DC Council Approves Bill Allowing Restaurants and Bars to Impose 20% Service Fees

By John Lopez

Mar 07, 2024 10:26 AM EST

The District of Columbia's council has recently voted in favor of a bill that permits restaurants and bars to add service fees of up to 20% to customers' bills.

This decision aims to offer more flexibility to businesses struggling with rising costs and increased minimum wages for tipped workers, but some are raising their eyebrows.

WASHINGTON, DC - MAY 21: People eat outside during the lunch hour at a restaurant on Pennsylvania Avenue in the Capitol Hill neighborhood on May 21, 2021 in Washington, DC. Starting Friday, Washington D.C.s local government has dropped its coronavirus capacity limits for most businesses operating in the city. Bars and nightclubs around the city will still operate under a 50% capacity limit until June 11.
(Photo : Photo by Drew Angerer/Getty Images)

What You Need to Know

The new legislation, the Restaurant Revitalization Bill, was approved after much debate. It mandates that businesses clearly disclose service charges to diners before placing orders. This transparency is intended to ensure that customers know the additional fees they may incur.

Under the bill's provisions, restaurants and bars must indicate how the service fee will be allocated on their menus. This includes specifying the portion dedicated to covering basic operating expenses and the portion allocated for workers' wages, particularly for tipped employees.

Moreover, an amendment to the bill was passed to provide a "safe harbor" for compliant businesses. This measure shields establishments from potential lawsuits related to the imposition of service charges as long as they adhere to the disclosed guidelines.

The bill, which has now been sent to DC Mayor Muriel E. Bowser for review, also includes provisions beyond service fees. It addresses concerns regarding the working conditions of delivery drivers and grants them access to restroom facilities at restaurants where they pick up orders.

What This Means for Tipped Workers

In addition to the service fee amendment, the council's decision holds significant implications for tipped workers in the district. DC's Tip Credit Elimination Act, which gradually increases minimum wages for tipped employees, reshapes the compensation landscape.

With the minimum wage set to rise to $17.50 per hour, restaurants are facing pressures to adapt their business models accordingly.

Despite the council's efforts to balance the interests of businesses and workers, challenges remain. Some advocacy groups, like One Fair Wage, push for further reforms to ensure fair compensation practices for tipped employees.

Meanwhile, an X (Twitter) poll conducted by user Potomac Fever suggests that the majority of respondents believe that DC's 20% service charge is sufficient, though a notable minority still opt to tip above this fee.

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