Even before Initiative 82 began its gradual march toward one minimum wage, bar and restaurant owners had instituted service charges — to recognize the risks involved in hospitality work during the pandemic and to offset the loss of tips when indoor dining was prohibited or greatly limited. But the ballot measure has pushed more proprietors to add service charges to their checks — or to increase menu prices — to help cover higher payroll costs.
In March, the Office of the Attorney General of the District of Columbia sent letters and fliers to local businesses to provide guidance on how to inform the public about service charges. The attorney general said restaurants and bars must “clearly and prominently disclose fees” at the start of the ordering process, and they must accurately describe the reason for the fee. The office said it could seek refunds or assess fines for establishments that violate the law.
Ultimately, all of this complicates the business of paying a check at the end of the night. So, what are you supposed to do? Here is the latest guidance on tipping in the District.
How much to tip
What to do: 20 percent is never wrong.
Absent a service charge, diners should tip 20 percent. But this gets tricky fast.
Even with the passage of I-82, countless restaurants still take advantage of a tip credit: They pay servers less than the minimum wage (currently $6 an hour in D.C. before it rises to $8 an hour in July) and rely on customer tips to cover the difference. If tips and wages combined are not enough to cover the minimum wage, owners are legally required to make up the difference. When there’s no service charge, one might assume a restaurant is taking a tip credit.
But that’s not always the case.
Ana-Maria Jaramillo and Gus May, owners of La Tejana in Mount Pleasant, pay all their employees $17 per hour because each worker is considered equal in the company’s business model. But because La Tejana is a counter-service operation and because customers can wait as long as 45 minutes before they even reach the counter to order breakfast tacos, Jaramillo and May don’t feel comfortable instituting a service charge. They figure customers would balk. But the owners allow diners to tip, and most do: between 15 and 20 percent for about 95 percent of the transactions, Jaramillo said.
They do so, Jaramillo suggested, because Washingtonians understand workers who earn the full minimum wage still don’t make enough to live comfortably in the District. The Massachusetts Institute of Technology estimates the living wage for one working adult with no children in D.C. is $22.15 per hour. On a busy Saturday, La Tejana’s employees can earn as much as $31 an hour, Jaramillo said.
“If I was already tipping 20 percent every single time I went, I don’t think that I would allow anything to get in the way of that, even if it was a new law,” Jaramillo said. “I think I would still continue to just put 20 percent because that’s what I had always been doing, and because I want the restaurant to survive and I believe in them.”
But for restaurants that still take a tip credit — your server can likely provide insights on the establishment’s policies — you are expected to tip. Servers rely on these tips to survive.
If there is a service charge
What to do: Figure out what it’s for.
Unlike tips, which legally belong to tipped workers, a service charge is money that proprietors can use any way they want. The D.C. attorney general has said service charges must not only be disclosed at the beginning of the ordering process, but restaurants must use the money for the purpose stated on the menu or via the server. What’s billed as a worker’s health fund, for example, can’t become a restaurant-owner vacation fund.
Chris Svetlik, co-owner of Hill East Burger, has instituted a service charge from the day it opened last fall. Since I-82 kicked in, though, Svetlik and Hill East Burger have painstakingly tried to explain how they distribute the cash: Half goes to the staff, both front and back of the house, and half goes to the business. Yet, that tells only part of the story, Svetlik said.
Hill East Burger pays its staff $10 to $15 per hour — more than the $6 per hour required for tipped workers in D.C. — but the burger joint guarantees an hourly wage of $25 to $30 per hour on every shift, even a slow Monday night. The business uses its half of the service charge to subsidize the increased base pay — and to help cover its share of health insurance for full-time employees.
Many customers are “appreciative of the transparency and of a policy that at least is exploring a new way to provide staff a high guaranteed wage and a more stable take-home pay night to night,” Svetlik said. Of course, some are not appreciative, as seen in comments in response to the burger shop’s added fees. Some are more confused than they were before Hill East’s explanation. Some feel gaslighted. Some wonder why the shop doesn’t just raise prices.
“I do think that a lot of the folks who are saying ‘just raise prices,’ if we did raise prices and the burger was $18 and fries are $8, they would be complaining,” Svetlik said. “The costs have to come from somewhere.”
Transparency is key. The owners contacted for this story say they welcome questions — and scrutiny — from the public. Be cautious with businesses that are vague about their service charges.
If the service charge goes entirely to restaurant employees
What to do: It’s okay not to tip.
Some restaurants make it easy: They give every penny of the service charge to employees. Patrice Cleary, owner of Purple Patch in Mount Pleasant, puts a 20 percent service charge on “each check for dine in and patio that is shared with all staff working that day,” as noted on the menu.
Part of the fee is held for the kitchen staff, which receives a bonus each quarter based on the hours they worked during the period, Cleary said. The rest goes to the front-of-the-house staff, which gets paid its share of the tips twice a week. This money is on top of the $17 an hour, or more, that Cleary pays employees.
In other words, Cleary has nearly three times the labor costs compared to owners who rely on customer tips to help cover their payroll. Yet she doesn’t use the service charge to cover her increased costs. She takes the hit herself, annually shifting hundreds of thousands of dollars that would normally go to the restaurant and allocating it to the staff. She started this model during the pandemic and just continued it.
“I don’t see it as a pay cut. I see it as an investment,” Cleary said. “I want them to know that I wouldn’t have my restaurant without them. So how do I do that? These kids make a lot of money, but I’m happy they’re making a lot of money. They’re happy coming to work because they know they’re not relying on somebody leaving them a tip.”
Purple Patch still has a tip line on its checks, and that money all goes to the staff, too. About 50 percent of the customers add another 5 to 10 percent to their bill, Cleary said, though it’s not expected.
“Absolutely not,” Cleary said. “None of my staff expects it, either.”
If you can’t figure out what the service charge is for
What to do: See No. 1
Wage theft is a problem in the restaurant industry, even during the pandemic when the balance of power seemed to shift to workers. This isn’t just exploitation — it’s illegal, and the attorney general has a tip line to report such practices.
The industry’s history of wage theft — combined with the current trend toward service charges — has made the public even more wary about where the money from added fees goes. The restaurant is supposed to be clear about how the money is used, but maybe the menu language is too vague. Or maybe the server is too busy to give you a precise breakdown of the service charge. Or maybe, like Cleary with Purple Patch, you don’t want to go to a restaurant to conduct an investigation.
“I don’t want to be digging into somebody else’s business,” Cleary said. “I think there should be a little bit more transparency.”
For whatever reason, if you cannot figure out what a service charge is for, you should default to tipping as you usually would in the absence of an added fee. After all, overtipping is not a crime, and those tips are the legal property of the workers, not the owners.