Bear with me because this is a story about how a little provision slipped in at the last minute and buried deep in a innocuously-titled bill will have big implications for the restaurant industry in Connecticut.
You might have missed House Bill 5001 (now Public Act 19-198) titled “AN ACT ESTABLISHING A TASK FORCE TO STUDY WORKFORCE TRAINING NEEDS IN THE STATE.”
There was no legal analysis of the bill by the the Office of Legislative Research because “it does not analyze Special Acts.” This must just be a bill about a task force, right? Well not exactly.
Through an amendment that was adopted and passed by the House unanimously at 7:07p on the last day of the General Assembly session, two little noticed sections — Section 5 and 7 — were added to this bill. Three hours later, the Senate also passed it unanimously.
These provisions don’t have anything to do with a study on workforce training needs and everything to do with restaurants.
I haven’t found anyone that has yet reported on these provisions but for the reasons that will become apparent below, this is helpful news to restaurants and will impact class-action cases that are going on right now in Connecticut.
Section 7 of the bill contains the first provision to be aware of. Indeed, this provision will impact the very types of wage/hour claims I talked about in my previous post here.
Sec. 7. (Effective from passage and applicable to actions pending on or filed on or after said date) Notwithstanding the provisions of chapter 54 of the general statutes, section 31-62-E4 of the regulations of Connecticut state agencies is repealed.
And just like that, a provision that was central to the enforcement of state wage and hour laws and impacting the determination of whether a tip credit could be used for waitstaff (and the determination of whether incidental non-service work destroys the tip credit) will disappear. And note that it applies to all “actions pending or filed on or after” the date the governor signs it.
If an employee performs both service and non-service duties, and the time spent on each is definitely segregated and so recorded, the allowance for gratuities as permitted as part of the minimum fair wage may be applied to the hours worked in the service category. If an employee performs both service and non-service duties and the time spent on each cannot be definitely segregated and so recorded, or is not definitely segregated and so recorded. no allowances for gratuities may be applied as part of the minimum fair wage.
Does getting rid of the regulation mean that employer can’t take a tip credit? Or does it just mean the guidance will be silent at this point?
It’s hard to get into a lot of detail in a simple blog post but to understand the significance potentially of this rule and the elimination of it, recall the 2017 Connecticut Supreme Court case of Amaral Bros., Inc. v. Department of Labor (which I recapped in a post here) that this particular regulation has “existed in essentially [its] present form since 1958.”
And the court noted in that same opinion that by “retaining those [regulations] that distinguish between service and non-service restaurant employees, the legislature signaled its implicit approval of the tip credit regulations.”
But now that the legislature has repealed this regulation, what does that mean for the rest of the statute? Is this the start of an effort to undercut the tip credit rule? What does this mean to the determination of service vs. non-service duties that I talked about here and whether minimum wage must be paid to non-service duties that are incidental to the work performed by waitstaff?
Here is where another portion of the bill (Section 5) that was also added in the final hours of the session comes into play and answers some of those questions; it is hardly a poison pill to restaurants.
And it might be even bigger than Section 7 at least for now. Section 5 reads:
Not later than December 31, 2019, the Labor Commissioner shall post on the eRegulations System a notice of intent to adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, concerning allowances for gratuities permitted or applied as part of the minimum fair wage pursuant to sections 31-58 and 31-60 of the general statutes. The Labor Commissioner shall consult with representatives of the restaurant industry prior to posting such notice and shall consider the provisions of the Fair Labor Standards Act, 29 USC 203(m)(2) and 29 CFR 531.56, and include guidance provided by the United States Department of Labor Wage and Hour Division in Field Assistance Bulletin No. 2019-2, dated February 15, 2019, and in Wage and Hour Division Opinion Letter FLSA 2018-27, dated November 8, 2018, regarding such allowances.
Now we’re getting some place. In fact, this provision helps to clarify things more than it’s seemingly innocuous language might indicate. Because if you look at the U.S. Department of Labor’s Opinion Letter and Field Assistance Bulletin here, it states that:
“an employer may take a tip credit for any duties that an employee performs in a tipped occupation that are related to that occupation and either performed contemporaneous with the tip producing activities or for a reasonable time immediately before or after the tipped activities. To clarify this, the Department has issued WHD Opinion Letter FLSA 2018-27—formally rescinding its previous interpretation setting a 20 percent limit on related, non-tipped duties—and revised FOH 30d00(f) to reflect WHD’s interpretation of 29 C.F.R. § 531.56(e) as provided in the opinion letter.
Now bear with me even further as we go down this rabbit hole.
If you recall, it used to be the USDOL’s position that if a tipped employee spent 20% or more of his/her time performing “related” duties, the restaurant couldn’t take a tip credit for any time spent on those duties. This was referred to as the “80/20” rule.
But the guidance released in November 2018 and then confirmed in the FAB in February eliminated this rule at least at a federal level. “[The] WHD will no longer prohibit an employer from taking a tip credit based on the amount of time an employee spends performing duties related to a tip-producing occupation that are performed contemporaneously with direct customer-service duties or for a reasonable time immediately before or after performing such direct-service duties.”
So by referencing this USDOL guidance and bulletin, it appears that the legislature is now requesting that the CTDOL adopt similar regulations. And by eliminating the existing regulation, it seems to be removing a basis for some lawsuits against restaurants — at least for now. This could potentially be a game-changer for some lawsuits that using the service/non-service issue as the basis of seeking big monetary claims.
What else could this mean for Connecticut? Overall, it should mean that help may on the way for restaurants struggling to separate out service and non-service duties. A Connecticut DOL position consistent with the USDOL position will be helpful for some clarity and consistency.
Because there was no debate at the legislature and this provision seems to have been slipped in at the last minute, it’s hard to know exactly what the thinking was behind it or how the Connecticut Department of Labor will respond. We’ll have to see how this all plays out in the next few months. Given that this passed unanimously in the legislature, it seems likely that Governor Lamont will sign this as well.
For now, restaurants need to consult with their local counsel as soon as possible to talk about the implications of this new law and how it may impact their businesses.