Connecticut: New Law Codifies “80/20” Rule for Compensating Tipped Employees

APPLIES TO

All Employers with CT Employees in Hospitality and Service Industries

EFFECTIVE

April 1, 2020*

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(888) 378-2456

Hospitality employers who take tip credits when compensating employees will be relieved to hear that Connecticut’s legislation has made new strides to clarifying how tipped employees must be paid.  The recently-passed Public Act 19-1 requires the Connecticut Labor Commissioner to adopt regulations codifying the federal “80/20” rule.  The Act requires the Labor Commissioner to post a notice of intent to adopt these regulations by April 1, 2020, though the actual effective date of the rule is not yet clear.

Generally speaking, restaurant and other hospitality industry employers are permitted to pay tipped workers less than the minimum wage so long as the employees receive tips that make up the differential to the statewide minimum wage (currently $11.00/hr.).  However, the regulations controlling the tip credit have historically been much more complicated than the federal model.  Previously, employers could only apply the reduced “tip credit” hourly rate to hours spent performing tipped services, requiring employers to keep detailed records for what work the employee performed, and how it should be segregated.

In an effort to ease this administrative burden, the Connecticut DOL produced a guidance permitting employers to utilize the federal 80/20 rule, which allowed business owners to take tip credits if the non-tipped work performed by the employee constituted 20% or less of their total working hours.  However, this guide did not contain the force of law, resulting in confusion and wage and hour claims for employers who adopted the 80/20 rule.

With Public Act 19-1, Connecticut is expected to formally adopt the 80/20 rule.  While this standard will not go into effect until later in 2020, the Act creates a good-faith defense for employers who previously utilized the 80/20 rule.  Employers are still liable for unpaid wages and court costs, but will not be subject to other penalties and attorney’s fees.  Lastly, the Act also requires the Labor Commission to conduct wage and hour audits in at least 75 Connecticut restaurants each year to ensure compliance with the regulations.

Action Items

  1. Read Public Act No. 19-1 here.
  2. Update pay practices for tipped employees consistent with the new rules.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2020 ManagEase

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