No, Initiative 77 didn’t end tipping in D.C.: A guide to the newly passed measure

Various D.C. progressive groups gather for an election-night watch party Tuesday at Busboys and Poets in Brookland. (J. Lawler Duggan for The Washington Post)

D.C. voters on Tuesday approved a measure advertised as a minimum-wage hike for servers, bartenders and other tipped employees so they no longer have to depend on gratuities for their income.

It was a hard-fought victory for the Restaurant Opportunities Center — the advocacy group behind it — and a blow to the restaurant industry that opposed it. And the debate isn’t over, with calls for the D.C. Council to intervene and overturn the ballot measure.

But there’s still much confusion about what this means for restaurants and tipping. Here are some answers to commonly asked questions about the measure known as Initiative 77:

What exactly does Initiative 77 do?

D.C.'s Initiative 77 passes, further regulating employers' mandate to ensure that tipped workers take home at least minimum wage for each hour worked. Although Initiative 77 was silent on the issue of tipping, many fought it as a battle ground over whether tipping--and the restaurant industry--would survive in the District. (Video: Billy Tucker/The Washington Post)

The District, like most states and the federal government, has a two-tier minimum-wage system.

The standard minimum wage in the District is $12.50 an hour. But restaurants, bars and other businesses can count customer tips toward that total and have to pay workers only $3.33 an hour out of their own pockets.

Initiative 77 slowly phases out the $3.33 “tipped wage” over eight years until employers pay the same standard minimum wage, which is already set to go up to $15 an hour by 2020 and automatically rise with inflation every following year.

Hooray! I don’t have to tip anymore!

Not so fast. The initiative doesn’t say that.

Eliminating the tipped wage is a step toward the European no-tipping model, but it’s not meant to stop tipping outright. Seven states (including the entire West Coast) require restaurants to pay full minimum wage, and tipping rates there are comparable with rates in the rest of the country.

There’s never been a law requiring customers to leave a 20 percent tip. It’s a matter of etiquette and social norms. And in an expensive city such as the District, there will be pressure to pay service workers more than minimum wage.

But some workers are worried people who misunderstood the measure will stop tipping immediately, even though they won’t be paid the full minimum wage for almost a decade.

So let me get this straight. Restaurant workers only make $3.33 an hour?

No.

Their bosses only have to pay them $3.33 an hour. But workers are earning more when their tips are included. If tips are falling short of minimum wage because of slow business or cheap customers, it’s the employer’s responsibility to make up the difference.

Let’s say a bartender is pulling in hundreds of dollars in tips a night: Her boss needs to chip in only $3.33 an hour. But if that bartender keeps getting stiffed and her pay comes out to only about $10 hourly with tips included, her boss is supposed to fork over an extra $2.50 hourly so they reach minimum wage.

Do employers ever not make up the difference?

Yes, but that doesn’t appear to be a rampant problem.

The best data point comes from the D.C. Department of Employment Services. Audits of nearly 600 businesses employing about 7,400 tipped workers discovered 419 wage violations. That means there were violations involving about 5 percent of workers.

So when does the pay raise take effect?

The language of the ballot measure says the first increase in the tipped wage should take place on July 1 — going from $3.33 to $4.50. That’s complicated by the fact that the ballot measure can’t be enacted for several months, but Initiative 77’s sponsors say they won’t push for retroactive pay.

The tipped wage would keep increasing by $1.50 annually until the city has one minimum wage tied to inflation in 2026. This is designed to give businesses time to adjust to the cost increases.

Even before the ballot measure, the tipped wage was scheduled to rise to $5 by 2020.

How are businesses going to pay for higher labor costs?

They have a variety of options: Raising prices, implementing an automatic service charge on bills or switching up models. It’s important to remember that the minimum wage isn’t tripling overnight, so they have time to adjust.

The increase in hourly wages also comes with hidden costs, including higher insurance premiums and employer-paid payroll taxes.

Gwyneth Borden, head of the San Francisco Bay area’s restaurant association, says many California eateries absorbed the costs of paying full minimum wage by including more delivery, catering and other non-table-service business in their operations.

Do the city’s elected leaders have any control over this?

They do. Foes of Initiative 77 want them to use it.

Mayor Muriel E. Bowser (D) and 10 of 13 council members have opposed the ballot measure. But overturning the will of the voters is politically dicey territory — with precedent — and no elected official has called for that step yet.

They have several options, including emergency legislation to halt implementation, permanent repeal or a replacement plan that could placate both sides. The council adjourns for summer recess in a few weeks, but the measure isn’t scheduled to be enacted until fall. Even then, it’s being slowly phased in over time — buying lawmakers more time to act.