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Overview of the D.C. Minimum Wage

The minimum wage in the District of Columbia is $13.25 per hour and will increase to $14.00 per hour on July 1, 2019.  D.C. Employers may pay “tipped employees” less than this minimum wage, but no less than the tipped minimum wage of $3.89 per hour.  The difference between the D.C. minimum wage and a tipped employee’s direct wage paid by the employer is referred to as a “tip credit” that is applied to the employer’s minimum wage obligation.  Assuming an employer pays a tipped employee the minimum of $3.89 per hour, the employer would receive a maximum tip credit of $9.36.


Illustration 1:

  • [$13.25 (Minimum Wage)] – [$3.89 (Tipped Minimum Wage)] = [$9.36 (Tip Credit)]

Although Employers can apply the full tip credit to their minimum wage obligation, if the weekly average of an employee’s hourly earnings (tips + wages) do not equal the D.C. minimum wage of $13.25, the employer must compensate the employee with the difference.

 

Calculating Overtime Wages

While D.C. minimum wage obligations may be straightforward, calculating the tipped minimum wage for employees who work overtime is not as intuitive.  The Fair Labor Standards Act (“FLSA”) establishes the rules for calculating overtime wages.  This federal law entitles non-exempt employees to at least 1½ times their regular rate of pay for all hours worked over 40 hours in a workweek.

In the District, an employee who is compensated at the minimum wage of $13.25 is entitled to at least $19.88 for each hour worked over 40 hours in a workweek.  


Illustration 2:

  • [$13.25 (Minimum Wage)] x [1.5 (Overtime Rate)] = [$19.88 (Overtime Rate of Pay)]

In contrast, if an employee is compensated at the tipped minimum wage, that employee’s direct overtime pay will equal $10.52 per hour for each hour worked over 40 hours in a workweek.  So where does this number come from?

For the purposes of this example, let’s assume that an employee is compensated at the tipped minimum wage of $3.89 and at the minimum overtime rate of 1½ times their regular rate of pay.

A common misunderstanding by employers when calculating overtime is to pay 1½ times the employee’s tipped minimum wage of $3.89.  If a tipped employee is paid less than the minimum wage of $13.25, overtime is still paid at 1½ times the minimum wage of $13.25. 

However, the D.C. tip credit of $9.36 can still be applied. In this example, the tip credit would be subtracted from the overtime rate of pay, which would equal the “tipped overtime rate of pay.”


Illustration 3:

  • [$13.25 (Minimum Wage)] x [1.5 (Overtime Rate)] = [$19.88 (Overtime Rate of Pay)]
  • [$19.88 (Overtime Rate of Pay)] – [$9.36 (Tip Credit)] = [$10.52 (Tipped Overtime Rate of Pay)]

 

Conclusion

Assuming a tipped employee is paid the tipped minimum wage, overtime for that employee would be paid at $10.52 per hour for each overtime hour worked.

This material is for informational purposes only and should not be relied on for legal advice.  For legal assistance with an employment matter, contact our Firm through the “Contact Us” page on our website, or calling us at 202-795-9999.