DC Voters Take Initiative to Substantially Increase the Minimum Wage for Tipped Employees

According to a summary of the Initiative, the measure will:

• Gradually increase the minimum wage in the District of Columbia to $15.00 hourly by 2020;
• Gradually increase the minimum wage for tipped employees so that they receive the same minimum wage directly from their employer as other employees by 2026; and
• Beginning in 2021, require the minimum wage increase yearly in proportion to increases in the Consumer Price Index.

On June 7, 2016, the DC City Council voted unanimously to approve a proposal of Mayor Muriel Bowser that would increase the District’s minimum wage for non-tipped workers to $15 per hour by 2020. Under the same ordinance, tipped workers were also set to see a base wage increase from $2.77 an hour (the base rate in 2016) to $5 an hour by 2020.

According to The Washington Post, only one Council Member, Mary Cheh (D-Ward 3), supported the Initiative. The Post also reported that the Initiative was opposed by Mayor Bowser and at least six Council members. Based on more recent reports, as many as 10 Council members may now oppose the measure. Save Our Tips, a group that opposed the Initiative, argued that “under the current system, the tip credit guarantees that servers and bartenders receive the minimum wage but enables tipped employees to earn well above the minimum wage, typically somewhere between $20-40 an hour. Initiative 77 would eliminate the tip credit and upend this system, harming servers and bartenders across the District.”

Save Our Tips also claimed that “[i]f the tip credit is removed, many restaurants and bars will be forced to increase menu prices and decrease staff size. Tipping helps fuel the high-quality guest service that has become a hallmark of the District’s world-class dining scene. Unfortunately, the changes that restaurant and bar operators would be forced to make if the tip credit is eliminated will lead to a more expensive and less pleasant dining experience across the city.”

Commentators have asserted that the Initiative will effectively change who is legally responsible for paying tipped employees the bulk of the minimum wage – the customers or the employer. Under current DC law, employers only have to pay tipped employees $3.33 per hour, on the assumption that their tips will bring them up to and perhaps over the current minimum wage of $12.50 per hour.

The Initiative would raise the tipped employee minimum wage by $1.50 each year until it reaches $15.00 in 2025. By that time, tipped employees would have the same minimum wage as non-tipped employees, and DC would join eight other states that have a single tier minimum wage system. Opponents of the Initiative claim that it may force restaurants to impose service charges to cover their higher wage costs. Customers who pay a high service charge may likely decrease the amount of their tips for servers, if they pay them at all.

The Initiative now moves to Congress for the standard 30-day review period. It seems unlikely that Congress will overturn it. Regardless, the DC Council could vote to overturn the measure or to modify it in some way. Given public support for the Initiative, it is difficult to predict what the Council will do.

Arent Fox’s Labor & Employment practice will continue to monitor developments in this area. For more information, please contact Michael Stevens or the Arent Fox professional who usually handles your matters.