Sponsors (14)
Official title: To amend the Fair Labor Standards Act of 1938 to repeal the separate minimum wage for tipped employees, and for other purposes.
Introduced September 3, 2025 by Jahana Hayes · Last progress September 3, 2025
The bill shifts pay and legal protections toward tipped workers—raising guaranteed cash wages and strengthening tip rights and tax clarity—while imposing higher labor, payroll-tax, compliance, and cash‑flow costs on small hospitality businesses that could lead to higher prices, reduced hiring, or litigation.
Tipped workers (servers, bartenders, other tipped employees): immediate increase in guaranteed cash pay (starts at $3.60/hr with annual increases) and a phase‑out of the tip credit so that tipped employees eventually receive at least the federal minimum wage in cash.
Tipped employees: clear legal right to keep all tips and to prompt payment of mandatory service charges, plus explicit prohibitions on managers/supervisors taking tips and on employers using tips to cover card-processing fees, strengthening worker protections against theft and misuse of tips.
Employees and employers: improved transparency and accountability for tip pools and recordkeeping via clearer procedures for creating/modifying tip pools and clarified tip‑retention liability, which should make enforcement and recovery of owed tips easier for workers.
Small businesses in hospitality (restaurants, bars): substantially higher labor and payroll-tax costs from increased cash wages and reclassification of service charges, likely leading to higher menu prices, reduced hiring, cut hours, or potential business closures.
Some tipped employees: risk of reduced total take‑home earnings if employers respond by lowering tip rates, cutting hours, or if reclassification of service charges increases payroll tax withholding on amounts workers previously treated as non-taxable.
Employers: increased administrative, compliance, and legal burdens from new recordkeeping, modified tip‑pool procedures, immediate payment rules, and expanded penalty cross‑references, raising operating costs and exposure to penalties and litigation.
Based on analysis of 4 sections of legislative text.
Phases out the federal tip credit, raises required cash wages for tipped workers to the regular minimum over time, bans employers from keeping tips, tightens tip-pool rules, and treats certain service charges as tips for payroll taxes.
Ends the federal tip-credit system and phases in a higher cash minimum wage for tipped workers while strengthening rules that protect tips and tip-pooling. It also treats certain mandatory service charges as tips for payroll tax purposes. The bill replaces the current tipped minimum-wage framework with a transitional cash-wage schedule that raises employers' required direct pay for tipped employees each year until it equals the regular federal minimum wage, bans employers from keeping employee tips, sets new rules for tip-pools and mandatory service charges, and changes how those service charges are treated under Social Security payroll tax rules.