The District of Columbia passed emergency legislation on June 3, 2025 that paused an increase to the tipped minimum wage from $10 per hour to $12 per hour, which was originally set to take effect on July 1, 2025. At least for now, this pause permits employers who lawfully take a tip credit to continue paying their tipped employees a cash wage of $10 per hour while taking a tip credit of $7.50 per hour.
Initiative 82
On November 30, 2022, the district passed the controversial Tip Credit Elimination Act, also known as Initiative 82, which gradually lowers the tip credit until it is eliminated altogether on July 1, 2027.
Since July 1, 2024, provided proper notice is given, District employers have been required to pay tipped employees a cash wage of $10.00 per hour so long as such employees earn a sufficient amount in tips so that their cash wage and tips are greater than or equal to the minimum wage, currently $17.50 per hour, for all hours worked. In other words, employers could take a tip credit of $7.50 against its minimum wage obligations for tipped employees.
On July 1, 2025, the hourly minimum wage in the District increases to $17.95. Under Initiative 82, on that date, the cash wage for tipped employees was set to increase from $10.00 per hour to $12.00, and the tip credit was set to decrease from $7.50 per hour to $5.95 per hour. However, the District City Council’s decision last week freezes the cash wage that must be paid to tipped employees at $10.00 per hour, thereby increasing the tip credit from $7.50 to $7.95 on July 1, 2025.
Employers should be aware that this legislation does not affect the July 1, 2025 increase to the District-wide minimum wage. However, it does increase the tip credit that an employer may take as an allowance against a tipped employee’s wages assuming that the employee earns a sufficient amount in gratuities.
Effective July 1:
- District Minimum Wage - $17.95 per hour
- Cash Wage for Tipped Employees - $10.00 per hour
- Tip Credit – $7.95 per hour
Is This the End of Initiative 82?
No. At least not yet.
On May 5, 2025, Mayor Muriel Bowser announced that her fiscal year 2026 budget proposal will include the repeal of Initiative 82.
The District City Council’s June 3, 2025 decision did not repeal Initiative 82. Rather, it paused it in the wake of Mayor Bowser’s anticipated fiscal year 2026 budget proposal. However, the City Council’s vote is an indicator that the District is at least open to modifying any future changes to the tipped minimum wage, or, as Mayor Bower urges, scrapping it altogether.
Although employers with tipped workers are likely relieved at this development, they should nonetheless take all necessary steps to ensure that they are ready to pay their non-tipped employees the new $17.95 per hour minimum wage set to take effect in only a few short weeks.
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