A small clarification and refinement. The definition of a "tipped employee" in Section 3(t) of the FLSA was refined to clarify the language regarding the wage calculation and to specify the types of work periods an employer may use for evaluation, replacing "1 month" with "every 28 days" for greater precision.
Tipped Employee Protection Act
- Sponsor
- Rep. Womack, Steve [R-AR-3]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Jan 13, 2026
Bottom line
The bill revises the definition of a tipped employee under federal law, potentially offering employers greater flexibility in how tips are credited towards minimum wage, including for non-tipped duties, and over longer pay cycles.
What it actually does
This bill amends the Fair Labor Standards Act of 1938 to redefine "tipped employee." It changes the definition from an employee who "customarily and regularly receives more than $30 a month in tips" to one who receives tips and other cash wages that, when combined with the employer's cash wage, meet the federal minimum wage over an employer-determined work period. Crucially, it specifies this applies "without regard to the duties of the employee" and allows the work period to be a day, week, or even a full pay period.
Proponents argue
Proponents argue that this bill clarifies the definition of a tipped employee, reduces administrative burdens for businesses, particularly in the hospitality sector, and provides flexibility for employers to ensure employees meet minimum wage requirements through a combination of cash wages and tips over a defined work period. They contend it eliminates complex and often litigated rules regarding the distinction between tipped and non-tipped duties, fostering a more predictable regulatory environment.
Opponents contend
Opponents contend that this legislation could weaken protections for tipped workers, making it easier for employers to pay a sub-minimum cash wage for significant portions of an employee's time, including non-tipped duties. They argue that allowing wages to be averaged over longer work periods could lead to financial instability for workers and that the "without regard to the duties" clause could result in tips subsidizing non-tipped work, effectively reducing workers' overall take-home pay.
The bill text is very short and can be read quickly, but its implications for millions of tipped workers and their employers are significant and require deeper consideration than the text length suggests.
Section 2, amending 29 U.S.C. 203(t)
Revision of Tipped Employee Definition
This provision fundamentally alters the definition of a "tipped employee" under the Fair Labor Standards Act. It removes the requirement that an employee "customarily and regularly receives more than $30 a month in tips." Instead, it defines a tipped employee as someone who receives tips and other cash wages that, when combined with the employer's direct cash wage, are not less than the federal minimum wage for a specified work period. This calculation is to be made "without regard to the duties of the employee," meaning the type of work performed (tipped or non-tipped) does not affect whether tips can be credited towards the minimum wage. The work period can be determined by the employer, such as a day, week, or entire pay period.
Supporters argue
Supporters argue that this revision clarifies the definition of a tipped employee, providing much-needed regulatory certainty for employers. They contend that the "without regard to the duties" clause eliminates the complex and often litigated "80/20 rule," which required employers to track time spent on tipped versus non-tipped duties, thereby reducing administrative burdens and potential for costly disputes. The flexibility in defining the "work period" allows businesses to account for the natural fluctuations in tip income while still ensuring minimum wage compliance over a reasonable timeframe.
Critics contend
Opponents contend that this provision weakens protections for tipped workers by allowing employers to count tips towards the minimum wage for all hours worked, regardless of whether those hours were spent on tipped or non-tipped duties. They argue that this could lead to employers paying the sub-minimum cash wage for significant portions of an employee's time spent on tasks like cleaning or food preparation, effectively using tips earned during service hours to subsidize non-tipped work. Furthermore, allowing averaging over longer work periods could mean workers receive less than minimum wage for extended stretches, creating financial instability.
Tradeoffs
This provision navigates the tension between providing employers with greater flexibility and reducing administrative complexity in managing tipped wages, versus ensuring robust wage protections and consistent income for tipped employees. It seeks to simplify compliance for businesses but raises concerns about potential impacts on worker earnings and the scope of the tip credit.
The bill explicitly states that the definition of a tipped employee applies "without regard to the duties of the employee."
Section 2(2), amending 29 U.S.C. 203(t)
Why it matters:This phrase is a deliberate policy choice to address and effectively eliminate the long-standing "80/20 rule" and similar interpretations by the Department of Labor, which previously limited the amount of time a tipped employee could spend on non-tipped duties while still being paid the sub-minimum cash wage. Its inclusion here aims to simplify compliance by removing that distinction.
Case for: Proponents argue this simplifies compliance for employers, eliminating the complex and often litigated "80/20 rule" and similar interpretations that created administrative burdens and uncertainty for businesses, especially in the restaurant industry. It ensures that all hours worked by a tipped employee, regardless of specific task, can contribute to the tip credit calculation, making payroll management more straightforward.
Case against: Opponents argue this provision could allow employers to pay the sub-minimum cash wage for significant portions of an employee's time spent on non-tipped duties (e.g., cleaning, food prep), effectively using tips earned during service hours to subsidize non-tipped work. This could reduce the employee's overall effective wage for non-tipped tasks and shift more financial risk onto the worker.
Estimated impact: Potentially significant impact on the wages of millions of tipped employees who perform a mix of tipped and non-tipped duties, particularly in the hospitality and service sectors.
The bill defines "work period" as a period determined by the employer, such as 1 day, 1 week, every 2 weeks, every 28 days, or every pay period, for the purpose of calculating whether the combined cash wage and tips meet the minimum wage.
Section 2(3), adding paragraph (2) to 29 U.S.C. 203(t)
Why it matters:This provision provides employers with flexibility in how they calculate and ensure compliance with the minimum wage for tipped employees. By allowing averaging over longer periods, it can smooth out fluctuations in tips, which is a key concern for businesses in industries with variable customer traffic.
Case for: Proponents argue this flexibility allows employers to manage payroll more efficiently and account for the natural variability of tip income. It ensures that an employee's total compensation over a reasonable period meets the minimum wage, even if daily tips fluctuate, reducing the need for frequent adjustments and administrative overhead.
Case against: Opponents argue that allowing employers to average wages over longer work periods (e.g., 28 days or a full pay period) could mean that employees might work for extended stretches where their combined cash wage and tips fall below the minimum wage, only to be "made whole" later. This could create significant financial instability for workers who rely on consistent income to cover immediate expenses.
Estimated impact: Affects how frequently employers must assess and ensure minimum wage compliance for tipped workers, potentially impacting cash flow for employees and administrative burden for employers across the service industry.