Connecticut's New Restaurant Wage Law Codifies '80/20 Rule' For Tipped Employees

Following months of political maneuvering, including a gubernatorial veto, Connecticut has enacted compromise legislation that attempts to clarify how restaurants and other hospitality industry employers must pay workers who receive tips in customer service jobs that also require untipped work. The new law, Public Act 19-1, directs the state's Labor Commissioner to adopt regulations codifying the so-called "80/20 rule" and to conduct random wage and hour audits of restaurants to ensure wage and hour compliance. It also restricts the right of employees to bring future class actions against restaurants for alleged violation of wage rules.

Background on State and Federal Regulation of Tip Credits and "80/20 Rule"

Under the federal Fair Labor Standards Act (FLSA), restaurants can generally pay servers who receive tips a reduced minimum wage of $2.13 per hour if that amount, combined with $5.12 in gratuities1 that a server receives, equals the federal minimum wage of $7.25 per hour (the "tip credit" rule).

Connecticut's state minimum wage is currently $11 per hour. Under the state's tip credit rules, employees in the hotel and restaurant industries (other than bartenders) who "customarily and regularly receive gratuities" can be paid $6.38 per hour in direct wages.2 Bartenders must be paid at least $8.23 per hour.3 While the difference between these tipped employee minimums and the $11.00 state minimum wage can be satisfied by gratuities,4 for restaurants to employ the Connecticut tip credit in practice has proved complex, controversial and sometimes extremely costly.

Federal regulations recognize that an employee in a tipped occupation may perform some untipped work, such as a server who spends part of the time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses, without causing the employer to lose the tip credit.5 The "80/20 rule" concerning this situation was established in the U.S. Department of Labor's Field Operations Handbook in 1988 and has since been followed by many courts. Under the 80/20 rule an employer may pay tipped employees the reduced "tip credit" hourly wage for all time they work in the restaurant if the employees spend at least 80% of their time performing tipped duties like waiting tables. Even if they spend up to 20% of their time on duties like setting tables, for which they do not receive tips, the lower hourly rate can be paid for those hours as well.

How the 80/20 rule should be applied to particular cases has been disputed, however, and the rule has been the subject of frequent litigation. In October 2019, the federal DOL proposed to eliminate the 80/20 formula in favor of a position it previously took in a 2018 opinion letter. If finally adopted by the federal DOL, this changed position would not impose any specific...