Congress moves to end the $2.13 tipped minimum wage—with a 3-year phase-in

What it does

This bill eliminates the separate federal minimum wage for tipped employees (currently $2.13/hour) and requires them to be paid the full federal minimum wage ($7.25/hour). It phases in the change over several years, starting at $3.60/hour and increasing by $1.50 annually until reaching the standard minimum. The bill also strengthens protections for tips: employers cannot keep tips for any reason (including payment processing fees), employees can vote to establish tip pools, and mandatory service charges must be disclosed and paid to workers.

Why we flagged it

The bill's core mechanism is a scheduled increase in the minimum wage for tipped employees paired with new legal restrictions on employer use of tips and new worker voting rights over tip pooling. It is fundamentally a labor-protection measure, not a deregulation or carve-out.

What the text implies

• The phase-in period (starting at $3.60/hour, increasing $1.50/year) means tipped workers will not reach the full $7.25 minimum for approximately 3–4 years, creating a multi-year window of below-minimum wages for workers in states that do not set a higher tipped minimum.
• The definition of 'tipped employee' excludes workers who spend >20% of hours on non-tipped duties, potentially creating incentives for employers to reclassify workers or restructure job duties to avoid the higher wage floor.
• Tip-pooling provisions require 51% worker vote to establish or modify pools, but employers retain administrative control and can mediate disputes unilaterally if workers cannot reach consensus—creating potential for employer influence over tip distribution.
• Service-charge disclosure requirements apply only to mandatory charges; voluntary tips remain unregulated, leaving room for employer pressure or manipulation of customer expectations around discretionary tipping.
• The bill treats mandatory service charges as tips for federal income tax and Social Security purposes, potentially increasing payroll tax liability for workers and employers without explicit discussion of tax consequences.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Tipped workers gain guaranteed higher base wages and stronger legal protections against tip theft and misuse. The phase-in period allows businesses time to adjust, and the tip-pooling provisions include worker voting rights and transparency requirements. The primary cost—higher labor expenses for restaurants and hospitality—is diffuse and does not directly harm ordinary citizens as consumers or workers.

Who stands to gain

• tipped workers (wage increase)
• hospitality and food-service workers (primary wage beneficiaries)

Named in the bill

Fair Labor Standards Act of 1938, Internal Revenue Code Section 3121, Electronic Fund Transfer Act Section 921, restaurants and food-service establishments, hospitality industry, payment card networks

Where it stands

13 cosponsors: 13 Democrats.

• Sep 3, 2025 — Introduced · Congress.gov: “Introduced in House”
• Sep 3, 2025 — Referred to House Committee on Ways and Means and House Committee on Education and Workforce · Congress.gov: “Referred to the Committee on Education and Workforce, and in addition to the Committee on Ways and Means, for…”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.