HR 85119th CongressIn Committee

Small Business Flexibility Act

Introduced: Jan 3, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Small Business Flexibility Act would revise the Fair Labor Standards Act to broaden who may participate in tip pooling. Under current law, tip pools are limited to employees who customarily and regularly receive tips. The bill adds a new subparagraph that defines three categories of employees who can be part of tip pools: (a) employees who customarily and regularly receive tips (the existing pool), (b) employees who customarily and regularly receive tips and also receive a cash wage at least equal to federal minimum wage, and (c) employees who do not customarily and regularly receive tips. In effect, this change allows tip pools to include certain tipped employees who also earn minimum-wage wages and, notably, employees who do not customarily receive tips at all. The goal is to give small businesses more flexibility in how they distribute tips among a broader set of staff.

Key Points

1Expands tip pooling eligibility beyond only traditional tip-receiving employees to include additional categories defined in new subparagraph (C).
2Subparagraph (C) establishes three pools: (i) all employees who customarily and regularly receive tips; (ii) employees who customarily and regularly receive tips and earn a cash wage at or above the federal minimum wage; and (iii) employees who do not customarily and regularly receive tips.
3The change is framed as providing “flexibility” for small businesses in how tips are distributed among staff.
4The bill preserves the structure of tip pooling under the Fair Labor Standards Act but broadens who can participate, potentially affecting how tip income is shared with non-tip-earning staff.
5The bill assigns the short title “Small Business Flexibility Act” and would become law if enacted through the normal legislative process.

Impact Areas

Primary group/area affected- Employers in the service sector (especially small businesses) that rely on tip pools, and employees who receive tips as well as certain non-tip staff who are paid at least the federal minimum wage.Secondary group/area affected- Back-of-house or non-tipped employees who may now be eligible to share in tip pools under the new categories, potentially including cooks, hosts, or other staff in establishments with tipping practices.Additional impacts- Compliance and administration: Employers will need to adjust payroll and tip-pooling processes to align with the broadened definitions and ensure proper documentation.- Wage considerations: The explicit inclusion of employees paid at or above minimum wage in tip pools could affect overall wage and tip distributions, with potential implications for wage equity and morale.- Interaction with state law: States with stricter or different tip-pooling rules or higher minimum wages may affect how this federal change applies locally (state law may still govern where it provides greater protections).

Generated by gpt-5-nano on Nov 18, 2025