In Washington, D.C., the tip credit policy has been restored.
In a move aimed at balancing the concerns of restaurant owners and workers, the D.C. Council has passed a compromise legislation to slow and eventually stop a planned phase-out of the tip credit in the nation's capital.
The current status of the tip credit in Washington D.C. is that the D.C. Council has reinstated and preserved a 25% tip credit after partially repealing the phased elimination mandated by a voter-approved initiative (Initiative 82).
The tipped minimum wage will remain at $10 until July 1, 2026, then increase gradually every two years, reaching 75% of the minimum wage by 2034, at which point the 25% tip credit becomes permanent. This compromise effectively slows down and halts the previously planned full phase-out of the tip credit by 2027.
Earlier in 2025, the Council paused the scheduled increase of the tipped wage from $10 to $12 per hour that was set for July 1, 2025. During this pause, the tip credit increased slightly from $7.50 to $7.95, reflecting the minimum wage increase to $17.95, but the full wage increase for tipped workers was halted temporarily pending further legislative adjustments. This emergency legislation expires September 28, 2025.
The Council’s move follows significant pushback from restaurant owners and the mayor, who argued the original plan was threatening business viability. The compromise aims to address these concerns by slowing wage increases but maintaining some tip credit to support the restaurant industry.
Voters in D.C. 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. However, industry officials have highlighted data suggesting the city's restaurant business was struggling with closures and job losses as the tipped wage increased.
The compromise legislation approved by the D.C. Council on Monday is a change to what was Initiative 82. Rebekah Paxton, research director with the Employment Policies Institute, stated that leaving the tip credit elimination as-is was untenable for local restaurants and their employees. On the other hand, Mike Whatley, VP of state affairs and grassroots advocacy for the National Restaurant Association, has stated that the compromise will provide meaningful relief for operators and is supported by tipped employees.
In addition, the City Council will be required to conduct a bi-annual study on the economic trends affecting the restaurant industry. D.C. Mayor Bowser called for a return of the tip credit in May, stating that the city needs to remove barriers to growth, and that restaurants "need special attention."
The compromise legislation comes as full-service restaurants in the District had been cutting jobs, with 74 closures in the city last year. The Council's decision to preserve the tip credit is expected to provide some stability for the struggling restaurant industry in the city. After 2034, a 25% tip credit will be permanent in D.C.
[1] [Source 1] [2] [Source 2] [3] [Source 3]
- The compromise legislation passed by the D.C. Council aims to address the concerns of the restaurant industry and its workers, as it preserves a 25% tip credit and slows down the phase-out of the tip credit, as outlined in Initiative 82.
- The ongoing financial management (restaurant finance) of restaurants in the nation's capital is expected to become less burdensome with the permanent 25% tip credit established in 2034, potentially leading to improved business operations and growth.
- In the realm of business and politics, the D.C. Council's decision to preserve the tip credit has been met with applause from both restaurant owners and workers, as it offers meaningful relief for operators and maintains a level of support for the restaurant industry, which has been experiencing challenges amidst increased labor costs and job losses. (Additionally, the general-news coverage of this decision can be found in Source 1, Source 2, and Source 3.)
