Trying to follow both state and federal wage and hour laws isn’t that hard.

But it isn’t that easy either.

Let’s say you’re a restaurant with a waitstaff.  Like most restaurants nowadays, your customers pay by credit card and you, the employer, have to pay the credit card company a percentage on each sale.

You know there are rules regarding deductions of the wages to employees. But what about tips? Can you take out the percentage of fees being charged by the credit card company on the tips?

According to the U.S. Department of Labor: Yes.

In its fact sheet, the USDOL makes it plain that such actions by an employer do not violate federal law, so long as they are limited to the fees on the tips themselves.

Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage. For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA.

The DOL also has 2006 opinion letter bolstering its views here. Even Connecticut, in an unofficial guidance, permits the practice.

While that aspect is clear, the remaining aspects of tip pooling are still very much being debated.  According to a DOL Field Bulletin this spring, in the Conolidated Appropriations Act, 2018, the Act provided that certain other portions of DOL regulations that barred tip pooling when employers pay tipped employees at least the full FLSA minimum wage and do not claim a tip credit no long have further force or effect.

As a result, according to the DOL, “employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools.”

And if that weren’t confusing enough, employers in Connecticut also need to comply with the Wage Order drafted by the Connecticut Department of Labor that has additional guidance on tip pooling.

Employers must continue to tread cautiously in the area of wages. Minefields continue to be ever present — and the impact of a failure to comply with the law can be costly.


file0001835967537The Connecticut Supreme Court, in a unanimous decision that will be officially released April 4, 2017, has ruled that employers may not use the “tip credit” for pizza delivery drivers and therefore, the employees must be paid the standard minimum wage.

You can download the decision in Amaral Brothers, Inc. v. Department of Labor here.  The decision is no doubt a disappointment to employers who believe that the Connecticut Department of Labor’s regulations in this area far outstretch the plain language of the applicable wage/hour statute.

The case arises from a request by two Domino’s franchises for a “declaratory ruling” from the Connecticut Department of Labor (DOL) that delivery drivers are “persons, other than bartenders, who are employed in the hotel and restaurant industry, …who customarily and regularly receive gratuities.” The request arises from Conn. Gen. Stat. §31-60(b), which has been amended over the years.

Why would the employer make such a request? In doing so, the employer wanted to take advantage of the “tip credit”, in which employees are paid below the conventional minimum wage, but his or her salary is supplemented by tips from customers.

Originally, as noted by the employer’s brief to the Court: “The DOL denied Plaintiff’s Petition for the following stated reasons: (1) the regulations were valid because they served a remedial purpose, were time-tested and subject to judicial scrutiny…; and (2) the only act of “service” was handing the food to the customer at the customer’s door and so delivery drivers’ duties were not solely serving food as required under Regulations of Connecticut State Agencies § 31-62-E2(c). The DOL’s decision was that only employers of “service employees” as defined by the DOL could utilize the credit, and Plaintiff’s employees were not service employees.

A lower court upheld the DOL’s conclusions “agreeing that the regulations were ‘reasonable’, ‘time tested’, and had ‘received judicial scrutiny and legislative acquiescence’. The court also determined that the ‘minimum wage law should receive a liberal construction.'”  (You can also view the DOL’s brief to the Court here.)

The Connecticut Supreme Court upheld the Department of Labor’s interpretations here finding that the regulations issued by the agency were “not incompatible” with the enabling statute.  In doing so, the Court noted that this is a bit unusual because the employer was contending that the regulations were originally valid when issued, but repealed by implication when there was an amendment to the statute at issue.

The Court’s decision traced the origin of the tip credit in a portion of the decision that only lawyers will love. But then they get to the heart of the matter: “It was reasonable for the department to conclude that the legislature did not intend that employees such as delivery drivers, who have the potential to earn gratuities during only a small portion of their workday, would be subject to a reduction in their minimum wage with respect to time spent traveling to a customer’s home and other duties for which they do not earn gratuities.”

While the court’s decision directly implicates delivery drivers, it only impacts those employed directly by the employer (see also: UberEats, GrubHub etc.).  Nevertheless, in upholding the DOL’s interpretation here, the scope of who falls within the tip credit at restaurants is going to be further challenged in the courts.

Before employers make any further conclusions, Connecticut businesses should also be aware that the scope of the tip credit and of tip pooling is being debated at the federal level as well.  The National Restaurant Association has joined many others in asking the U.S. Supreme Court to hear a case on the subject. We should hear shortly whether the Court will accept such a case.

The Court’s decision is yet another reminder that restaurants in Connecticut should review the situations in which the tip credit is being utilized. Issues regarding tip pooling should be reviewed as well.  This case doesn’t answer all the questions that come up in the restaurant context. But in terms of figuring out the scope of the law, it helps to answer (albeit in a manner not helpful to employers overall) some outstanding questions.

I’ve previously touched on a number of bills that were passed in the short legislative session that ended earlier this month but I thought I would recap the session briefly in one post.

Of course, the CBIA already did most of the work so I won’t repeat the good work and recommend the post to you first.

The minimum wage hike in Senate Bill 32 is certainly the most significant piece of legislation to come down.  It will increase as follows:

  • $9.15 per hour on January 1, 2015
  • $9.60 per hour on January 1, 2016
  • $10.10 per hour on January 1, 2017

This will also affect the minimum wage for hotel and restaurant employees with the corresponding tip credit.

  • $5.78 per hour on January 1, 2015
  • $6.07 per hour on January 1, 2016
  • $6.38 per hour on January 1, 2017.

For bartenders, the minimum wage will change to the following:

  • $7.46 per hour on January 1, 2015
  • $7.82 per hour on January 1, 2016
  • $8.23 per hour on January 1, 2017

As I noted in a prior post as well, the legislative approved fixes to the Paid Sick Leave law in House Bill 5269. You can find my recap of those changes here.

And that’s pretty much it.  There were many proposals on the table — including changes to the CHRO or banning discrimination against the unemployed — but none made it to a vote.  Given all the mandates of the prior years, employers should be enjoying this short reprieve.

With the governor’s race this fall, it’ll be very interesting to see the results of that.  If Governor Malloy is elected for a second term, employers should continue to expect a good number of bills to continue. If Tom Foley is elected, expect to see more compromise legislation.  But that’s six months away.

For now, employers can breathe a little easier knowing that they don’t have to make too many changes this year.

In short order, Connecticut has just jumped to the front of the line when it comes to increasing the minimum wage.

On Wednesday, March 26th, the General Assembly passed an increase to the minimum wage in Connecticut. This will amend the previous increases that had been negotiated last year and raises the minimum wage past the $10 mark.

Senate Bill 32 can be downloaded here.  Governor Malloy is expected to sign the bill into law Thursday evening.

There are three major changes brought about by this new law.

  • The New Minimum Wage.  The current minimum wage is $8.70 per hour; that was scheduled to go up to $9.00 on January 1, 2015.  Under the new law, there will instead be a serious of additional increases: (1) to $9.15 on January 1, 2015, (2) to $9.60 on January 1, 2016, and (3) to $10.10 on January 1, 2017.
  • The New Tip Credit.  As noted in the bill summary, the bill does not change the “tip credit” allowed by law. But it will now will automatically increase “the employer’s share of minimum wages for (1) hotel and wait staff from $5.69 to $5.78 in 2015, $6.07 in 2016, and $6.38 in 2017 and (2) bartenders from $7.34 to $7.46 in 2015, $7.82 in 2016, and $8.23 in 2017.”
  • Apprentice Rate.  The bill does not change the existing rule that allows employers to pay learners, beginners, and people younger than age 18 at a rate equal to 85% of the minimum wage for their first 200 hours of employment. The minimum wage increase scheduled under current law would have increased this learner’s wage from its current $7.39 to $7.65 on January 1, 2015. The bill instead effectively increases the learner’s wage to $7.78 in 2015, $8.16 in 2016, and $8.59 in 2017.


Last night, the House of Representatives, following the lead of the Senate, approved of a measure that will increase the minimum wage paid in Connecticut to $9 per hour.

The Governor has said he will sign the bill.  The law becomes effective on July 1, 2013, technically, but the changes will not occur until 2014.   

Here’s what employers need to know:

  • On January 1, 2014, the hourly minimum wage will increase from $8.25 per hour to $8.70.
  • On January 1, 2015, the hourly minimum wage will increase from $8.70 per hour to $9.00 per hour. 
  • Learners, beginnings and people under age 18 can still be paid “sub-minimum wage” for the first 200 hours of work at 85% of minimum wage. That will mean a minimum of $7.39 in 2014 and $7.65 in 2015.
  • The bill also adjusts the “tip credit” to keep the employer’s share  for waiters and waitresses at its current $ 5. 69 and for bartenders at its current $ 7. 34. In other words, the bill increases the tip credit percentages so that the employer’s share of these employees’ wages remains at their current amounts.

For employers, you should also use these changes to update your workplace posters effective January 1, 2014 as well to reflect these revisions to the current law. 

There’s one week left to go in the legislative session.   There are several more employment law bills under consideration. Stay tuned.

Last month, it was the EEOC that released new regulations on the ADA.  This week, it’s the Wage & Hour Division of the Department of Labor, that has released new regulations on the Fair Labor Standards Act.  The new regulations will go into effect in early May 2011.

While some of these revisions are more technical in nature, there are some others which could have an impact on employers and some portions which aren’t revisions, but additions.  Here are a few highlights:

  • For employers that use a fluctuating workweek method of payment of employees (in which an employee is paid a fixed salary for fluctuating hours), there had been some discussion that the DOL might allow bonus payments in such instances. Instead, the DOL questioned such payments noting that "bonus and premium payments … are incompatible with the fluctuating workweek method."

Connecticut employers should remember the guidance that came out from the Connecticut Supreme Court back in 2008 about this method as well.  In that case, the Court looked to the federal regulations for guidance on interpreting state laws; the new regulations further complicate that and therefore, employers that use the fluctuating workweek method ought to consult with an attorney to ensure that it will be in compliance with the new regulations.

If you’d like more information about it, there’s a notable blog post from the Wage & Hour Litigation Blog here. 

  • Another major area that the regulations addressed was whether an employer has to "inform" an employee of tip credit provisions.  The DOL stated that employers do need to "inform" the employees of the tip credit, but also notify the employee of various items before utilizing the method. These items include:
    • the direct cash wage the employer is paying the employee
    • the amount the employer is using as a credit against tips received

The regulations contain a more detailed list of information to be provided.  Therefore restaurants in particular should review these items and make sure that their policies and practices will be compliant with these new regulations.

Of course not all of the revisions are notable. In one area, the regulations revise existing regulations to remove the words "firefighter" and replace them with "employee in fire protection activities". 

You can download all of the regulations here

As the dog days of summer now seem firmly entranced over Connecticut, this week’s installment of "The Basics" focuses on minimum wages.  There are lots of exceptions and rules, but the basics are fairly straightforward:


Photo courtesy of Library of Congress, circa 1943. 


The Connecticut Senate voted late today to override the veto of the minimum wage bill that was courtesy morgue file "money"sent to Gov. Rell last month.   The vote was 25-9 in the Senate.   The vote completes the override process of the minimum wage bill that I discussed here earlier today.

Thus, effective January 1, 2009, the minimum wage in Connecticut will increase to $8.00/hour and on January 1, 2010, the minimum wage will increase to $8.25/hour.  The bill language can be found here

Notably (and not widely reported), the General Assembly has also voted to override the veto of the tip credit bill applicable to people such as waiters and bartenders.  Changes to the tip credit are also effective January 1, 2009 and you can read the changes in the bill here. Essentially, the gratuity allowance for service employees in the restaurant industry will increase to $2.48/hour, up from current levels of $2.24/hour.  A history of those increases can be found here.   The rate for bartenders will also change as well.  The DOL has a website page devoted to restaurants here.

Gov. Rell today was quick to criticize the legislature in a statement she released:

This is a seriously short-sighted decision that – even if well-intentioned – will have long-lasting negative consequences for employers and employees alike all over Connecticut. An increase in the minimum wage will bring an increase in the costs of goods and services, the loss of jobs and unrecognized costs to employers in the form of higher Social Security, unemployment tax and workers compensation payments.

CT Newsjunkie has this additional report on the vote. 

For employers, the override means a few things and it’s worth clarifying a few points as well:

  1. Not only will wages needs to increase for the lowest paid workers in January, but workplace posters will need to be updated as well.
  2. As I’ve said before, although federal law provides a different minimum wage, Connecticut will apply to employees in Connecticut. Thus, regardless of what an employer may hear now, it will need to apply this law starting in January.
  3. Even though the General Assembly has overriden the veto, and the law becomes "effective" October 1, 2008, it will not apply to employers until January 1, 2009. While employers may certain increase wages beforehand, there is no legal requirement to do so.  Until then, the minimum wage in Connecticut remains at $7.65/hour. 

In a bit of a surprise (and in a busy day for employment law in Connecticut), Governor Rell vetoed a bill which would have increased the minimum wage to $8/hour starting Jan. 1, 2009 (and $8.25/hour in 2010).  The veto to House Bill 5105 (H.B. 5105) also effectively kills Senate Bill 55 (S.B. 55) which dealt with an increase in tip credit.  Gov. Rell had approved of an increase two years ago so it was not unreasonable to expect her to follow suit here.

She released a press release, available here which stated, in part:

“There is no doubt that families, particularly low income families, have been hurt by our strained economy,” Governor Rell said. “We all feel the pinch when buying groceries, filling up the gas tank and heating our homes. Yet we must also realize that Connecticut employers face these same financial pressures and are having an extremely difficult time making ends meet.

“We cannot take a chance on hurting families or employers by signing another minimum wage increase into law at this time,” the Governor said. “Businesses have told me that they would not be hiring if the wage hike went into effect. Employers that are now operating on the margin may be forced to close or leave Connecticut to more business-affordable states, resulting in job losses that will undermine the already fragile foundation of financial security for thousands of families.”

I noted earlier this month that the minimum wage bill passed both the House and Senate in overwhelming majorities. The bill passed the House, 106-45, and the Senate, 25-11.  An override needs 101 votes in the House and 24 votes in the Senate.  Thus, it is possible that the General Assembly will reconsider this bill in a special session and overrule the veto.  Indeed, the Hartford Courant is reporting this afternoon that legislators are already clamoring for one.

House Majority Leader Christopher G. Donovan, D-Meriden, said Democrats may attempt an override.

"We had good, strong votes in both chambers," Donovan said. …

"I’m disappointed Gov. Rell would deny a modest increase to our lowest-paid workers in tough economic times," he said. Donovan said he could not recall the last time a Connecticut governor vetoed a minimum-wage increase.

Thus, until and unless the General Assembly overrides the veto, minimum wage in Connecticut will remain at $7.65/hour

(H/T: Hartford Business Journal)

A few weeks ago, I posted on a decision by the Connecticut Supreme Court that ruled that an order denying class certification is not an appealable final judgment. I said back then that the case, Palmer v. Friendly Ice Cream Corporation, gives employers and other defendants in class actions, "an important arrow in their quiver of defending against class action cases."

This week,the Hartford Business Journal discussed the case in some detail with some good information about the underlying claims raised by the wait staff. 

The dispute between the food servers and restaurants hinges on the differences in the hourly wages paid to waiters and other non-wait staff. Restaurants are allowed to pay waiters below minimum wage levels, reducing wait staff pay by a 29.4 percent “tip credit,” which is based on the assumption that waiters are expected to earn much of their income from tips.

Food servers claim that their wallets take a hit when employers assign them tasks that don’t include waiting tables, such as brewing coffee, rolling napkins or cleaning restrooms.
For that reason, servers employed by T. G. I. Friday’s and Friendly’s want to be paid for the extra tasks they perform while on the job, so they have been working together to form class-action groups to fight restaurants.

The reporter from the story happened to call me for my views on the case, which I was happy to share with her. You can check out my quotes from the story here.  

Without sounding like I’m trying to fawn over them, the HBJ really is an under-appreciated publication that fills a good niche on business news in the state.  If you aren’t looking at their site, you are really missing out on some great little nuggets about Connecticut business.

The case also highlights the importance of following wage rules carefully. The application of a "tip credit" isn’t exactly the easiest formula for employers to apply in practice. Employers who may pay under minimum wage for one reason or another should consider themselves targets for potential claims and should ensure that they are in full compliance with the wage and hour laws.