District of Columbia Voters Approve Initiative to Phase Out Minimum Wage Tip Credit by 2026

Author: Michael Cardman, XpertHR Legal Editor

June 20, 2018

Voters in the District of Columbia have approved a ballot initiative^* that will, if enacted, gradually increase the minimum direct cash wage for tipped employees so that they receive the same minimum wage directly from their employer as non-tipped employees by 2026.

Currently, the District of Columbia allows an employer to claim a tip credit toward its minimum wage obligation for employees who receive gratuities equal to the difference between the minimum direct cash wage of $3.33 per hour (rising to $3.89 on July 1) and the District of Columbia minimum wage of $12.50 (rising to $13.25 on July 1). Thus, the maximum tip credit that may be claimed is $9.17 (rising to $9.36 on July 1).

If the ballot initiative is enacted, the minimum direct cash wage for tipped employees would increase according to the following schedule:

• $4.50 on July 1, 2018;
• $6.00 on July 1, 2019;
• $7.50 on July 1, 2020;
• $9.00 on July 1, 2021;
• $10.50 on July 1, 2022;
• $12.00 on July 1, 2023;
• $13.50 on July 1, 2024;
• $15.00 on July 1, 2025; and
• The same as for non-tipped employees on July 1, 2026.

There remains a chance that the ballot initiative will not be enacted in its current form.

The ballot initiative will not be effective until it undergoes a 30-day review process by the US Congress. However, Congress has overturned DC legislation only three times in the past 45 years.

The initiative also could be altered or reversed by the city council. Mayor Muriel Bowser and six of the 13 members of the Council of the District of Columbia are on record as opposing Initiative 77, while only one is on record supporting it, according to Ballotpedia, a nonpartisan and nonprofit organization headquartered in Middleton, Wisconsin. It is rare but not unprecedented for the city council to overturn a ballot initiative: in 2001, they reversed a 1994 referendum that placed term limits on elected officials.

If the initiative is enacted, the District of Columbia would join seven states - Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington - that do not allow employers to claim a tip credit. Many local minimum wage ordinances - including those in Minneapolis, San Francisco and Seattle - also do not provide for a tip credit.

^* Note: There is an error in the Summary Statement of the ballot initiative, which was published in the District of Columbia Register on September 26, 2016. It incorrectly states that the Initiative will "gradually increase the minimum wage for tipped employees so that they receive the same minimum wage directly from their employer as other employees by 2025" (emphasis added). It should state 2026, a public information officer for the District of Columbia Board of Elections confirmed to XpertHR. The legislative text and the ballot itself have the correct 2026 date.