Tipped Worker Protection Act

This bill would end the lower “tipped” minimum wage and strengthen protections for workers’ tips. It phases in raises for tipped workers: $3.60 an hour for the first year after the law takes effect, then increases by $1.50 each year until it reaches the regular federal minimum wage. Once the tipped wage matches the regular minimum wage, the separate tipped wage is fully repealed. If an employer adopts a new, employee‑approved tip pool during the transition, the repeal applies to that employer sooner .

Workers keep all their tips. Employers, managers, and supervisors cannot keep any part of employees’ tips or use them to cover credit or debit card fees. Tip pools can be created if at least 30% of non‑supervisory employees request a vote and a majority approves. Participation must be voluntary, funds must be kept separate, and records must be open to participating employees. The definition of “tip” also covers any part of a mandatory charge that a customer could reasonably think goes straight to workers .

If a business adds a mandatory service charge, it must tell customers and workers why the charge is added and exactly what portion, if any, will go to employees—and then pay that portion promptly. Optional charges cannot be added unless the customer asks for them. For tax purposes, the disclosed portion of a mandatory charge that goes to employees is treated like tips for Social Security tax rules on amounts received after the law takes effect. Penalties are strengthened for breaking the tip rules. Most tip‑handling rules apply on the date of enactment; the tax change and the phase‑in schedule also start then .

Key points

• Who is affected: Tipped employees and their employers.
• What changes: Gradual end to the tipped minimum wage; workers keep all tips; stricter rules for tip pools; clear disclosure and prompt payment of any service‑charge portions promised to employees; tougher penalties for violations; certain service‑charge amounts treated as tips for tax purposes .
• When: Tip rules and tax treatment apply at enactment; tipped‑wage raises start at $3.60 in year one and rise $1.50 each year until they reach the regular minimum wage, when the separate tipped wage ends. Employers that set up an approved tip pool during the transition end the tipped wage sooner for their workplace .