The cost of minimum wage

The impact of DC’s new tipped service law


Bailey Bish, Staff Writer

On Nov. 8, 2022, Raif Ahmed was sitting on his friend’s couch and decided to glance at a New York Times poll for the results of a new ballot initiative that would change how tipped workers are compensated in Washington, D.C.

Ahmed said he had spent the weeks before the vote going door-to-door in Southeast D.C., talking to residents about their experiences and opinions on tipped worker compensation in the District. On Nov. 8, he stared at his phone, where the New York Times reported that Ward 8 voted to pass the initiative 74% to 26%.

“I really do take a lot of pride from that door knock,” Ahmed said. “It wasn’t my first time door knocking, but it was probably my favorite.”

Ahmed said he was one of many D.C. residents who celebrated the passing of Initiative 82 on Nov. 8, 2022, which would slowly eliminate the tip credit system for tipped workers in the District.

The tip credit system is commonly used in the service industry and allows employers to pay their workers below the standard minimum wage as long as their tips make up the difference, according to D.C. law. With Initiative 82, tipped workers in the District will gradually start to see an increase in the current standard of $5.35 an hour, according to the law. By 2027, the minimum wage of tipped service workers will match the standard minimum wage of non-tipped workers, which is set to be raised to $17 an hour in July 2023, according to a public notice from the Department of Employment Services Office of Wage and Hour.

For Ryan O’Leary, an AU alumnus who proposed Initiative 82 and managed its campaign, bringing Initiative 82 to the forefront of D.C. politics was about fighting for better working conditions for tipped workers. O’Leary, who has previously worked as a tipped worker, said that Initiative 82 helps create more financial stability for tipped workers.

O’Leary said that income for many tipped workers is calculated over a two-week basis rather than shift-by-shift, which may lead to instances where workers make sub-minimum wages throughout the week.

“You never know what you’re making week to week, or even year to year,” O’Leary said. “So even though restaurant workers oftentimes do make a lot of money by the end of the year, you’re kind of stuck in this paycheck-to-paycheck way of living.”

O’Leary said that while Initiative 82 is a step in the right direction, there is still more to be done in the coming years to improve the working conditions of tipped workers. O’Leary said it is important to establish a public pension for tipped workers and unionize tipped workers in D.C. O’Leary also said it is essential to support organizations like Justice and Restaurant Opportunity Center who investigate tipped wage reports. Despite the difficulties around organizing a workforce like tipped workers, O’Leary said organizers and activists believe there is a possibility for future progress.

“It’s been done before at the turn of the century,” O’Leary said. “It can be done again.”

While supporters of Initiative 82 said the bill is set to change the lives of many tipped workers in the District, local business owners like Geoff Tracy, owner of Chef Geoff’s, said the initiative will change the business model of local restaurants throughout the District.

Initiative 82 will require local D.C. restaurants to create a new business model under increasing labor costs. The law is set to bring new challenges to local D.C. restaurants and a new business model under increasing labor costs. Tracy said the initiative will change an already complex compensation system for tipped workers. Tracy said the system works slightly differently for every restaurant.

“The server collects their tip and they may have to tip out a busser or a bartender or a food runner,” Tracy said. “There’s some sort of system involved. We’re trying to figure out how to create, essentially, the status quo in terms of overall compensation.”

Tracy said that the change in compensation will amount to large increases in expenses throughout the next few years that will need to be passed through the consumer. While his business is working out the details of adding an automatic service charge, Tracy said this might not be the case for every local business.

“Each restaurant is going to have to come up with a unique way to offset those increased costs,” Tracy said.

Tracy said he hopes the District will pursue an education program in the upcoming years to explain to all types of consumers the change in the minimum wage in D.C., as well as support local businesses through these changes.

“I have a theory called infinite adaptability,” Tracy said. “You can plan for anything, and things are going to be different. It’s never going to be exactly the way you planned.”

For Restaurant Association Metropolitan Washington – a trade association focused on representing and advocating restaurants and the food service industry –the main focus in the aftermath of Initiative 82 is supporting local businesses through these changes.

“This is a seismic shift for a restaurant, for the essential way they do business,” said Che Ruddell-Tabisola, director of government affairs and member advocacy for Restaurant Association Metropolitan Washington, or RAMW. “The number one job is keeping restaurants open and people working.”

This shift in the restaurant model has been a concern for RAMW since 2018, when D.C. voters passed Initiative 77, an early proposal to end tip credit nearly identical to Initiative 82, according to a May 2018 blog post on RAMW’s website. The D.C. Council voted to repeal Initiative 77 on Oct. 2018, though they did not provide an official reason in the bill. Initiative 82 was retained by the council on Nov. 30, 2022 after the public vote, according to the D.C. Council website.

RAMW did not support Initiative 77 when it was on the ballot, according to the blog post. Initiative 77 would move restaurants to a service charge, eliminate tips, reduce staff size and end overtime, according to the blog post. Now, four years later, RAMW is focused on guiding local businesses through the changes brought on by Initiative 82, Ruddell-Tabisola said.

Ruddell-Tabisola said that for many local restaurant owners, Initiative 82 is a source of fear and uncertainty in an industry still recovering from the effects of COVID-19. To help mitigate these fears, RAMW is looking to provide resources and advocate on behalf of restaurant owners throughout the District, Ruddell-Tabisola said.

One of the main resources RAMW has provided for restaurants in the immediate aftermath of Initiative 82 is wage modeling webinars. Ruddell-Tabisola said during these webinars, local businesses learn from bookkeepers, employment lawyers and representatives from a payroll company about the projected cost impact of Initiative 82 and the different models restaurants can use to adjust to these changes.

RAMW is also focused on finding long-term policies supporting a post-Initiative 82 industry, Ruddell-Tabisola said. One of those long-term solutions is reforming the District’s liquor liability laws and insurance costs.

In D.C., businesses that serve alcohol can be held liable for the actions of a drunken person under certain circumstances, such as serving someone underage or intoxicated, according to Title 25 of the D.C. code. The District has some of the most extensive and restrictive liquor liability laws in the area, causing D.C businesses’ liquor liability insurance to be considerably more expensive when compared to neighboring states Virginia and Maryland, Ruddell-Tabisola said.

In the coming years, RAMW hopes to advocate against the current restrictions imposed on restaurants in the District due to strict liquor liability laws, seeking to bring down insurance costs for local businesses, Ruddell-Tabisola said.

“That’s something we could advocate for and hopefully partner with policymakers on,” Ruddell-Tabisola said. “That would save folks some money in their pocket every month when they’re trying to figure out where this increased labor cost comes from.”

As the immediate impacts of Initiative 82 are set to be seen in the coming months, business owners and tipped workers alike are trying to find ways to keep money in everyone’s pockets, Ruddell-Tabisola said.

“One of the strengths of the industry is its diversity,” Ruddell-Tabisola said. “It’s an industry in a constant state of innovation.”

As for Ahmed, he said the core of Initiative 82 lies in showing support for tipped workers. Ahmed said that while door-knocking, he connected with residents from Southeast D.C. who spoke about financial hardships, their support for increased wages, and the personal impact of Initiative 82.

“You talk to enough people who have tangible issues in their life, specifically ones that hit their pocketbook or their wallet, and you connect it to people in their lives that they care about, you’re way more likely to get them involved in making change,” Ahmed said.

This article is a part of AWOL’s 32nd Magazine edition