In our July 9, 2018 post we reported that a seven-member majority of the D.C. Council had introduced a bill, Bill 22-0913 (Tipped Wage Workers Fairness Amendment Act of 2018) to repeal Initiative 77, an initiative that District of Columbia voters approved on June 27, 2018 that would incrementally increase the minimum cash wage for tipped workers to $15.00 per hour by July 1, 2025 and effectively eliminate the tip credit starting July 1, 2026. We also noted that no further action would occur until this Fall due to a two-month summer recess.

The Council is now back in session and on October 2, 2018, gave initial approval to repeal Initiative 77 by a margin of 8-5. In so doing it rejected a proposed compromise that would create an exemption under Initiative 77 for servers and bartenders, who had expressed the most opposition to the measure, while keeping the minimum wage hike for other categories of workers such as parking lot attendants, hotel bell-hops, and restaurant workers who share gratuities, who proponents of Initiative 77 claim do not earn enough tips to reach the standard minimum wage. However, the repeal bill will not be effective until it is approved by the Council at a second vote, at which there could be additional amendments before it becomes final, and after signature by the Mayor and a Congressional review period.

The Council also passed emergency legislation, Bill 22-0992, the Tipped Wage Workers Fairness Emergency Amendment Act of 2018, which revokes the increase in the tipped minimum wage from $3.89 to $4.50 as of July 1, 2018 contained in Initiative 77 as of October 9, 2018, the same date that Initiative 77 is otherwise scheduled to become effective. This emergency legislation will take effect immediately upon approval by the Mayor and is good for up to 90 days. Thus, employers need not worry about any increase in the tip minimum wage taking effect while the repeal of Initiative 77 remains in process.

Notably, some aspects of the proposed compromise were added to the repeal legislation, although, the Council will have to budget funds in order for these provisions to take effect. These include:

(1) a mandate that the Mayor create a website outlining the rights and benefits guaranteed to an individual under ten different District labor and anti-discrimination laws, and provide employers a poster with information about the website as well as a description of employee rights under the District’s labor and anti-discrimination laws (this apparently would replace most, if not all, of the current required posters);

(2) a mandate for businesses with tipped workers to require annual training on sexual harassment and minimum wages for all owners, operators and managers;

(3) a requirement that all businesses with tipped workers utilize a third-party payroll company to prepare their payroll and provide a quarterly wage report showing hours worked, total pay and gratuities received, and average weekly wage for each employee;

(4) establishment of a dedicated phone line for reporting violations of tipped wage laws;

(5) establishment of a Tipped Workers Coordinating Council (TWCC) consisting of representatives of several District government agencies, the Restaurant Association of Metropolitan Washington, The Hotel Association of Washington, two Mayoral appointees from policy organizations, and three Council employees; the TWCC is to work on coordination of tipped worker polices, conduct regular and anonymous case reviews of tipped wage violations, and develop protocols to ensure recommendations are incorporated into DOES policies and procedure; and

(6) a public education campaign to raise awareness and educate the public about the rights of tipped workers.

There are likely to be amendments to these provisions at the second vote session.

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.

[Read the update—July 16, 2018—“Proposed D.C. Council Legislation Puts Voter-Approved Elimination of Tip Credit Into Question.”]

Sign - Minimum Wage Increase AheadAs anticipated in our posting on June 9, 2016, on June 21, 2016, the Washington, DC, Council unanimously passed on second reading the Fair Shot Minimum Wage Amendment Act of 2016, without substantive amendment. As discussed in our prior posting, this bill increases the District of Columbia minimum wage – already set to increase to $11.50 on July 1, 2016 – by additional annual increments until it reaches $15.00 on July 1, 2020. It also increases the tipped minimum wage in annual increments starting July 1, 2017 from the existing $2.77 to $5.00 on July 1, 2020. Both rates will increase in subsequent years based on increases in the cost of living.

Mayor Bowser is expected to sign the bill soon. The bill will then be subject to a Congressional review period that, due to scheduled recesses, may not be complete until the end of 2016. Consequently, the Council also passed identical emergency legislation that will become effective upon the mayor’s approval for 90 days, and likely will then be renewed until the review period has passed. So, as a practical matter the law will take effect almost immediately.

Notably, similar measures raising the minimum wage to $20.00 in by July 1, 2020, in both suburban Montgomery County  and the City of Baltimore, are pending and at present appear likely to pass later this year.

Washington, D.C. is poised to join California and New York by raising its minimum wage to $15.00 per hour.

Sign - Minimum Wage Increase AheadOn June 7, 2016, the D.C. Council, with support of Mayor Muriel Bowser, unanimously passed on first reading the Fair Shot Minimum Wage Amendment Act of 2016 . The bill will continue to raise the District of Columbia minimum wage – currently $10.50, but previously set to increase to $11.50 on July 1, 2016 – in additional annual increments until it reaches $15.00 by July 1, 2020. Beginning on July 1, 2021, the minimum wage will increase further based on the increase in the Consumer Price Index for All Urban Consumers for the Washington Metropolitan Statistical Area.

Notably, the bill will also increase the tipped minimum wage from the existing $2.77 per hour, where it has been since 2005, in annual increments of 56 cents (55 cents in 2020) to $5.00 on July 1, 2020, again with annual indexing in successive years. This increase in the tipped minimum wage represents a compromise between advocates who sought to eliminate any lower minimum wage for tipped employees, or to at least set a higher rate of half the minimum wage as Mayor Bowser originally proposed, and significant portions of the restaurant industry that resisted any increase at all.

The law also contains special provisions for government contractors that currently are covered by D.C.’s Living Wage Act, which generally require them to pay the minimum wage if it becomes higher that the living wage (currently $13.85, but also subject to annual adjustment). In addition, for the first time, District employees are covered by the D.C. minimum wage law.

The bill still faces a second vote, likely either on June 21 or 28, 2016, at which time it is possible there may be some amendments. After Mayor Bowser signs the bill, it is subject to a Congressional review period, but is expected to take full effect well in advance of the 2017 increases.