Washington, D.C. has changed its mind on the tip credit.
The D.C. Council on Monday passed a compromise legislation that will slow and ultimately stop a planned phase-out of the tip credit, eventually preserving a 25% tip credit in the nation’s capital.
Voters in the city approved a measure in 2022 to increase the tipped wage until July 2027, when servers and other tipped workers would receive the same minimum wage as non-tipped workers.
But the D.C. Council on Monday approved an amendment to what was Initiative 82, which will keep the tipped wage at $10 until July 1, 2026. It will then increase to 56% of the minimum wage and will increase to 60% in 2028. The wage will increase by 5% every two years until it reaches a peak of 75% by 2034. At that point, a 25% tip credit will be permanent.
The City Council will also be required to conduct a bi-annual study on the economic trends affecting the restaurant industry.
“We appreciate Mayor (Muriel) Bowser and the D.C. Council acting to mitigate the real-life challenges tip credit elimination was presenting to tipped workers and restaurant owners in the District,” Mike Whatley, VP of state affairs and grassroots advocacy for the National Restaurant Association, said in a statement. He said that the compromise “will provide meaningful relief for operators and preserve a model that is supported by tipped employees.”
D.C. officials have sounded regret on the tip credit elimination in recent months, worried about the impact its elimination would have on the city’s restaurant scene.
Bowser in May called for a return of the tip credit, saying that the city needed to remove barriers to growth and that restaurants “need special attention.”
In June, the District passed emergency legislation pausing a planned increase in the tipped wage that had been set to move from $10 an hour to $12 on July 1. The non-tipped minimum wage in the city is $17.95.
Industry officials have highlighted data suggesting the city’s restaurant business was struggling with closures and job losses as the tipped wage increased. Full-service restaurants in the District had been cutting jobs. And there were 74 closures in the city last year.
“The negative consequences of eliminating the tip credit are undeniable,” Rebekah Paxton, research director with the Employment Policies Institute, said in a statement. “With overwhelming evidence of restaurant job losses, workers’ lost tip earnings and historically high restaurant closures, leaving Initiative 82 as-is was untenable for local restaurants and their employees.”
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