This bill rewrites key parts of the Fair Labor Standards Act to lift the federal minimum wage through a multi-year phase-in to a substantially higher floor and then require annual adjustments tied to the median hourly wage. It eliminates longstanding subminimum rules: the tip credit and the special youth/new-hire lower wage, and it starts a timed transition away from special certificates under section 14(c) for workers with disabilities.
For employers, the changes mean scheduled, predictable increases that later become automatic annual adjustments; for DOL, they create new calculation, notice, and enforcement duties. The shift removes statutory carve-outs that have long allowed pay below the standard federal minimum, producing concentrated compliance and budget impacts for labor-intensive businesses and organizations that employ people under 14(c).
At a Glance
What It Does
The bill phases federal minimum wage increases over several years to a new, higher legal floor and then requires the Secretary of Labor to adjust the rate annually using a BLS-based median hourly wage measure. It eliminates separate federal subminimum rates for tipped workers and for newly hired employees under age 20, and phases out the use of 14(c) special certificates for workers with disabilities while offering technical assistance.
Who It Affects
Low-wage employees (including tipped workers and young new hires), employers in hospitality and retail, providers that employ workers under 14(c) (sheltered workshops and some nonprofit providers), and the Department of Labor, which must calculate, publish, and enforce new rates. State and local employers relying on the federal floor will also feel the change.
Why It Matters
The bill converts a series of political minimum-wage choices into law and then into an automatic indexing mechanism, shifting the policy decision from Congress to an annual statistical calculation. It removes legal exceptions that have allowed lower statutory pay, increasing payroll costs and regulatory obligations while changing how supported employment is funded and administered.
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What This Bill Actually Does
The Raise the Wage Act restructures the federal minimum-wage framework in three linked ways: a multi-year phase-in to a much higher federal minimum, an annual indexing rule that ties future increases to a BLS median-wage statistic, and the systematic removal of statutory subminimum rates. Instead of one-off congressional raises, the bill installs a staged build-up and then an administrative rule for yearly adjustments, with the Department of Labor responsible for making the annual calculation and publishing notice in advance.
Tipped employees and employers that have historically used the federal tip credit face two changes: first, a separate lower cash wage for tipped workers is scheduled to rise over several years and then the special tipped-wage structure is eliminated so that tipped workers will ultimately be entitled to the standard federal minimum; second, the bill clarifies that employees have an explicit right to retain all tips and requires employers to inform employees of that right. The bill also phases out the temporarily lower federal rate permitted for newly hired workers under 20, bringing those workers to parity with the standard federal rate on a timetable tied to the phase-in.For individuals with disabilities and the employers that hire them under FLSA section 14(c), the bill directs a transition from special, subminimum certificates.
It bars issuance of new certificates after enactment, provides DOL-mandated technical assistance and referrals to help maintain employment opportunities, and sets a statutory sunset tied to when the program reaches parity with the standard minimum wage. That combination is designed to preserve employment while ending a statutory carve-out over time.Operationally, the bill adds publication and timing rules: the Department of Labor must announce wage increases in the Federal Register and on its website before they take effect, and it must compute an annual adjustment using Bureau of Labor Statistics data.
The bill also tightens remedies on tip misuse by amending penalties, and it staggers effective dates so that certain repeals trigger only after the scheduled transitions complete. The general effective date for the Act is the first day of the third month after enactment, with several provisions phased according to the statutory timetable established in the amendments.
The Five Things You Need to Know
The statutory phase-in sets explicit annual floors that rise each year (examples include $9.50, $11.00, $12.50, $14.00, $15.50, and $17.00) and, beginning six years after the effective date, switches to annual indexing.
Tipped workers' cash-wage schedule is separately phased (examples include $6.00, $8.00, $10.00, $12.00, $13.50, $15.00, and $17.00) and then becomes equal to the standard minimum wage; employees are given an explicit right to retain all tips and employers must inform them.
Newly hired employees under 20 get a stepped schedule (starting at $6.00 in year one) that increases annually by up to $1.75 until it reaches parity with the standard federal minimum, after which the separate rate is repealed.
Section 14(c) wages for employees with disabilities follow a phased increase (beginning at $5.00 and moving up through intermediate floors) and the bill prohibits issuance of any new 14(c) special certificates after enactment and sunsets the authority once parity with the standard minimum is reached.
The annual indexed increase is calculated by the Secretary of Labor using the annual percentage increase in the Bureau of Labor Statistics' median hourly wage of all employees, determined not later than 90 days before the new rate takes effect, and rounded up to the nearest $0.05.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Phased increases to a higher federal minimum and annual indexing
This provision replaces the single statutory wage figure with a multi-step schedule that reaches a higher nominal floor and then hands the Secretary of Labor authority to set future increases annually based on a BLS median-wage metric. Practically, employers must prepare for several discrete payroll increases and then for an annually adjusted federal floor; payroll systems, wage bands, and contract language will need updates to track the Secretary's published rate each year.
Tipped workers: phased cash wage, explicit tip-retention right, and elimination of separate tipped rate
The bill first raises the permitted cash wage for tipped employees through a sequence of steps and then eliminates the separate tipped-wage regime so tipped workers receive the standard federal minimum. It also inserts an express employee right to retain tips and requires employer notice. Compliance implications include reworking tip-credit accounting (or abandoning the credit), updating payroll and tip-pooling policies, and modifying employee handbooks and posted notices.
Newly hired employees under 20: temporary subminimum schedule and repeal
The bill replaces the historic $4.25 youth subminimum with a short-term stepped rate that increases each year until parity with the standard minimum is achieved, after which the separate provision is repealed. Employers who hire teens must track which hires fall under the temporary schedule and prepare for the administrative repeal date when the special classification disappears.
Transitioning and sunsetting 14(c) special certificates for workers with disabilities
The bill raises allowable special-certificate wages in stages, prohibits issuing any new certificates after enactment, requires the Department of Labor to provide technical assistance to affected employers, and sets a sunset so all certificates lose legal effect once the special-certificate wage equals the standard minimum. This creates a managed exit path but will obligate DOL to deliver transition resources and to monitor employment outcomes for people with disabilities.
Notice rules and stronger penalties for mishandling tips
The Department of Labor must publish notices in the Federal Register and on its website ahead of any required wage increase (statutorily specified timing). The bill also amends FLSA penalty language to prevent employers from retaining or using employees' tips, expanding the scope of civil remedies and signaling heightened enforcement focus on tip misuse.
General effective date with phased triggers for repeals and transitions
Except where the text specifies otherwise, the Act takes effect on the first day of the third month after enactment. Several repeals and transitions are tied to statutory triggers (for example, the date when a given stepped wage reaches parity with the standard rate), creating a staged cascade rather than a single universal effective date, which complicates employer calendar planning.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Low-wage workers across industries — receive legally higher statutory wages and, after phased changes, ongoing annual increases tied to median wages, boosting earnings and economic security.
- Tipped employees — receive an explicit right to retain all tips and a clear schedule that moves toward full parity with the standard minimum, raising guaranteed cash earnings over the transition.
- Workers with disabilities employed under 14(c) — the bill guarantees a managed transition with DOL-provided technical assistance and referrals aimed at preserving employment opportunities while increasing statutory pay.
- Young newly hired workers — benefit from a faster climb in base statutory pay compared with the prior low youth rate, improving entry-level earnings during the phase-in.
Who Bears the Cost
- Restaurants, bars, and other tip-reliant businesses — face increased direct payroll costs as the tipped credit is phased out and the obligation to pay higher cash wages scales up; they must also update tip-pooling and notice practices.
- Small employers and labor-intensive retailers — will carry proportionally higher wage-bill increases and administrative costs to adjust payroll systems and compliance programs on a multi-year timetable.
- Providers that use 14(c) certificates (sheltered workshops, some nonprofits) — confront tighter margins and program redesign costs to transition to competitive integrated employment models or to adjust wages under the new schedule.
- Department of Labor — inherits new calculation, publication, technical-assistance, and enforcement responsibilities without accompanying appropriations in the bill text, increasing administrative workload.
Key Issues
The Core Tension
The central dilemma is between raising guaranteed earnings for low-wage workers and preserving employment opportunities and program stability: stronger statutory pay floors and the end of subminimum rules advance equity and incomes, but they also impose real cost and administrative burdens that can reduce hours, accelerate automation, or shrink supported employment unless paired with targeted transition funding and careful enforcement design.
The bill balances three distinct policy moves — initial multi-year increases, a switch to statistical indexing, and elimination of statutory carve-outs — but those moves create several implementation tensions. Indexing to the BLS median hourly wage can produce faster increases than price-based measures in some years, exposing employers to volatile payroll shifts; conversely, the median measure could lag in recessions and deny workers real purchasing-power gains.
The Secretary’s 90-day determination and the statutory rounding rule (up to $0.05) reduce some uncertainty but still leave calendar and payroll-system timing headaches for employers and payroll vendors.
Phasing out the tip credit and the 14(c) program attempts to raise and equalize pay, but it risks unintended employment consequences. Employers may respond by cutting hours, accelerating automation (self-service kiosks), reducing staff, or shifting job classifications.
For workers with disabilities, the ban on new 14(c) certificates and the eventual sunset raise legitimate concerns about maintaining employment pathways; the bill’s technical assistance mandate helps, but the statutory text does not fund that assistance or require specific state-level supports. Finally, the publication and notice requirements are useful for predictability, but the cascade of trigger-based effective dates (some provisions only repealing after parity is reached) creates complex compliance windows that will require careful operational planning.
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