What Does D.C. Initiative 82 Mean For D.C. Restaurant Owners If Passed? - Aprio (2024)
November 8, 2022 is General Election Day in the District of Columbia (D.C.) and D.C. residents have the opportunity to vote for or against Initiative Measure 82 titled “Increase Minimum Wage for Tipped Employees Measure” which would require D.C. business owners to gradually increase the pay that all workers earn to at least $16.10 per hour (plus tips) by 2027.
Tipped employees in D.C. are currently paid $5.05 per hour as of July 1, 2022. Tips that are earned help push the actual earnings that tipped employees receive to D.C.’s current minimum wage of $16.10. Initiative 82 would require tipped employees to be paid the same minimum hourly wage base as other types of workers by 2027.
By increasing the pay of tipped employees from $5.05 per hour to $16.10 per hour, restaurant owners could be on the hook for the employees’ additional hourly wages. Employers may have to fund their employees’ new wages by raising menu prices. The additional hourly wages could also potentially be funded by way of restaurant owners inserting automatic gratuities or service charges to the customers’ bills. These charges which are generally added onto restaurant bills when there is a large party, could become a standard practice if Initiative 82 passes.
If automatic gratuities or services charge become a standard practice if Initiative 82 were to pass, this could mean the potential loss of the FICA Tip Credits. The FICA Tip Credit, also known as the “Credit for Employer Social Security and Medicare Taxes,” is a federal tax credit for restaurant owners equal to the employer’s share of the Social Security and Medicare taxes paid on employees’ tips. The “FICA Tip Credit” has proven to be a highly favorable tax credit for restaurant owners as it significantly reduces tax liabilities. Initiative 82 has the potential to phase out the practice of tipping in D.C. which as result could gradually phaseout the FICA Tip Credit.
While Initiative 82 has the potential to get passed and become law, the D.C. Council could still block or modify the measure again after the election in November like they did for Initiative 77 in 2018 when the Council raised approximately $340,000 to advocate against Initiative 77. Members of the D.C. Council and members of the Restaurant Association of Metropolitan Washington have already expressed strong opposition to this new initiative.
But in 2022, D.C. residents voted for something called Initiative 82. It phases out the sub-minimum wage in the hopes that restaurant workers receive steady, higher pay. In three years, restaurants will have to pay the city's full minimum wage.
The D.C. Council voted Tuesday to limit service fees at bars and restaurants to 20 percent, the latest salvo in a long-running battle over Initiative 82, a law meant to gradually raise the minimum wage for the city's tipped workers.
An initiative to increase the minimum wage for tipped employees to the same level as non-tipped employees. Initiative 82 passed its 30-day legislative review period and became law on February 23, 2023, however on January 17, 2023, the DC Council voted to delay the first pay increase until May 1, 2023.
The new amount is now $8 an hour before tips. If tipped employees made less than the standard minimum wage of $17 an hour, employers would make up the difference. However, the recent price hikes, and subsequent ones, would force business owners to charge customers extra in the coming months and years.
D.C. employers should take note that beginning July 1, 2024: Regardless of employer size, the minimum wage will be increasing from $17.00 per hour to $17.50 per hour for all D.C. employees. The base minimum wage for tipped employees will increase from $8.00 per hour to $10.00 per hour.
The "Restaurant Revitalization" bill includes regulations on food delivery apps and caps service fees at bars and restaurants to 20%. The bill passed 12-1 and now heads to Mayor Muriel Bowser's desk for consideration. If signed, it will undergo congressional review before becoming law.
Last year, D.C. passed a ballot initiative that will gradually raise the minimum wage for tipped workers — and diners have been confused about how much to tip since. As of May 1, the minimum wage for tipped employees increased from $5.35 to $6 per hour, but it will jump another $2 per hour on July 1.
Introduction: My name is Stevie Stamm, I am a colorful, sparkling, splendid, vast, open, hilarious, tender person who loves writing and wants to share my knowledge and understanding with you.
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