Tipped Worker Protection Act

The "Tipped Worker Protection Act" seeks to fundamentally alter the compensation structure for tipped employees by repealing the separate minimum wage for these workers. This legislation mandates a transition period during which the direct cash wage paid by employers to tipped employees will gradually increase, starting at $3.60 per hour and rising by $1.50 annually, until it reaches the full federal minimum wage. A key provision ensures that all tips are retained by employees , explicitly prohibiting employers, managers, or supervisors from keeping any portion of tips or using them to cover business costs, including financial transaction fees. The bill also expands the definition of "tip" to include certain mandatory service charges that customers might reasonably perceive as going directly to staff. Furthermore, it establishes a framework for employee-approved tip pooling systems among non-supervisory staff, requiring a majority vote for establishment and employer administration at no cost to employees. Employers imposing mandatory service charges must disclose the reason for the charge and the specific portion, if any, that will be paid directly to employees. These allocated service charges will also be treated as tips for Social Security tax purposes. The amendments related to tip retention, pooling, and service charges will take effect immediately upon enactment.