On October 23, D.C. Mayor Muriel Bowser signed legislation to overturn Initiative 77, which would have established a higher minimum wage for service workers who rely on tips for the majority of their incomes. This move comes after the D.C. Council voted 8-5 in favor of the repeal the week prior, as well as after strong opposition from the Restaurant Association of Metropolitan Washington, restaurant operators, workers, and tipped employees, who stressed the negative impact that Initiative 77 would have on the local restaurant industry.
Initiative 77 would have significantly impacted a restaurant’s business operations by changing the way restaurant owners pay tipped workers. Under Initiative 77, D.C. business owners would have been required to gradually increase pay so all workers would earn at least $15 per hour by July 2020. Tipped workers in D.C. are currently paid a base wage of $3.89 per hour, because the tips they receive push the earnings to the District’s current minimum wage of $12.50. Initiative 77 would have required tipped workers to be paid the same amount as other workers by 2026. This change had the potential to lead restaurants to eliminate tipping and instead add service charges or automatic gratuities onto restaurant bills to accommodate the requirements of Initiative 77. Such a move could have further led to the loss of FICA Tip Credits that many full service restaurant owners are dependent upon.
While the repeal of Initiative 77 is considered an overall positive for the local restaurant industry, there are new mandates for restaurant owners to ensure that they promote an appropriate work environment and that employee wages and tips are handled properly. These mandates are included in a new bill, which contains the following requirements for D.C. restaurant operators:
- By July 1, 2019, employers must distribute a sexual harassment policy to employees and post it in a “conspicuous place”
- By Jan. 1, 2020, employers must use a third party payroll business that will submit quarterly earnings reports to the mayor
- Business owners, operators, and managers will be required to attend a training on the requirements of D.C.’s wage theft laws
- Tipped employees must be provided with their tip out sheet each pay period
Our tax specialists are available for consultation on this and other business management topics for restaurants and hotels. Please contact our hospitality tax advisors or Aaron Boker at 301.231.6200 for more information.