District of Columbia Voters Approve Eliminating Tip Credit, but Final Result Remains Uncertain
Voters in the District of Columbia on June 19, 2018 approved an initiative (Initiative 77) that would incrementally increase the minimum cash wage for tipped workers to $15.00 per hour by July 1, 2025, and starting July 1, 2026 to the same amount as the then-minimum wage for all other workers, effectively eliminating the tip credit. If the initiative takes effect, the District would join seven states that do not have a separate minimum wage for tipped workers, i.e., Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.
The D.C. Council previously enacted legislation raising the minimum cash wage for tipped workers to $3.33 on July 1, 2017; $3.89 on July 1, 2018; $4.45 on July 1, 2019; and $5.00 on July 1, 2020, consistent with increases in the general minimum wage to $12.50, $13.25, $14.00, and $15.00 that will take effect on the same dates. Each year thereafter, the minimum wage will increase in proportion to the annual average increase in the CPI-U for the Washington area. D.C. Code §32-10003.
The voter initiative would change the minimum cash wage for tipped workers to $4.50 on July 1, 2018; $6.00 on July 1, 2019; $7.50 on July 1, 2020; $9.00 on July 1, 2021; $10.50 on July 1, 2022; $12.00 on July 1, 2023; $13.50 on July 1, 2024; $15.00 on July 1, 2025; and to whatever the minimum wage then is for other workers on July 1, 2026. These provisions will not apply to employees of the District of Columbia, or employees performing services under contracts with the District of Columbia.
It is not yet clear whether the initiative will become law, at least it its present form. It passed by only 55 percent in an election in which turnout was only 16.7 percent. Before it becomes law, it must clear review by the D.C. Council, which could amend or overturn it. So far, the measure has faced public opposition from Mayor Muriel Bowser and a majority (eight) of the D.C. Council, as well as many restaurant owners, wait staff and bartenders, who fear it will increase direct labor costs, force staffing reductions, and significantly reduce the amount of tips received. Both the Restaurant Association of Metropolitan Washington and the separate “Save our Tips” campaign already have stated that they will take their fight to the Council. If the Council approves the measure, it must then clear a thirty-legislative-day review period by the Congress. At best, the initiative is not likely to take effect until sometime in the fall of 2018.
In the meantime, employers currently taking the tip credit should note the increase in the minimum for tipped employees to $3.89 (and for all other employees to $13.25) taking effect on July 1, 2018. Notably, supporters of the initiative have stated that they will not seek retroactive effect of the initiative’s July 1, 2018 increase to $4.50.