D.C. Voters Approve Eliminating the Tip Credit System

November 9, 2022

On Nov. 8, 2022, Washington, D.C., voters overwhelmingly approved “Initiative 82,” which, once certified and implemented, will eliminate the tip-credit system in D.C. With this new law, D.C. joins the ranks of seven states with no tip credit: Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington state. The initiative was adopted as Act 24-700.

Under the current tip-credit law, D.C. employers are entitled to claim customers’ tips as partial credit toward the employer’s obligation to pay a minimum wage. For example, rather than pay a bartender $16.10 per hour (the current minimum wage in D.C.), a D.C. restaurant is permitted to pay the bartender $5.35 per hour, so long as the bartender makes up the difference ($10.75) in customer tips. This difference is called the “tip credit.” If a tipped employee does not receive gratuities sufficient to meet the minimum wage, the employer must make up the difference by paying the employee enough to reach the minimum wage.

Under Initiative 82, the tip credit would be eliminated gradually, with full implementation by 2027. While the campaign for Initiative 82 focused almost entirely on the restaurant industry, it would affect all tipped employees, including restaurant servers, bartenders, hairdressers, bellhops, valets, barbers and nail salon workers. D.C. employers are expected to raise prices in response, and mandatory service charges may become more popular on patrons’ bills.

This initiative was familiar for D.C. residents, who approved a nearly identical measure in 2018, called Initiative 77. After that vote, however, the D.C. Council voted by a margin of 8-5 to repeal Initiative 77. Ultimately, D.C. repealed Initiative 77 with the enactment of the Tipped Wage Workers Fairness Amendment Act of 2018. Now, however, it has been reported that a majority of the D.C. Council supports eliminating the tip credit system.

Jan. 30, 2023 Update: The D.C. Mayor signed Act 25-0003 on Jan. 26, 2023 delaying the gradual elimination of the tip credit from Jan. 1, 2023 to May 1, 2023. Accordingly, on May 1, 2023 the tipped minimum wage will be $6.00 per hour, and on July 1, 2023 the tipped minimum wage will increase to $8.00 per hour. The tip credit will be fully eliminated by July 1, 2027.

If you have questions about this law, or any aspect of labor and employment law, please contact the authors of this article or any member of the firm’s labor and employment team.

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