Council members in DC voted to allow restaurants and bars to charge service fees of up to 20%, provided that it’s made clear to diners before they order.
DC council members voted on Tuesday to approve the Restaurant Revitalization bill, which includes clauses related to liquor licenses and regulating delivery services.
In an amendment voted in on Tuesday, the bill now limits how much restaurants and bars can add on to customers’ bills as a service charge.
The amendment says that businesses can impose “a service fee of not more than 20%” as long as they “prominently” disclose the charge by listing it on their menus and websites and telling customers before they place an order.
The businesses have to state on their menus how the fee will be used, including what proportion would be used for base operating costs and what proportion would go to workers above the applicable minimum wage.
More restaurants have been scrapping tips in recent years and replacing them with service charges. But diners and consumer groups have been hitting back against these additional fees, arguing that they’re not always clearly disclosed on menus and that these charges should just be included in the menu prices.
The council members behind the amendment said that businesses in DC were already allowed to impose service charges if they met certain guidelines, yet some restaurants still faced lawsuits over the practice. The amendment aims to stamp this out.
Travelers United, a nonprofit that filed lawsuits against two restaurant groups that charged service fees in DC, argued that they were deceptive.
The amendment stipulates that bars and restaurants that introduce service fees under the guidelines won’t be carrying out “unfair or deceptive” trade practices.
“The amendment creates a ‘safe harbor,’ so that those in compliance will be protected from private lawsuits,” the council members said in a rationale statement to support the amendment. “The intent is to ensure disclosure to patrons.”
The amendment was passed seven votes to six.
The Restaurant Revitalization bill has now been sent to DC Mayor Muriel E. Bowser for review, after which it will head to the District’s Congress.
DC is eliminating tip credits for bar and restaurant workers
DC’s Tip Credit Elimination Act, which came into force last year, requires restaurants in DC to raise minimum wages for tipped workers each year until they reach the district minimum wage by 2027.
Groups like One Fair Wage are trying to overturn legislation allowing lower wages for tipped workers. The Washington Post reported that some restaurants had introduced service charges to cover the higher wages they now need to pay staff.
The Tip Credit Elimination Act has been gradually shrinking the amount of tip credit that restaurants can claim.
The minimum wage that employers have to pay for tipped workers in DC is currently $8 an hour. However, if a worker’s average tip earnings don’t bring this up to the District minimum wage of $17 an hour, the employer has to pay the difference.
From July 1, when the District minimum wage goes up to $17.50 an hour, restaurants will have to pay tipped workers a minimum of $10 an hour.
At Tuesday’s council meeting, an amendment to speed up the implementation of the Tip Credit Elimination Act by requiring restaurants to pay tipped workers the District minimum wage by July 2025, instead of 2027, was voted down.
Other provisions in the Restaurant Revitalization bill include conducting a study into the working conditions of delivery drivers and allowing them to use the restrooms of restaurants where they collect orders.
