H.R. 3662 — Labor Income Fairness and Transparency Act

This section increases the federal minimum wage under the Fair Labor Standards Act of 1938 from $7.25 per hour in phased steps—(1) to $10.25 per hour beginning one year after enactment; (2) to $13.75 per hour beginning two years after enactment; (3) to $17.00 per hour beginning three years after enactment; and (4) for each succeeding year, to an amount (not less than the prior year's minimum wage, rounded up to the nearest $0.05) equal to the prior year's minimum wage multiplied by the percentage increase in the median hourly wage of all employees (as determined quarterly by the Secretary of Labor using Bureau of Labor Statistics data). (Thus, the minimum wage will track growth in median wages after reaching $17.00 per hour.)

This section phases out subminimum wage exceptions under the Fair Labor Standards Act (FLSA) for youth, student-learners, full-time students, and workers with disabilities, effective one year after enactment. (As background, these exceptions currently allow employers to pay youth under age 20 $4.25 per hour for the first 90 days of employment; student-learners and full-time students at certified or percentage-based rates below the $7.25 federal minimum wage; and workers with disabilities at productivity-based rates below the minimum wage via special certificates issued by the Secretary of Labor.) Specifically, beginning on the effective date, the section— (1) revises youth wages under Section 6(g) for the first 90 consecutive calendar days to $8.50 per hour (from $4.25), increasing to $12.75 after 12 months, $17.00 after 24 months, and the statutory minimum wage under Section 6(a)(1) after 36 months; (2) sets minimum rates for student-learner certificates under Section 14(a) to $9.29 per hour, $13.14 after 12 months, $17.00 after 24 months, and the statutory minimum wage after 36 months (previously, rates certified below the minimum wage); (3) substitutes rates for full-time students under Section 14(b) to $9.77 per hour, $13.38 after 12 months, $17.00 after 24 months, and the statutory minimum wage after 36 months (previously, percentages yielding subminimum rates); and (4) sets minimum rates for special certificates for workers with disabilities under Section 14(c) to $9.77 per hour, $13.38 after 12 months, $17.00 after 24 months, and the statutory minimum wage after 36 months (previously, productivity-based subminimum rates), and prohibits issuance of new special certificates after 36 months.

This section revises the Fair Labor Standards Act (FLSA) cash wage requirements for tipped employees (currently $2.13 per hour plus a tip credit up to the $7.25 federal minimum wage) by requiring employers to pay (1) $7.09 per hour beginning on the effective date specified in section 6(a)(1)(A); (2) $12.05 per hour beginning 12 months thereafter; (3) $17.00 per hour beginning 24 months thereafter; and (4) the full minimum wage under section 6(a)(1) beginning 36 months thereafter. It requires employers to provide tipped employees with daily notice of tips received, permits tip pooling among employees who customarily and regularly receive tips, and prohibits employers, managers, or supervisors from retaining any employee tips—including for processing costs—regardless of whether a tip credit is taken. The amendments take effect one year after enactment.

This section increases civil penalties in section 16(e)(2) of the Fair Labor Standards Act to $2,200 (from $1,100) each place the amount appears. The amendments take effect 120 days after the date of enactment.

This section authorizes the Secretary of Labor to make grants to eligible state, local, and Tribal governments to (1) develop and enforce wage laws and regulations and (2) improve compliance with wage laws and regulations, including through training and educational workshops. To be eligible, a state or local government must submit an application as required by the Secretary.

This section establishes the National Advisory Committee on the Hospitality Industry to advise the Secretary of Labor on matters related to hospitality workers, including the Fair Labor Standards Act, tipped workers, worker safety, apprenticeships, independent contractors, visa programs, and other relevant issues. The 15-member committee, appointed by the Secretary, consists of (1) five labor organization representatives (one each from hotels and lodging, food and beverage service including restaurants, and gaming and entertainment); (2) five employer representatives from the same sectors; (3) three public members with relevant expertise; and (4) two representatives from state, local, or Tribal government agencies related to tourism or wage enforcement. The committee must meet at least twice annually, and the Secretary must provide it with an executive secretary and necessary staff services.

This section restores and makes permanent, for taxable years beginning after December 31, 2025, temporary expansions to the Earned Income Tax Credit (EITC) for individuals without qualifying children (i.e., refundable tax credits that supplement earnings and offset payroll taxes for low-income workers). Specifically, it (1) eliminates the maximum age limit of 65 and lowers the minimum age to age 19 (from age 25) generally, to age 24 for specified students, or to age 18 for qualified former foster youth or qualified homeless youth; (2) doubles the credit rate and phaseout rate to 15.3% (from 7.65%); and (3) increases the earned income amount to $9,820 (from $4,220) and phaseout amount to $11,610 (from $5,280), with inflation adjustments based on calendar year 2020 (from 1995).

This section establishes definitions for purposes of the Act, including (1) "State," which has the meaning given the term in section 3(c) of the Fair Labor Standards Act of 1938 (29 U.S.C. 3(c)) (i.e., the 50 states, DC, Puerto Rico, American Samoa, Guam, Northern Mariana Islands, and Virgin Islands); and (2) "Tribal government," which means the government of an Indian tribe as defined in section 4(e) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304(e)) (i.e., any federally recognized Indian tribe, band, nation, or other organized group or community, including Alaska Native villages or corporations).