On June 19, 2018, District of Columbia residents voted to pass (by a 55.14% to 44.86% margin) Initiative 77, providing for a single minimum wage for all employees, including tipped workers.

The restaurant industry led the opposition to the Initiative noting that the additional labor costs of the minimum wage will need to be sourced by one of the following: (1) through job cuts; (2) by the employer’s overhead; or (3) by passing the costs to the consumer through an increase in the costs of goods and services, which can decrease business and/or decrease the likelihood of customers tipping.

Under this voter-approved Initiative, employers will be required to pay minimum wage to any workers who currently earn a “tipped wage” (a lower base wage plus tips, presently $3.33 per hour). As a result of the passed Initiative, the base wage of tipped employees will incrementally increase until 2026, when all employers of tipped workers in the District will be required to pay the same minimum wage as all other workers in the District earn. Specifically, the Initiative calls for $1.50 increases each year in the minimum wage of tipped workers until their hourly pay reaches $15 in the year 2025.

Now that voters have voted to pass this Initiative, it will move on to the D.C. Council for review. The Council can choose to pass, amend, or repeal the ballot measure. Prior to the June 19 vote, Mayor Bowser, as well as ten out of thirteen Council members openly opposed the Initiative. However, it will be challenging for the Council members to repeal a measure that their constituents voted in favor of. The law will also go to Congress for a review period once the election results are certified. Congressional review could take time depending on their recess schedule.

What’s Next for Employers?

Going forward, employers should assume Initiative 77 will proceed as written, until we hear otherwise from the DC Council or Congress. If implemented, the increased wages will likely lead to broader “tip pooling”, or required sharing of tips among employees. Up until recently, under the Fair Labor Standards Act and interpreting case law, required tip pooling was only permitted among employees who “customarily and regularly” receive tips. However, under the passage of a recent spending bill, tip pooling will be permitted among all employees (including back of house employees who do not customarily earn tips, such as cooks and dishwashers) where workers are already earning minimum wage.

Employers may also consider a “service charge” or other adjustments in their pricing in order to cover additional labor costs.

Jenna Mennona contributed to this piece.