Local Governments Tip Offsets for Tipped Employees

Current law allows a local government to establish local minimum wages in excess of the statewide minimum wage established in the state constitution. A local government that enacts a minimum wage must provide a tip offset for tipped employees in an amount equal to the tip offset amount described in the state constitution, which is $3.02.

The bill requires states that on and after January 1, 2026, a local government that has enacted a code or an ordinance imposing a minimum wage that exceeds the state minimum wage to enact another code or ordinance on or before September 1, 2025, that: may increase the amount of the tip offset associated with the local minimum wage; except that a local government shall not impose a tip offset in an amount that allows a tipped employee to earn less than the state minimum wage minus $3.02.

• Imposes a tip offset for food and beverage employees in an amount that equals the amount by which the local minimum wage exceeds the state minimum wage, plus $3.02; and
• Takes effect on or before October 1, 2025.

After September 1, 2025, and until October 1, 2026, a local government that enacts a code or an ordinance that imposes a minimum wage in an amount that exceeds the amount of the state minimum wage must also enact a code or an ordinance that imposes a tip offset in an amount that equals the amount by which the local minimum wage exceeds the state minimum wage, plus $3.02. On and after October 1, 2026, a local government may enact a code or an ordinance that increases or decreases the amount of the local tip offset; except that a local government may not enact a code or an ordinance that:

• Decreases the amount of the tip offset to an amount less than $3.02;
• Decreases the amount of the tip offset by more than 50 cents in any 12-month period; or
• Increases the amount of the tip offset by an amount that would allow an employee to be paid a wage that is less than the state minimum wage, minus $3.02.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)