The Council of the District of Columbia recently passed the Tipped Wage Workers Fairness Amendment Act of 2018, which repealed a voter referendum known as Initiative 77.
Instead of implementing some version of the relatively simple changes described in Initiative 77, the Act imposes a number of onerous, often unusual requirements on employers of tipped employees. These changes include requiring employers to:
Initiative 77, also known as the Minimum Wage Amendment Act of 2018, was preceded by one of the District’s most vigorous campaigns and was passed in June by nearly 56% of D.C. voters. The initiative aimed to:
The initiative would have increased wages for approximately 16,000 workers in the D.C. area, many of whom are making as little as $3.89 per hour plus tips. The District of Columbia currently has the largest gap in the country between the tipped minimum wage and standard minimum wage.
Proponents of Initiative 77 believe that paying everyone the same minimum wage is fairer than having a two-tier wage system. Some of the concerns they raise include the unpredictability of tipped income, worries about wage theft from unscrupulous bosses, and the allegation that servers often need to put up with sexual harassment from customers to get a decent tip.
Many tipped employees state that there is too much anxiety in their income because of factors that are beyond the employee’s control. One tipped employee interviewed by local news station, WTOP, said that anything from a server’s schedule to weather or even race or gender can be a determining factor as to whether the server makes the tips necessary to survive financially.
Other advocates of the initiative stress that that the objective of raising the tipped minimum wage is not to eliminate tips. Instead, tips should continue to be “a ‘token of gratuity’ but not a subsidy for workers’ wages.” The National Employment Law Project argues that employers in other cities in “One Fair Wage” states that have adopted the $15 minimum wage, such as San Francisco and Seattle, are not only successfully adapting, but are thriving and growing with the industry.
On the other hand, raising the tipped minimum wage comes with increased costs for employers. Many businesses, especially restaurants, would have to pass the cost along to consumers. Advocates of “Save Our Tips” also claim there is a risk that tipped workers would actually lose earning potential because customers won’t tip when a service charge is added to the bill. Employers may even be forced to lay off employees to decrease their costs.
Although the Act has repealed the minimum wage initiative, it takes strides to protect employees while substantially increasing employers’ administrative burden.
Effective immediately, covered employers will need to submit a quarterly report to the Mayor of D.C. containing data on its tipped workers and certifying that each worker was paid at least the required minimum wage, including gratuities.
The Act also puts a number of other notice, posting, and documentation obligations on the employer. Beginning on Jan. 1, 2020, all covered employers (except for hotel employers) must use a third-party payroll provider.
Employers will further need to ensure that each pay statement for tipped employees is accompanied by an itemized statement that includes:
The Act also directs the Mayor to establish an informational website, a public education and awareness campaign concerning the rights of workers, and a hotline to address wage complaints. The Office of Human Rights is required to create sexual harassment and wage theft courses for both employees and managers. Notably, these changes may be able to address some of the concerns regarding sexual harassment and wage theft brought up by advocates of a higher tipped minimum wage.
The complicated nature of the requirements in the Act demand a careful review of current practices. Employers in D.C. will want to determine whether the Act applies to them and accordingly revise any policies or procedures affected by the new law.