Joanna Fantozzi

Washington, D.C. is set to vote on another ballot initiative, WRAP (The Workers and Restaurants Priorities Bill), following the controversial passage of Initiative 82 in Washington, D.C. last fall — which will eliminate the tip credit over time. Two public hearing sessions just wrapped up at the end of June, where the pros and cons and possible outcome of the passage of this additional bill were discussed.

While Initiative 82 would gradually phase out the tip credit and increase the tipped workers’ base minimum wage to match the district's minimum wage over the course of five years until it reaches district minimum wage in 2027, WRAP — as introduced by D.C. Councilmember Kenyan McDuffie — would speed up that timeline to 2025.

The bill would also define and regulate consumer-facing service charges in efforts to maintain transparency and help operators transition financially to the new law, which will triple the base wages of tipped workers. According to the bill, operators would not be allowed to implement a service charge that exceeds 22%. The bill also protects operators from potentially predatory situations with landlords, and prevents these charges from being included in percentage-based leases. Additionally, come Oct. 1, the WRAP bill would put forth an education campaign to inform business owners, employees, and the public of the changes to the tipped wage compensation system.  

Related:Tip credit is eliminated in Washington, D.C.; another state passes a $15 minimum wage

The bill, introduced in response to Initiative 82, has been similarly controversial with detractors and supporters on both sides throughout the hospitality industry. According to Ryan O’Leary, a former restaurant employee and former organizer with advocacy group, One Fair Wage, who introduced Initiative 82, WRAP would be a step backward for the progress worker advocates made with the passage of the original bill, as originally reported by DCist.

However, the Restaurant Association of Metropolitan Washington supports the new measure, even though the organization did not agree with the initial elimination of the tip credit because the organization believes the follow-up bill will provide long-term relief to the restaurant industry.  

“We've been trying to explain to folks that this money doesn't come out of the air; it has to come from somewhere,” Shawn Townsend, president and CEO of the Restaurant Association of Metropolitan Washington told Nation’s Restaurant News. “Most of our operators have already raised food prices, and margins are already so thin in the restaurant industry. So more and more operators are implementing service charges to offset this cost. The service charges have been all over the place and we believe this bill provides some sort of consistency.”

Related:Labor department sets limits on use of tip credit for server side work

Critics of the bill have also suggested that by adding guidelines for service charges, restaurant operators would actually just be creating a new form of tip credit, and a way to pass off these new labor costs to the customer, rather than the business owner. But the RAMW believes otherwise.

“The service charge is not just being used to fund base wages, it’s also used to help cover costs of operating a business,” Townsend said. “There are a number of ways the service charge is being used…. But you will still see many consumers choose to continue to tip on top of the service charge, so it does not replace the tip credit.”

Contact Joanna Fantozzi at [email protected]