Tipped Worker Protection Act
Bill: H.R.8427 | Sponsor: Rep. Hayes, Jahana (D-CT)
Policy area: Labor and Employment

Summary:
Tipped Worker Protection Act
This bill increases the minimum wage for tipped employees over a phase-in period and provides a process for employers to pool and distribute tips.

To amend the Fair Labor Standards Act of 1938 to repeal the separate 
       minimum wage for tipped employees, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tipped Worker Protection Act''.

SEC. 2. SCHEDULED REPEAL OF SEPARATE MINIMUM WAGE FOR TIPPED EMPLOYEES.

    (a) In General.--
            (1) Repeal.--Section 3(m)(2)(B) of the Fair Labor Standards 
        Act of 1938 (29 U.S.C. 203(m)(2)(A)), as so redesignated by 
        section 3(a) and as amended by section 3(b) of this Act, is 
        amended by striking the sentence beginning with ``In 
        determining the wage an employer is required to pay a tipped 
        employee,'' and all that follows through ``of this 
        subsection.'' and inserting ``The wage required to be paid to a 
        tipped employee shall be the wage set forth in section 
        6(a)(1).''.
            (2) Conforming amendments.--
                    (A) Retention of tips.--Section 3(m)(2)(C) of the 
                Fair Labor Standards Act of 1938 (29 U.S.C. 
                203(m)(2)(B)), as so redesignated by section 3(a) and 
                as amended by section 3(c) of this Act, is further 
                amended in clause (i) of such section 3(m)(2)(C) by 
                striking ``Regardless of whether or not an employer 
                takes a tip credit, the employer'' and inserting ``An 
                employer''.
                    (B) Status as a tipped employee.--Subsection (t) of 
                section 3 of the Fair Labor Standards Act of 1938 (29 
                U.S.C. 203) is repealed.
                    (C) Penalties.--Section 16 of the Fair Labor 
                Standards Act of 1938 (29 U.S.C. 216), as amended by 
                this Act, is further amended--
                            (i) in subsection (b), by striking ``the 
                        sum of any tip credit taken by the employer and 
                        all such tips unlawfully kept by the employee'' 
                        and inserting ``the sum of all such tips 
                        unlawfully used or kept by the employee''; and
                            (ii) in subsection (c), by striking ``the 
                        sum of any tip credit taken by the employer and 
                        all such tips unlawfully kept by the employee'' 
                        and inserting ``the sum of all such tips 
                        unlawfully used or kept by the employee''.
            (3) Delayed effective date.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by paragraphs (1) and (2) 
                shall take effect with the beginning of the first 1-
                year period described in 3(m)(2)(A)(i) of the Fair 
                Labor Standards Act of 1938 (29 U.S.C. 
                203(m)(2)(A)(i)), as amended by subsection (b), for 
                which the hourly wage for such 1-year period would 
                equal or exceed the minimum wage in effect under 
                section 6(a)(1) as of the beginning of such 1-year 
                period.
                    (B) Special rule for tip pools established or 
                maintained during transition period.--In any case in 
                which a system to pool tips is established for the non-
                supervisory employees of an employer in accordance with 
                section 3(m)(2)(D) of such Act (29 U.S.C. 203(m)(2)(D)) 
                (as added by section 3(d) of this Act) prior to the 
                beginning of the 1-year period described in 
                subparagraph (A), the amendments made by paragraphs (1) 
                and (2) shall apply with respect to such employer 
                beginning with the date on which such system is 
                established.
    (b) Minimum Wage for Tipped Employees During Transition Period.--
            (1) In general.--Clause (i) of section 3(m)(2)(B) of the 
        Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)(A)), as 
        so redesignated by section 3(a) of this Act, is amended to read 
        as follows:
                            ``(i) the cash wage paid such employee, 
                        which for purposes of such determination shall 
                        be not less than--
                                    ``(I) for the 1-year period 
                                beginning on the date of enactment of 
                                the Tipped Worker Protection Act, $3.60 
                                an hour;
                                    ``(II) for each succeeding 1-year 
                                period, an hourly wage equal to the 
                                amount determined under this clause for 
                                the preceding 1-year period increased 
                                by $1.50 (but not to exceed the minimum 
                                wage in effect under section 6(a)(1) as 
                                of the beginning of such 1-year 
                                period); and''.
            (2) Definition of tipped employee.--Section 3(t) of such 
        Act (29 U.S.C. 203(t)) is amended by striking ``he customarily 
        and regularly receives more than $30 a month in tips'' and 
        inserting ``the employee customarily and regularly receives for 
        each month an amount in tips equal to (or in excess of) the 
        difference between the total cash wages paid to the employee 
        under subsection (m)(2)(A)(i) for such month and the total 
        wages that would have been paid to the employee for the hours 
        worked in such month pursuant to the minimum wage in effect 
        under section 6(a)(1) but for subsection (m)(2), except that an 
        employee shall not be considered a `tipped employee' for any 
        workweek in which the employee spends more than 20 percent of 
        the employee's hours of employment performing duties related to 
        the employee's occupation for which the employee does not 
        directly receive tips''.

SEC. 3. REQUIREMENTS RELATING TO RETENTION AND POOLING OF TIPS.

    (a) Treatment of Certain Amounts as Tips.--Section 3(m)(2) of the 
Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as 
        subparagraphs (B) and (C), respectively; and
            (2) by inserting before subparagraph (A), as so 
        redesignated, the following:
    ``(A) `Tip' includes any discretionary amount paid directly to an 
employee by a customer and any portion of a mandatory charge imposed on 
a customer by the employer which is added to the cost of the product or 
service in any manner that may reasonably lead the customer to believe 
that the amount collected by the employer from such charge will be paid 
in full directly to the employee.''.
    (b) All Tips Retained by Employees.--Subparagraph (B) of section 
3(m)(2) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)), 
as redesignated by subsection (a), is amended by striking ``of this 
subsection'' and all that follows through the end of the subparagraph 
and inserting ``of this subsection. Any employee shall have the right 
to retain, regardless of whether received as part of a system to pool 
tips established in accordance with subparagraph (C), any tips received 
by such employee.''.
    (c) No Tips Retained by Employers.--Subparagraph (C) of section 
3(m)(2)(C) of the Fair Labor Standards Act of 1938 (29 U.S.C. 
203(m)(2)), as redesignated by subsection (b), is amended to read as 
follows:
    ``(C)(i) Regardless of whether or not an employer takes a tip 
credit, the employer may not keep tips received by its employees for 
any purpose or use such tips for any purpose other than to facilitate 
the distribution to employees of the full amount of all such tips under 
a system to pool tips established in accordance with subparagraph (D).
    ``(ii) A violation of clause (i) includes--
            ``(I) allowing managers or supervisors to keep or use any 
        portion of employees' tips; and
            ``(II) keeping or using any portion of employees' tips to 
        cover the cost of financial transaction fees, including any fee 
        established, charged, or received by a payment card network for 
        the purpose of compensating an issuer for its involvement in a 
        transaction in which a person uses a debit card or credit card 
        (as the terms ``debit card'', ``credit card'', ``issuer, and 
        ``payment card network'' are defined in section 921(c) of the 
        Electronic Fund Transfer Act (15 U.S.C. 1693o-2(c)))''.''.
    (d) Tip Pools.--Section 3(m)(2) of the Fair Labor Standards Act of 
1938 (29 U.S.C. 203(m)(2)), as amended by this section, is further 
amended by adding at the end the following:
    ``(D)(i) In any case in which an employer is provided with written 
documentation demonstrating that not less than 30 percent of all of the 
non-supervisory employees of the employer request a vote on whether to 
establish or modify a system to pool tips in accordance with this 
subparagraph, such a system shall be considered to be so established or 
modified if the employer is provided with written documentation 
demonstrating that not less than 51 percent of all such employees vote 
in favor of establishing or modifying such a system.
    ``(ii) The employer shall maintain a written record of any vote to 
establish or modify a system to pool tips held pursuant to this 
subparagraph, including the name of each employee voting and the vote 
totals. The employer shall provide a copy of such record to any 
employee upon request.
    ``(iii)(I) A system to pool tips established under this 
subparagraph shall be administered by the employer, at the employer's 
expense, in a manner ensuring that--
            ``(aa) participation in the system is voluntary for each 
        employee and determined without coercion from the employer;
            ``(bb) such tips are shared among all non-supervisory 
        employees participating in such system;
            ``(cc) funds held in such system are maintained separately 
        from any other funds; and
            ``(dd) the records of such system are available to be 
        examined by each such participating employee.
    ``(II) In administering a system to pool tips established under 
this subparagraph, an employer may suggest reasonable and customary 
practices.
    ``(III) In any dispute among employees relating to the 
administration of a system to pool tips established under this 
subparagraph, the employer may mediate and impose a resolution of the 
dispute on the employees participating in the system only if--
            ``(aa) in the case of employees in a restaurant or similar 
        retail food establishment, no agreement resolving the dispute 
        can be reached among--
                    ``(AA) 50 percent or more of the participating 
                service employees whose primary job duties include 
                direct interaction with customers; and
                    ``(BB) 50 percent or more of all other 
                participating employees; and
            ``(bb) in the case of employees in any other establishment, 
        no agreement resolving the dispute can be reached among 50 
        percent or more of the participating employees.
    ``(iv) An employer shall not be required to compensate any employee 
participating in a system to pool tips established under this 
subparagraph in any case arising as a result of another participating 
employee withholding tips from such system.
    ``(v) An employer shall not discharge an employee or otherwise 
discriminate against an employee based on the employee's vote with 
respect to, or participation in, a system to pool tips established 
under this subparagraph.
    ``(vi) In this subparagraph, the term `non-supervisory employee' 
means any employee who has, at any point in their typical duties, 
decision making authority over the scheduling of other employees, the 
hiring of other employees, or the termination of other employees.''.
    (e) Service Charges.--Section 3(m)(2) of the Fair Labor Standards 
Act of 1938 (29 U.S.C. 203(m)(2)), as amended by this section, is 
further amended by adding at the end the following:
    ``(E)(i) In any case in which an employer imposes a mandatory 
charge on a customer which is added to the cost of the product or 
service, the employer shall--
            ``(I) disclose to the customer and to all employees 
        involved in the sale of such product or delivery of such 
        service--
                    ``(aa) the reason for such charge; and
                    ``(bb) the portion of such charge, if any, which 
                upon its collection will be paid in full by the 
                employer directly to employees; and
            ``(II) promptly pay to employees upon collection of such 
        charge any portion identified in the disclosure required under 
        subclause (I)(bb);
    ``(ii) In any case in which an employer represents that a charge is 
payable at the discretion of the customer, the employer may not add 
such charge to the cost of any product or service unless first 
requested by the customer.''.
    (f) Penalties.--Section 16(e)(2) of the Fair Labor Standards Act of 
1938 (29 U.S.C. 216(e)(2)) is amended--
            (1) by striking ``section 3(m)(2)(B)'' and inserting ``any 
        provision of section 3(m)(2)''; and
            (2) by inserting ``or used'' after ``kept''.
    (g) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act and shall apply with 
respect to all tips received on or after such date.

SEC. 4. SERVICE CHARGES TREATED AS TIPS FOR PURPOSES OF EMPLOYER CREDIT 
              FOR SOCIAL SECURITY TAXES, ETC.

    (a) In General.--Section 3121(q) of the Internal Revenue Code of 
1986 is amended by adding at the end the following: ``In the case of 
any mandatory charge to which section 3(m)(2)(E) of the Fair Labor 
Standards Act applies, the portion of such charge described in 
subclause (I)(bb) of such section shall be treated as tips for purposes 
of this subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts received on or after the date of the enactment of this Act.
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