Sponsors (12)
The bill strengthens protections and guaranteed cash pay for tipped workers and clarifies tip- and service‑charge tax treatment, at the cost of higher labor and administrative expenses for employers (especially small hospitality businesses) and potential changes to some workers' take-home pay or total earnings as businesses adjust.
Tipped workers (servers, bartenders, etc.) will receive higher guaranteed cash pay immediately (initial bump to $3.60/hr and scheduled $1.50/yr increases) and ultimately have the tipped minimum wage phased out so they are paid at least the federal minimum in cash.
Tipped employees gain an explicit legal right to keep all tips and to prompt payment of mandatory service charges, and are protected from managers/supervisors taking tips or employer use of tips for card fees.
The bill creates clearer rules for tip retention, tip-pool creation/modification, recordkeeping, and ties damages to tips 'used or kept,' improving accountability and making it easier for employees to recover unlawfully withheld tips.
Small businesses in hospitality (restaurants, bars) will face materially higher labor costs during the phase-in and after the tip-credit phaseout, which may lead to higher menu/pricing, reduced hiring, cut hours, or closures.
Some tipped employees could see lower total take-home earnings if employers change tipping models, reduce tip-outs, cut hours, or alter pricing strategies in response to higher wage costs.
Employers will incur increased administrative, recordkeeping, compliance costs and greater penalty/liability exposure (including cross-referenced penalties), raising business overhead and audit/litigation risk.
Based on analysis of 4 sections of legislative text.
Phases out the FLSA tip credit with a rising cash-wage schedule for tipped workers, tightens tip-retention and pooling rules, and treats certain service charges as tips for payroll-tax purposes.
Introduced September 3, 2025 by Jahana Hayes · Last progress September 3, 2025
Eliminates the federal tip credit over a multi-year schedule and replaces it with a rising minimum cash wage for workers who receive tips, strengthens rules that protect employees’ tips and limits employer use of tips, and treats certain mandatory service charges as tips for payroll-tax purposes. It also creates new procedural and recordkeeping requirements for tip-pooling, requires prompt disclosure and payment of service charges to employees, and bans employers and managers from keeping employee tips. Many of the employee protections and the payroll-tax change take effect on enactment for tips and service charges received after that date; the full repeal of the tip-credit framework follows a phased schedule that raises the mandatory cash wage each year until it reaches the regular federal minimum wage (or takes effect sooner for employers who establish certain tip-pooling arrangements).