On January 6, 2020, Connecticut Governor Ned Lamont signed into law House Bill No. 7501 (An Act Concerning the Workforce Training Needs in the State and Revisions to and Regulations of Gratuities Permitted or Applied as Part of the Minimum Fair Wage). The law significantly affects Connecticut tip credit regulations in the service industry and mandates that the state's minimum wage regulations incorporate the "80/20" or "20%" tip rule. This new law also affects tip credit class actions in Connecticut, which have been on the rise significantly in state and federal courts over the past few years.
In sum, the new law requires that:
- The Labor Commissioner post a notice of intent to adopt new regulations concerning tipped wages by April 1, 2020.
- The notice provide for the repeal of Regulation section 31-62-E4, which requires employers to segregate time that servers spend on "service" versus "non-service" duties.
- The Labor Commissioner consult with representatives of the restaurant industry and consider federal guidance on tip credits.
- The potential penalties that a restaurant employee may recover if he or she proves a violation of the tip credit regulations be addressed.
- An employer's good faith belief include reasonable reliance on written guidance from the Labor Department (e.g., the 80/20 rule).
- Importantly, effective from passage, no individual may bring a class action premised on violations of the tip credit regulations unless the individual can prove that all class members (1) performed non-service duties (not incidental to service) for more than a de minimis amount of time and (2) were not properly compensated for some portion of their non-service duties.
The new law, signed after a similar bill was vetoed by Governor Lamont earlier in 2019, succeeded in part due to the rise of class actions by restaurant employees involving tip credit regulations, some of which threatened to close several Connecticut businesses with mounting legal fees and penalties. One Connecticut restaurant recently filed for bankruptcy after losing a 2015 lawsuit filed by a former bartender who was awarded back pay and attorneys' fees. Once the new regulations are posted (which should occur by April 1, 2020) restaurants and other service-related industries in Connecticut are encouraged to review their existing employment policies and procedures to ensure compliance with the new regulations.
Contact Wilson Elser's Employment & Labor practice for more information or to discuss how the new law affects your business.
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