D.C.’s Minimum Wage Battle: A Primer

If the hotly debated Initiative 77 ballot measure passes, it will change the way local hospitality workers get paid. D.C. residents will vote on the issue as part of the primary election on Tuesday, June 19. Here’s a primer to help those on the fence determine a stance.

Under current law, employees eligible for tips must earn at least $3.33 an hour. If the gratuities they collect on top of this wage don’t add up to $12.50/hour — the baseline minimum wage — employers must make up the difference.

If Initiative 77 passes, the minimum wage would rise by $1.50 an hour each July until it reaches $15 an hour in 2025. From then on, the lower tip-based pay rate would disappear and all hourly workers would earn the same amount. If it doesn’t pass, the minimum wage will rise to $5 an hour by 2020.

The leaders in this years-long fight over the measure are the local chapter of Restaurant Opportunities Centers United (ROCU), which got Initiative 77 on the ballot, and the Restaurant Association Metropolitan Washington (RAMW), a local trade group that vehemently opposes the measure.

ROCU and its supporters say this is about empowering low-income workers.

“In cities that have adopted the eliminated sub-minimum wage, earnings and employment have gone up among tipped workers and poverty has gone down,” claims economist Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities.

As of now, seven states have adopted “One Fair Wage” (OFW) protocols for tipped workers with a single minimum wage for all hourly employees, regardless of tips. Bureau of Labor (BLS) statistics show that OFW states overall have higher wages, tips, sales, employment, and establishment growth than others. The median wage for tipped restaurant workers in OFW states is $11.44, surpassing the median wage of $9.57 in states with lower minimum wage for tipped workers. Both of these figures include tips in the calculation.

Nearly 29,000 workers in D.C. work tip-based jobs, with 80 percent hailing from the restaurant world. And they are all subject to potential wage theft, which can range from restaurants underpaying individual employees to distributing collected tips in a disproportionate manner.

“What’s frustrating for people is that our employees are already guaranteed minimum wage — the wording of the bill makes it sound like they aren’t,” says Dave Delaplaine, general manager and beer director at Adams Morgan restaurants Roofers Union and Jug & Table.

As of now, many independent restaurants have been denouncing the initiative as a business killer. Large-scale restaurant groups, some of which could absorb the blow more easily via multiple U.S. locations, are expressing concern too.

Robert Gallo, vice president of Guestcounts Hospitality, the company behind Penn Quarter’s cavernous Cuba Libre, estimates Initiative 77’s ripple effects will increase payroll, taxes, and benefit costs by more than $500,000 a year.

Cuba Libre/Facebook

“The passing of this bill is nothing short of giving the vibrant restaurant scene in D.C. a lethal injection. D.C. meet Dr. Kevorkian,” he tells Eater. “If the tip credit was eliminated, we would be forced to change our business model as it now exists in order to survive.”

Add It Up

Based on various Eater interviews, restaurants are prepared to enact any or all of the following changes should Initiative 77 pass: schedule less staff per shift to trim payroll costs; automatically tack on gratuity to the price of a meal, raising the cost of most items anywhere from 25 percent to 40 percent; move to automated ordering systems, like placing iPads at tables to eliminate hourly labor; and shrink menus as a reflection of lost labor.

One of the most outspoken voices when it comes to potential cost effects is Michael Richmond, general manager at Michelin-starred Rose’s Luxury. He crunched some numbers and came up with possible scenarios for local businesses. He says raising the pay of 30 tipped workers, including both front- and back-of-the-house personnel, from $3.33 to $15 an hour would cost a restaurant $728,000 extra a year (or roughly $24,000 per employee). That nearly three-quarters of a million-dollar deficit would have to be made up by higher prices, additional charges, or a combination of both, Richmond tells Eater. Furthermore, he says tipped restaurant workers currently earn 30 percent more than the minimum wage with tips (between $20-$35 per hour), so that number could easily balloon to $1 million. That’s in addition to fees for “percentage rent” built into D.C. leases, in which 6 percent to 8 percent of gross sales goes back to the landlord (or $80,000), according to Richmond.

Others are doing their own back-of-the-envelope calculations.

“If you are spending this extra money for your payroll, you aren’t going to have anything left to give those raises for folks doing a great job,” points out Diane Gross, owner of 10-year-old neighborhood restaurant Cork on 14th Street NW.

Sheena Wills, bartender at DC9 nightclub, is hearing ripples of concern from coworkers. The back-of-house staff is wondering when an anticipated yearly raise will go through, since bartenders are now going to be paid more, she says. And line cooks are wondering if they’ll have to handle cooking duties, washing dishes, and running food orders to make up for any potential downsizing.

“It is a legitimate fear, and I think it’s very condescending and very insulting for people to say, ‘Oh well it will be fine, jobs won’t be lost,’” Wills says, ”because one, you don’t know that, and two it’s really disrespectful to not listen to how we feel and what we’re saying.”

Espita Mezcaleria partner Josh Phillips estimates he’ll have to raise the price of his tacos from $10-$12 a pair to $8 apiece if the bill goes through.

Rey Lopez/Eater DC

“I think we will close, flat out,” says Phillips, adding that the proposed phase-in would only delay the inevitable. “You might not notice the hurt over the eight years, but at the end of it we are fucked.”

Phillips has already been affected by the fight. He’s had to put off expansion plans for a second restaurant because of uncertainty about future payroll costs. “We had investors tell us flat out that if this passes, money’s not coming,” Phillips says.

Longtime D.C. restaurant broker John Asadoorian tells Eater that word has spread about Initiative 77; he says one Chicago operator is holding off on bringing any new restaurants to D.C. for now.

Competent restaurant employees could soon follow suit, warns Delaplaine.

“It’s going to be hard for restaurants to compete with Maryland and Virginia, which don’t have this system,” he says, adding that he thinks the initiative could cause workforces to be slashed by a quarter. D.C. restaurateur Ari Gejdenson told Eater earlier this year that he would have to take his business elsewhere, should the bill pass.

Security for All

Supporters argue that while a small number of tipped workers are employed at high-end restaurants where they can make a comfortable living, high-earning servers are a minority and are not representative of most tipped workers in D.C.

ROCU’s data shows that tipped workers face poverty rates that are nearly twice that of non-tipped workers; servers and bartenders in D.C. experience a poverty rate of 19 percent, ROCU says, while workers, generally, experience a poverty rate of 8 percent.

Venorica Tucker, a tipped worker and ROCU member, says the initiative gives a voice to minority workers afraid of speaking up due to language issues and fear of retaliation.

“The reason I’m stepping up for this initiative is because I know that a lot of those people will never say anything. They won’t say, ‘I’m not making enough money,’ and … a lot of these people are working two and three jobs,” she tells Eater. “They don’t see their families and this is what they have to do in order to survive.”

Justin Zelikovitz, an attorney who runs DC Wage Law, represents 1,000 low-wage workers, mostly from Latin America, employed by businesses without a defined front and back of the house. “There’s a whole category of workers in this town that are marginalized and deserve a real minimum wage,” he says.

Others say slow seasons are fueling their support for the change.

”Tipped workers deserve a raise because $3.33 is essentially free labor. There are times business slows down, especially in January and February, and while a better wage definitely won’t save you, it will help in hard times,” says Thea Bryan, bartender and ROCU member. “I believe these wages need to come up. They’ve been stagnant for far too long.”

Ed Lazere, candidate for D.C. Council chairman, wants to create more opportunities by starting people off at a base pay of $15 an hour and then getting them tips on top of that.

“I actually think it will result in more middle-class jobs, better jobs with tips for more tipped workers in the District — restaurant workers, but also bellhops, parking lot attendants, and nail salon workers,” Lazere says of Initiative 77. “I believe that if we do the transition right, we will end up like California and the other states that have already done this.”

Imar Hutchins, owner of the historic Florida Avenue Grill, supports Initiative 77 because of the collective good he sees it doing.

“The reason why I support minimum wage legislation with elimination of the tipped minimum wage is that it is easier if it is legislated because then it is something that [the whole industry] has to deal with together,” Hutchins says in a testimonial shared with ROCU.

Wage Theft

Other proponents insist it’s not just about money.

ROCU director Ramirez says Initiative 77 will free up the workers who are foreign born and work multiple jobs from spending time filing complaints with the D.C. Department of Employment Services over allegations of wage theft — effectively ending a system she considers inherently racist and sexist.

“Shift-to-shift workers shouldn’t be expected to take up litigation to get the wages that they earn. We should fix the law that allows the wage theft to be eliminated,” Ramirez says. Some of the ways management gets around paying workers what they are owed includes withholding paychecks, not paying for overtime work, and selectively redistributing tips between front-of-house staff (servers, bartenders) and and back-of-the-house workers (line cooks, dishwashers).

RAMW CEO Kathy Hollinger, who calls Initiative 77 “atrocious,” disputes Ramirez’s logic. “If there’s a problem with wage theft, people should come together to fix it,” she says. ”It’s not fair to penalize thousands of operators who are doing it right.”

Current D.C. Council Chairman Phil Mendelson, who spoke out against Initiative 77 during a recent panel discussion organized by Washington City Paper, says there has to be a better way forward. “If there are people, typically in the lower-paying restaurants, who are being cheated, we need to improve enforcement — we don’t need to be cutting wages,” he says, calling the initiative “well intentioned” but “misguided.”

Sexual Harassment

Ramirez also claims that Initiative 77 will cut in half the number of sexual harassment cases in D.C. In the states that won a fair minimum wage for everyone and tips on top of them, the sexual harassment complaints before the Equal Employment Opportunity Commission dropped by 50 percent.

“And that’s because in those states, a woman can say ‘Enough. I’ve been waiting on you for an hour and a half, you’re drunk, you’re starting to hit on me, you’re starting to pinch me, you can leave my table now,” Ramirez says. “When you have women working for $3.33 from an employer and they have to make up the difference in tips, studies show that they’re more likely to put up with unwanted behavior to make that tip.”

Tierney Plumb/Eater DC

Over at just-opened Lupo Marino, general manager Mitzi Taylor worries that everything could come unraveled in just a few short days. And there may be nothing she can do about it.

“It makes no sense. Guests and tourists coming in won’t understand this. It’s a tipping culture. You can’t just change that with one vote,” she says. “I’d have to let everyone go. It would be terrible.”

What’s Next?

If Initiative 77 moves forward June 19, it still faces an uncertain future.

Congressional lawmakers have 30 legislative days to review — and possibly amend — the legislation before it becomes law. Meanwhile, the D.C. Council could always overturn it; many of the council members, along with Mayor Muriel Bowser, openly oppose the measure.

Should Initiative 77 stick, D.C. will join the growing roster of states that have raised the minimum wage in recent years.

—Lenore Adkins contributed to this report

• Do You Know Where Your Tip Money Is Going? [E]
• Hey, D.C.: Reject the misleading signs and raise tipped workers’ wages [Washington Post]
• City Paper to Host Free Panel on Ballot Initiative 77 on May 29 at Black Cat [WCP]
• D.C. Restaurant Association Blasts Looming Minimum Wage Hike Vote [EDC]
• Restaurateur Ari Gejdenson Says Minimum Wage Hikes May Force Him Out of D.C. [EDC]
• How Restaurants Are Surviving Higher Minimum Wages [E]