It is enacted by the General Assembly as follows:

SECTION 1. Sections 28-12-3 and 28-12-5 of the General Laws in Chapter 28-12 entitled "Minimum Wages" are hereby amended to read as follows:

28-12-3. Minimum wages. -- Every employer shall pay to each of his or her employees wages at a rate not less than the minimum hereinafter specified: effective April 1, 1991, and thereafter, at a rate not less than four dollars and forty-five cents ($4.45) per hour except as hereinafter specified, provided, however, that the minimum wage commencing September 1, 1996 shall be four dollars and seventy-five cents ($4.75) per hour and that the minimum wage commencing January 1, 1997 shall be five dollars and fifteen cents ($5.15) per hour. Provided, however, that the minimum wage commencing July 1, 1999 shall be five dollars and sixty five cents ($5.65) per hour.

28-12-5. Employees receiving gratuities -- Incentive-based wages -- Certain employees of nonprofit entities. -- (a) Every employer shall pay to each of his or her employees who are engaged in any work or employment in which gratuities have customarily and usually constituted a part of his or her weekly income the rate as provided by sections 28-12-3 and 28-12-3.1.

(b) Allowance for gratuities as part of the hourly wage rate for restaurants, hotels, and other industries except taxicabs and limited public motor vehicles shall not be an amount in excess of fifty percent (50%) of equal to the applicable minimum rates wage as provided by sections 28-12-3 and 28-12-3.1, however, the cash wage shall not be less than less two dollars and eighty-nine cents ($2.89) per hour. Gratuities shall mean voluntary monetary compensation received directly or indirectly by the employee for services rendered. In the case of taxicabs and limited public vehicles, the allowance for gratuities as part of the minimum rates as provided in section 28-12-3 shall not exceed twenty-five cents (25/c) per hour until December 31, 1996.

(c) Each employer desiring to deduct for gratuities as part of the minimum rates as provided in sections 28-12-3 and 28-12-3.1 wages paid to an employee shall provide substantial evidence that the amount which shall not exceed fifty percent (50%) of the applicable minimum wage rate per hour as provided in sections 28-12-3 and 28-12-3.1 was received by the employee, , shall be as set out in the formula in (b) above, however, the cash wage shall not be less than two dollars and eighty-nine cents ($2.89) per hour. The director of labor and training shall notify employers concerning what type of proof shall be accepted as substantial evidence for the purpose of this subsection. Employees involved shall be entitled to a hearing on the question of the amount of deduction if they so desire.

(d) In cases where wages are figured by the employer on an incentive basis in such a manner that an employee of reasonable average ability earns at least the minimum wage established by sections 28-12-3 and 28-12-3.1, it shall be taken that the employer has complied with this statute. It shall be of no concern to the director of labor and training how the employer arrives at its wage scale so long as it is not unreasonable in its demands on the employee.

(e) Where, in the case of the employment of a full-time student who has not attained his or her nineteenth (19th) birthday engaged in the activities of a nonprofit association or corporation, whose aims and objectives are of a religious, educational, librarial, or community service in nature, the employer-employee relationship does exist the employer shall pay to each such employee wages at a rate of not less than ninety percent (90%) of the minimum wage as specified in section 28-12-3. In case of any conflict between provisions of this section and those of section 28-12-3.1, the provisions of section 28-12-3.1 shall govern.

SECTION 2. This act shall take effect upon passage.