Washington D.C. Law Requires Companies to Outsource Payroll

A generous serving of compliance requirements is set to hit Washington D.C. businesses in the food service and hospitality industries.

Passed by the District of Columbia Council in 2018, the Tipped Wage Workers Fairness Amendment Act will soon impose a slew of training and reporting requirements for businesses with tipped workers. In an effort to help ensure compliance with the regulation, the District will require most of these businesses to outsource payroll.

Payroll Provider Requirements

Effective January 1, 2020, businesses with tipped employees will need to work with a third party to process payroll. There is no headcount threshold to cross before the requirement kicks in—if the employer has at least one tipped employee, the District will require them to comply.

Vendors will also be subject to their own set of requirements. Payroll providers serving D.C. businesses with tipped staff will need to submit quarterly reports to the Mayor’s office including employees’ names, hours worked, and total pay including tips (broken down by week). Each report will also need to include an explanation of the employer’s tip-pooling policy.

Note that hotels are exempt from the requirement to outsource payroll. That said, these businesses will still need to submit their own version of the quarterly report described above—a task most easily accomplished with payroll software.

Tip Declaration Forms

In addition to the quarterly reports described above, businesses will also need to provide tipped workers with a detailed breakdown of their wages each pay period. The Act requires that these statements include:

  • Total tips received
  • “Tip-outs” or any shared tips that the employee received
  • An explanation of how the shared tip was calculated   

As of this writing, the Mayor’s office has not clarified whether this information should be included on a conventional paystub or if it needs to be provided separately. The District Department of Employment Services is expected to provide additional details later this summer.

Anti-Harassment Training

The Act goes beyond just imposing payroll requirements. In addition to the above, businesses with tipped workers will need to maintain and prominently display a sexual harassment policy in the workplace no later than July 1, 2019. For a full listing of federal workplace postings, click here.

Also starting in July, new hires must receive in-person or virtual anti-harassment training within 90 days of their start date. Current employees will need to receive training within two years. Managers, executive leadership, and business owners must subsequently go through training at least every two years.

In the coming months, the Mayor’s office and District Department of Employment Services are expected to provide businesses with additional information regarding the Act’s quarterly reports and tip declaration forms. In the meantime, companies should consult with their payroll providers to ensure compliance ahead of the requirements’ effective date.

Curious to see how payroll software can make it easy to comply with local, state, and federal reporting requirements? Click here to learn how Namely makes processing and tax compliance a breeze.

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