Bill would bar employers from deducting credit‑card processing fees from workers' tips

House Bill 16-23 would prohibit employers from deducting any portion of a tip, gratuity or service charge to pay credit card processing fees, committee staff and witnesses said at a Feb. 5 Labor and Workplace Standards Committee hearing.

Staff explained that current merchant interchange fees typically range from 1.5 to 3.5 percent of a transaction and that, under current practice, employers may subtract a proportional share of processing fees from employees' tips. Representative O'Brien, the bill sponsor, said the practice effectively cuts tip income and that payment systems are part of business infrastructure employers should bear, not workers. "Workers shouldn't be forced to pay for that infrastructure," she said.

Hospitality unions and tip earners strongly supported the bill. Stefan Moritz of UNITE HERE Local 8 said shifting the cost of credit card processing onto tipped workers amounts to a 1.5–3.5 percent cut in tip income and urged the committee to protect low‑wage workers. The union and other worker groups said customers do not intend tips to subsidize card networks' interchange fees.

The Washington Hospitality Association urged caution and said tips are the property of employees; the association argued that interchange fees are charged by card networks, not employers, and warned that the bill could raise costs for small restaurants operating on thin margins. The association said a preferable approach is action focused on Visa and Mastercard interchange practices; it noted pending proposals in the other chamber that would target card network fees directly.

Witnesses did not report committee votes at the hearing. The committee heard testimony from hospitality unions, industry representatives and employers; members asked questions about whether merchants can pass fees to customers and about existing statutory protections for tips in Washington.