New Connecticut law clarifies how service industry employees are paid

A new Connecticut law will address a difficult issue about how the minimum wage applies to employees who are in the service industry and earn tips for part, but not all, of their shifts.

Employees who work for tips sometimes

Under the law, workers who earn tips can receive an hourly wage lower than the minimum wage because their employers get a “tip credit.” But that leaves the question of what happens to employees who spend part of their time at work in a role in which they receive tips but part of their time in a role in which they don't.

Consider, for example, a pizza restaurant with a dining room and a take-out counter. An employee might spend four hours waiting tables before switching to folding take-out boxes for two hours during the dinner rush. She receives tips only for the time waiting tables. Can the employer pay her the reduced minimum wage for her entire shift or only part of it?

Federal 80/20 rule

In 2009, the U.S. Department of Labor (DOL) adopted a rule allowing employers to pay employees a lower hourly rate—i.e., below the federal minimum wage—for all hours worked if they spent at least 80% of their time in a role in which they earned tips. If they spent more than 20% of their time working in a role in which they didn't earn tips, they had to be paid at least the full minimum wage for that time. The rule became known as the “80/20” rule.