Get the Facts

What is Initiative 77, and how does it affect restaurant and bar workers?

Initiative 77, the “District of Columbia Minimum Wage Amendment Act of 2017,” proposes to increase the tipped minimum wage to $15, which would eliminate the tip credit.

Cool. That’s a good thing, right?

Requiring that all staff earn at least minimum wage, or $15/hour, is definitely a good thing. It’s also already the law.

Both Federal and DC law require that all tipped employees make the minimum wage through a combination of their base wage plus tips, and strong protections are in place to ensure this happens. Employers must keep records documenting that employees’ earned tips plus base wage equals at least DC’s minimum wage. If those earnings ever fall below minimum wage the employer must “make up” the difference. The penalties for skirting this law are massive, and not a place that employers want to find themselves.

That said, DC restaurant and bar owners rarely have to “make-up” to minimum wage because, almost without exception, DC tipped workers make well above minimum wage—typically $20-40/hour or more. So this initiative is an attempt to solve a problem that does not exist, at least in the DC market.

Huh. Then what’s the rationale for the ballot initiative? Who’s behind it?

Ballot Initiative #77 was proposed and championed by the Restaurant Opportunities Center (also known as “ROC”). ROC is a national organization that wants to eliminate the tipped wage system, citing that doing so would help workers at places like “Denny’s, IHOP and Applebee’s, largely.”

Problem is, national chain restaurants and bars of the casual sit-down variety don’t really exist in DC. Of the more than 2,000 eating and drinking establishments in DC, only FOUR of them are those particular establishments.In DC, 96% of full-service restaurants and bars are independently operated.

So, what would this mean for DC restaurant and bar workers and owners?

This measure would dramatically change the way DC restaurants and bars do business. Essentially, workers who are now well-paid with strong extra earning potential would move to a system in which they receive an hourly wage (of $15), provided by their employer. Because very few restaurants and bars could afford to pay workers $15/hr PLUS tips, many would compensate by switching to a flat “service charge”—which they are not legally bound to share with employees.

Tipped employees will almost certainly earn less in this model. To give one example, in San Francisco, owner Thad Vogler told CNN Money that his servers were making as much as $45 an hour with tips, a figure that fell as low as $20 in a no-tipping environment.

Other restaurants and bars forced to comply with similar laws were forced to reduce hours, reduce staff size, increase menu prices, replace tipping with set hourly wages, and/or close their restaurant or bar. Most notably, restauranteur Danny Meyer (Gramercy Tavern, Union Square Café, Shake Shack, etc) went to a “tip included” environment in his restaurants—only to see 40 percent of his long-time front-of-house staff leave, complaining that their earnings were down significantly.

Okay, what does that mean for tips? Would people still tip?

Typically, when this type of change has been implemented in other places, restaurants and bars eliminate tipping, adding a service charge to a customer’s bill. But unlike with a tipping model, the service charge doesn’t automatically go to the server and other front-of-house staff. Restaurant and bar owners are fully entitled to claim all of the service charge money, or share only a fraction with wait staff.

What’s happened when this has been implemented elsewhere?

In 2015 in New York, a state wage board increased the base wage for all tipped workers by more than 50 percent. To adapt to the massive rise in labor costs, the state’s restaurants and bars were forced to raise prices, cut staff and shifts, or close their doors. The following year, Census Bureau data confirmed that more than 500 New York restaurant closed in the wake of this proposal—after years of restaurant growth.

What else should we know?

The current system works. In surveying tipped employees, owners and operators across the city, industry professionals want to preserve the tip system as it allows for a significantly higher income than an hourly wage, even if that hourly wage were to go to $15. So vote NO to ballot initiative #77!