Washington, D.C. city council votes to permanently reinstate tip credit

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Washington, D.C., is reinstating the tip credit less than three years after residents voted to phase out the tipped minimum wage by 2027, as part of Initiative 82.

The District of Columbia City Council voted on July 28 to bring back the tip credit, which will again allow business owners to pay tipped workers a base wage, while workers make up the rest of the mandated district minimum wage in tips. As of July 1, employers will have to pay tipped workers a base wage of $10 an hour with a tip credit of $7.95 if they don’t make up the rest in tips.

The bill now heads to Mayor Muriel Bowser’s desk for final approval. If she signs the initiative into law, Washington, D.C. would become the first municipality to abolish and then reinstate the tip credit system.

In May, Bowser included a plan to reverse the tip credit abolishment as part of her 2026 growth agenda for the country’s capital, stating at the time that, “D.C. must rebalance our system to ensure local restaurants can survive, compete, and employ D.C. residents.”

Now, two months later, D.C.’s city council voted 7 to 5 to partially appeal Initiative 82, which not only brings back the tip credit, but also slows the momentum of tipped wage growth, capped for now at 75% of the minimum wage by 2034. In a decade, the tip credit in D.C. will be permanently frozen at 25%.

The tip credit, which is currently abolished in seven states, is a controversial topic in the restaurant industry. Restaurant worker activist group, One Fair Wage, called the rollback of the tip credit ban “a betrayal of democracy,” with the organization’s president, Saru Jayaraman, accusing the city council of “siding with a corporate lobby” to decrease business owners’ minimum wage obligations.

Meanwhile, the restaurant industry has largely applauded D.C.’s about-face on this bill, with Mike Whatley, vice president of state affairs and grassroots advocacy for the National Restaurant Association, stating that the compromise will, “provide meaningful relief for operators and preserve a model that is supported by tipped employees.”

Other municipalities that have enacted or are currently considering changes to tip credit laws include:

Colorado, which as of June 3, now allows local city governments to lower their tipped minimum wage to match other tipped wage rates around the state.
Michigan, which voted in February on compromise legislation to raise the minimum wage to $15 an hour by 2027 but preserved the tip credit.