On November 8, 2022, Washington D.C. voters overwhelmingly passed Initiative 82 or the “District of Columbia Tip Credit Elimination Act.” As a result, the tip credit for D.C. tipped wage workers will be gradually phased out by 2027, at which time employers must pay their tipped employees the applicable D.C. minimum wage rate and eliminate the use of any tip credit.

Current State of the Use of Tip Crediting in D.C.

The current minimum wage for tipped workers in D.C. is $5.35 per hour. Employers may take a tip credit of up to $10.75 per hour by using the employee’s tips to cover the difference necessary to satisfy D.C.’s minimum wage, which is currently $16.10. Employers of tipped workers must also provide notice to employees of tip policies, including any tip-pooling procedures, and comply with the District’s quarterly reporting requirements as they relate to employees for whom a tip credit is taken.

Initiative 82

Initiative 82 will gradually phase out the tip credit by reducing the tip credit yearly (including twice in 2023), until it is eliminated entirely in 2027. During this time, the minimum hourly cash wage will simultaneously increase until it matches D.C. mandatory minimum wage. Beginning January 1, 2023, the tip credit will be phased out on the following proposed schedule:  

The D.C. Council will still need to implement this proposal and may make modifications to the phase-in period.  With the passage of Initiative 82, D.C. joins seven states that have prohibited the use of a tip credit for tipped wage workers—Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington State.

In response, D.C. employers are expected to raise prices or incorporate mandatory service charges to offset their increased labor costs. Patrons will have the option to tip on top of this as well. The Act will take effect after a 30-day congressional review period. Unlike its nearly identical predecessor Initiative 77, which was ultimately repealed by the D.C. Council in 2018, it has been reported that a majority of the D.C. Council supports the measure.

Next Steps for Compliance Under Initiative 82 and Tipped Wage Workers Fairness Amendment Act

Employers with tipped employees should prepare for changes required under Initiative 82, and ensure they are taking the proper tip credit in advance of the first phase, effective January 1, 2023. Employers may choose to pay employees the minimum wage in advance of the schedule’s deadlines.  While this may increase labor costs, it may also alleviate the burden of compliance with training and reporting requirements that employers of tipped workers must currently follow under the Tipped Wage Workers Fairness Amendment Act (“the Act”), which was enacted in 2018.  

The District of Columbia’s Office of Human Rights (DCOHR) recently provided guidance on employer requirements under the Act. Employers must submit a copy of their sexual harassment policy and a certified report of sexual harassment claims for calendar years 2020 and 2021 by December 31, 2022. The deadline for reporting 2022 harassment claims is currently set for March 1, 2023. The sexual harassment claims report must be submitted using the DCOHR’s online form, which is located at: https://forms.dc.gov/f/OHRTWWFForm.

The Act also requires that D.C. businesses with tipped workers undergo training that covers various topics, including Equal Employment Opportunity, sexual harassment, strategies for how to respond to, intervene in and prevent harassment in the workplace, and reporting potential violations. Employers must make good-faith efforts to complete training by December 31, 2022, although this deadline is likely to be extended by the DCOHR into 2023. Within 30 days of completion of harassment training, the employer must submit a certification to the DCOHR at tipsdc@dc.gov.  The DCOHR advised that Initiative 82 does not eliminate reporting and training requirements for employers that employ an employee receiving the tipped minimum wage.