User:K. Kellogg-Smith/Legislative history of the tip credit

The tip wage credit is an employer benefit included in a 1966 amendment to the U. S. Fair Labor Stamdards Act of 1938 ("FLSA", or "the Act") which extended coverage to hotel, motel and restaurant workers. The tip wage credit section of the amendment allowed employers, under certain conditions, to pay employees who receive tips less than the federal minimum wage stated in the Act. The amendment was added during President Johnson's administration by the Democratic-controlled 89th Congress. In 1996, during President Clinton's administration, the Republican-controlled 104th Congress for the first time indirectly amended the Fair Labor Standards Act through amendments and revisions included in other legislation, instead of directly amending the Act as had been the practice up to that time. To insure passage of tip credit changes in the Act that were a significant benefit to business, the changes were included as amendments to Section 2105, "Fair Labor Standards Act amendments" to the Small Business Job Protection Act. Although amendments to change the FLSA's minimum wage and other provisions have been initiated in subsequent U.S. Congresses, no changes to the tip credit provisions of the Act have been made since the 104th Congress.

Legislative background
The Fair Labor Standards Act of 1938 was a major piece of U.S. labor legislation when it was was enacted by the 75th Congress during the administration of President Franklin D. roosevelt,  The Act classified and defined workers who were to be covered under the provisions of the Act, and set the minimum wages, hours of work, overtime pay, and other conditions of employment for workers covered by the Act. While most wage-earning workers were covered by the provisions of the Act, agricultural and other classes of workers were specifically excluded from coverage. Among workers who were initially excluded from coverage under the Act were workers in the lodging and food service industries, many of whom regularly and customarily received tips and gratuities from customers.

Legislative history
Discussions and lobbying by labor unions and hotel and restaurant associations about including or continuing to exclude workers in the lodging and food service workers from coverage under the Act came up during many Congressional sessions subsequent to passage of the Act. By 1960 the arguments for inclusion of lodging and food service workers reached a point where Congressional action appeared to be necessary. Four months after President John F. Kennedy took office in 1961, the 87th Congress amended the Act to review coverage under the Act for lodging and food service workers. Five years later, during the administration of President Lyndon B. Johnson, the 89th Congress amended the FLSA to include hotel, motel, and restaurant workers under the provisions of the Act. Employers of tipped employees in the lodging and food service industries were, like all other employers, obligated to pay all their employees at least the minimum wage set by the Act, but were allowed to credit an employee's tips as "wages paid" under the minimum wage provisions of the Act, with the proviso that the credit taken could not exceed 50% of the statutory minimum hourly wage. The most substantive change to date made to the tip wage credit provision of the FLSA was made in 1996 during President George W. Bush's Republican-controlled 104th Congress, in their Section 2105(b) amendment to the Small Business Job Protection Act they fixed the minimum cash wage requirement for employers of tipped employees at not more than $2.13 an hour, and the employers' tip credit at not less than $2.13 an hour. The effect of this provision in the Small Business Job Protection Act was to permanently fix the minimum hourly cash wage for tipped employees at $2.13 an hour, regardless of the statutory minimum hourly wage, and to allow employers of tipped employees to increase their tip wage credit percentage by more than 50% of their tipped employees' minimum wage as the federal minimum hourly wage was increased. Subsequent U.S. Congresses have amended the Fair Labor Standards Act to gradually increase the minimum wage, but no Congressional action has ever been taken to eliminate the Act's tip credit provisions.