Late yesterday, various press reports signaled what could be the beginning of the end for 2011 Department of Labor guidance that had greatly expanded legal claims against restaurants.

The 2011 rule barred businesses (mainly restaurants) from including nontipped workers in their tip pools.  That practice – if done involuntarily – then entitles the servers or waitstaff who have contributed those tips to the tip pool to minimum wage for their hours (not the tip-credit minimum wage.)

As of this morning, the DOL had not released its’ rule publicly, but according to a Law 360 report the description “suggests it would roll back the DOL’s 2011 rule amending its interpretation of the Fair Labor Standards Act to blog businesses from giving a portion of service employees’ tips to traditionally nontipped workers, such as kitchen staff.”

The attack on this 2011 guidance is also making its way through the courts.  The U.S. Supreme Court is expected to decide soon whether to review a case out of the Ninth Circuit that upheld the tip pooling rule.

The timing of the DOL’s expected rollback is unclear, but it could have a significant impact on many cases pending in the court systems or being threatened now.  At the current rate, a change could be expected in the first quarter of 2018.

For restaurants and other employers such as hotels that have tipped employees, this change ought to be closely followed.  Until we see the scope of the proposed rule change, it is unclear what the full impact on existing cases will be but given past practices on situations like this, but it might just evaporate a whole host of lawsuits that have popped up.

Stay tuned.

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.

With all the developments the last week or two with the Connecticut legislative session, it’s been difficult to keep up with everything ELSE happening in employment law. 

So, time for a "Quick Hits" post, where I recap some of the stories you might have missed relating to the world of labor and employment law that might be of interest to employers in Connecticut and beyond.

 

Yesterday, I started recapping some stories from 2008 that never quite made it into full-fledged blog posts, but were worth a look at.

Before we move on to new subjects for the new year, I’ll recap a few more stories that are worth taking a look at that you might have missed. 

And there you have it.  Now, on to 2009.