods.

• Small businesses: Smaller employers may face administrative burdens adapting recordkeeping and payroll to the new measurement options; at the same time, some may prefer the flexibility to pick a period that fits their payroll cadence.

Net effect and likely dynamics:

• The amendment provides employers greater discretion over calculation timing while removing the narrow exclusion for very small tip receipts. That could increase the number of workers formally covered by the tipped‑employee definition in some workplaces, and create variability in tipped‑status determinations across employers and pay cycles. Employers that choose short measurement periods may see more frequent reclassification of workers from tipped/non‑tipped status across paychecks, creating potential compliance complexity and disputes. Enforcement agencies will need to resolve cases where employers' chosen measurement periods produce contested outcomes.