With the second attempt to raise the wages of tipped workers underway, a complication related to the 2018 Initiative 77 repeal bill could have big consequences for local businesses.

The issue stems from the back-and-forth over Initiative 77, a 2018 ballot measure to eliminate the tipped minimum wage, which is currently $5.35 per hour. The initiative was approved by voters, then repealed by the D.C. Council, and replaced with a different piece of legislation intended to assuage concerns from Initiative 77 advocates and prevent wage theft: the Tipped Wage Workers Fairness Amendment Act of 2018. Among other things, the law requires payroll companies to report certain wage data to the Department of Employment Services on a quarterly basis, aimed to help the agency spot employers who fail to make up the difference if a worker’s tips plus their base pay (or tipped minimum wage) don’t add up to the full minimum wage, which is currently set at $16.10 per hour.

The 2018 law is not yet fully funded and, as a result, the National Payroll Reporting Consortium says DOES has not yet required these more detailed reports from payroll companies. Once enforcement kicks in, however, the consortium said to the Council’s labor committee over the summer, and through an attorney more recently, that some members will no longer service D.C. employers because the new reporting requirements are too complex.

“Current payroll companies would abandon the D.C. market,” said David Julyan, the lawyer representing the National Payroll Reporting Consortium, at an April 14 meeting with the Tipped Workers Coordinating Council, a coalition of government and hospitality representatives.

“That is not a bluff,” Julyan told the group, which included the deputy chief of staff for DOES, Alan Karnofsky.

The National Payroll Reporting Consortium is a nonprofit trade association representing companies that service nearly 40% of the D.C. workforce, or more than 10,000 local employers. These companies are responsible for everything from payroll processing, to administering benefits and hiring.

Andrew Kline, Restaurant Association Metropolitan Washington general counsel and Tipped Workers Coordinating Council member, says restaurants are worried about having fewer payroll options. “What likely happens is we are left with one or two and the pricing is commensurate as to what happens when you don’t have a competitive marketplace,” he tells DCist/WAMU about what he believes will be a the financial burden on local restaurants.

“The DOES reps say, ‘We don’t believe them. They’re not going to pull out of the market,'” he adds. “I’m like, ‘I’m glad you are sure. I mean it doesn’t matter to you what they do. But my members are really concerned about this.'”

The 2018 law requires more wage details from an employer and their payroll provider than what is expected from other state and local governments, according to Paychex, a payroll company serving 1 in 12 private-sector employees nationwide and a member of the association. For example, payroll reports would have to delineate between cash and credit card tips, says Paychex’s director of compliance Mike Trabold.

“We certainly absolutely support and understand what D.C. is looking to do. We very much want workers to get all the wages they’re entitled to,” Trabold tells DCist/WAMU. “What D.C. is proposing is kind of incorporating some new aspects that really would be a pretty big lift.”

Trabold says his industry has also taken issue with implementation so far, calling the process “unconventional.” He says payroll companies have not yet received all the information needed to comply with the 2018 law, even though they need time to prepare. Whenever he’s raised the issue with city regulators, he says he’s been told to proceed as usual because enforcement is not funded. “We have the high-level requirements,” he says, “but not these supporting regulations or [specifications] to allow us to go in and do that work.”

Various other measures of the 2018 law have been slow to roll out, including an anonymous tip line to report wage theft and managerial training on minimum wage laws due to budgetary constraints.

Julyan said that the National Payroll Reporting Consortium has repeatedly communicated their concerns to government officials, including the fact that payroll companies are liable for the submitting wage data instead of employers.

Julyan presented the association’s proposed solution to the Tipped Workers Coordinating Council, which would be a reporting requirement similar to Maryland’s and that the association believes meets the legislative intent of the 2018 law. It would require an employer to provide workers with a report after each pay period showing their effective hourly rate, including tips. If a worker is underpaid, the employer is then required to take corrective actions and issue a new report. The employer would also have to submit reports to DOES. The association is still waiting on both a response to the proposal and on enforcement details.

Justin Zelikovitz, a managing attorney at DCWageLaw who represents workers who aren’t being paid properly, questions whether DOES will actually use the payroll data to go after wage theft. He is currently representing a former DOES employee who is suing the agency for unpaid overtime.

“It’s insanely complex,” he says of the 2018 law. “And it’s all designed to address a problem that shouldn’t even exist.” He favored raising the tipped minimum wage.

Currently, employers of tipped workers are expected to report certain wage data to DOES until payroll companies are on the hook, as well as use a third-party service to prepare payroll. But Zelikovitz says he has yet to encounter a restaurant that reports data to DOES via a portal. “The employers that were either intentionally or unintentionally violating the law — they’re not doing any of this,” he says. “The employers that are doing it right — they just have more burdens.”

A spokesperson for DOES declined to comment for this story, and to say whether employers are reporting data via the portal.

Members of the Tipped Workers Coordinating Council, a group created by the 2018 law that aims to improve conditions for tipped workers, including Kline and Zachary Hoffman of the National Democratic Club, are displeased by the lack of urgency from government officials.

“I personally feel like DOES has dropped the ball so often,” Hoffman tells DCist/WAMU.

Kline believes the problem stems from the way the Council legislated the law several years ago. “Our big concern was it was all being done on the fly and there had not been discussions, for example, with the payroll companies,” he tells DCist/WAMU.

Mendelson says he consulted with payroll companies at the time of writing the law. “Is the law right? Does it need to be fixed? This is the first I’m hearing of this,” he tells DCist/WAMU. “That doesn’t mean that it shouldn’t be addressed. That doesn’t mean that there isn’t a problem. It would be appropriate for the labor committee to do that.”

At-Large Councilmember Elissa Silverman, chairperson of the labor committee, tells DCist/WAMU she has been in contact with the payroll association and their attorney regarding the issue but understood that the parties were working with DOES on a solution. She is still reviewing the association’s proposal.

At the April 14 meeting, Julyan asked the Tipped Workers Coordinating Council to support the proposal from the payroll association, hoping to relay the endorsement to councilmembers. Kline and Hoffman offered their support. DOES Deputy Chief of Staff Alan Karnofsky declined to share any thoughts, only repeating “We don’t legislate.”