DC Voters Approve Measure Eliminating Sub-minimum Wage for Tipped Employees

Under current law, D.C. employers are able to pay their tipped workers a base (sub-minimum) wage of $3.33 per hour, so long as the workers make enough in tips to push their earnings to at least the District’s minimum wage, which is currently $12.50 per hour.  If the tipped worker does not earn at least the minimum wage for all hours worked, the employer is required to make up the difference.

However, on June 19, 2018, Washington D.C. voters approved Initiative 77, a contentious ballot initiative that would change this law.  Specifically, this Initiative would raise the city’s minimum wage to $15 per hour and phase out the sub-minimum wage for tipped workers; it will gradually hike the tipped minimum wage by $1.50 each year until it waiterreaches $15 in 2025, and by 2026, the minimum wage will be the same for all workers.  Through this Initiative, the District of Columbia would become the first major city to outlaw the practice of allowing employers to pay a lower hourly wage to workers who earn tips, although that practice is unlawful in California, Oregon, Washington, Alaska, Nevada, Montana, and Minnesota.  And officials in New York and Michigan are also considering ending their tipped-wage system this year.

This is not the end of the story, however, as Washington D.C.’s political leadership has voiced significant opposition to Initiative 77, and although it passed 55 to 44 percent, Congress and the D.C. Council can void the measure.  In particular, 10 of 13 members of the Council, as well as Mayor Muriel E. Bowser and Attorney General Karl Racine, have publicly opposed the measure.  Local restaurateurs also strongly oppose the measure, and will likely place pressure on the Council to intervene.  On the other hand, local progressive activists and the Restaurant Opportunities Center, which advocates for restaurant workers, are mobilizing to protect the election result.

Restaurant associations and owners have unequivocally stated that the tipped-wage system helps them stay open in an industry where profit margins are slim, and that the passage of Initiative 77 will lead to increased labor costs, higher menu prices (which in turn will result fewer customers), layoffs, and restaurant closings.  Perhaps surprisingly, many servers, bartenders, and other tipped workers have also voiced their opposition to Initiative 77, claiming that the increased menu costs will lead to fewer tips and overall lower take-home pay.  Other tipped workers, however, point to the fact that the median hourly wage for servers in D.C., including tips, is barely above the minimum wage as evidence in support of Initiative 77.

Interestingly, in 2016, Maine voters approved a ballot measure in November 2016, similar to Initiative 77, that would have phased out the tipped minimum wage by 2024. But months after passage of that initiative, restaurant workers and bartenders said patrons were confused and tipping them less, even though the law hadn’t yet gone into effect. That confusion, coupled with strong opposition from the National Restaurant Association, led lawmakers to reverse the ballot measure in July 2017. The tipped minimum wage in the state is currently $5 an hour.

At this point, it is impossible to predict whether the District will follow Maine’s path, although the strong opposition from the D.C. Council indicates that such a scenario certainly is possible.  On the other hand, the possibility of passage means that D.C. hospitality employers must at least start brainstorming about potential preparations and solutions should Initiative 77 become the law.  Therefore, D.C. employers should begin to consider strategies they will employ if they are required to pay their tipped employees more than the sub-minimum wage in the upcoming years.

Because these types of initiatives are gaining momentum throughout the country, all eyes will be on Washington, D.C. to see what happens  with Initiative 77 in the coming months.  Hospitality employers all over the country, and especially in D.C., should keep a close watch to see how this plays out.  We will certainly keep you apprised of all future developments.

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