Connecticut Tip Laws for Employers: Your Guide to Compliance and Pay

 

In Connecticut, the gap between the full minimum wage and the tipped minimum wage is considerably large. To ensure fair compensation, employers must get familiar with the state’s detailed tip laws. Compliance with Connecticut’s rules on tip ownership, tip credits, and tip pooling helps establishments increase employee satisfaction, avoid legal penalties, and maintain continuous operations.

What is a “tip” in Connecticut?

The Connecticut General Statutes & Department of Labor (DOL) defines a tip as a sum of money a customer leaves a service employee in recognition of a service performed. For a payment to count as a tip, the customer must give it voluntarily, choose the amount on their own, and give it directly to the employee or a valid tip pool. Tips count as employee income, but are not included in employee base wages.

What is the difference between a tip and a service charge?

Like most places in the United States, Connecticut has separate legal definitions for tips and service charges. Where tips are amounts the customer voluntarily grants, service charges are mandatory fees employers automatically add to customer bills. Tips belong to the customer, while service charges belong to the employer.

Who qualifies as a tipped employee in Connecticut?

The Connecticut DOL follows Fair Labor Standards Act (FLSA) standards, which define a tipped employee as a worker who customarily and regularly receives more than $20 in tips monthly. In short, tipped employees work in jobs where tipping is a standard part of customer culture. Examples of tipped employees include:

• Servers
• Bartenders
• Bussers
• Food Runners
• Barbacks
• Hotel bell staff
• Valets
• Salon staff

80/20 rules in Connecticut

Connecticut allows tipped employees to spend up to 20% of their time on non-tipped, incidental tasks (like cleaning, restocking, or packaging orders). If they exceed this limit, they are no longer considered tipped employees for those hours, and employers cannot apply tip credits to their wages.

Minimum wage and tip credit in Connecticut

At $16.35 per hour, Connecticut’s minimum wage is the third highest in the country, beat out only by Washington D.C. and select counties in California and Washington State. However, its tipped minimum wage is significantly lower. Thanks to tip credit laws, employers can pay restaurant workers and bartenders base wages of $6.38 per hour and $8.23 per hour, respectively, provided their employees earn enough tips to bring their income to the state minimum.

Connecticut tip credit rules

To ensure that employees receive fair compensation, Connecticut imposes multiple tip credit rules. These tell employers who qualify for the tip credit, how to execute tip credit arrangements, and what to do when employees don’t earn enough to make the state minimum wage.

• • Tip credit can only apply to tipped occupations. Employers can claim tip credits only on the wages of tipped employees. Lowering the minimum wage or claiming tip credit on the wages of non-tipped employees, such as supervisors, managers, and back-of-house staff, is prohibited.

• Breaking the 80/20 rule disqualifies employers from claiming tip credit. Tip credits are only valid for tipped employees who follow the 80/20 rule. If an employee spends more than 20% of their time on non-tipped work, the employer will be required to pay them full state minimum wage.

• Employers should cover insufficient tips. If an employee fails to earn enough tips to raise their income to the state minimum wage, it is the employer’s responsibility to make the difference. Denying employees a full wage can lead to wage theft claims, penalties, fines, or legal action.
• Employees must sign written attestations. Each pay period, employers must ask their employees to sign written agreements showing that their tips, combined with their base wage, add up to at least minimum wage. If the employee doesn’t sign off, the employer cannot legally claim the tip credit for that pay period.

Tip pooling in Connecticut

Tip pooling is a tip distribution system that allows tipped employees to combine their tips into one group fund, which they then distribute equally or under agreed-upon percentages (typically based on hours worked or position). Connecticut allows employers to impose tip pooling arrangements as long as all employees are informed beforehand.

Connecticut tip pooling rules

Employers must follow Connecticut tip pooling rules to ensure that their employees receive fair payment. These are:

• Employers are allowed to mandate tip pooling. Connecticut law does not require employee consent or signatures for tip pooling arrangements. Employers can also mandate tip pooling as a condition for employment. However, the tip pooling arrangement will only be considered valid if it follows other regulations, such as who can participate and how the distribution works.
• If tip credit applies, only tipped employees can participate in tip pooling. Employers who claim a tip credit must exclude non-tipped employees (such as managers, supervisors, and back-of-house staff) from tip pools. If they pay all employees the full minimum wage, they may include back-of-house staff. Managers, supervisors, and owners may never participate in tip pooling under any circumstances.
• Comply with tip credit rules. If a tipped employee makes insufficient tips even after receiving their share of a tip pool, the employer must pay the difference to meet the state minimum wage.
• Distribute tips fairly and promptly. Generally, employers should distribute tip pooling shares by the next regular payday.
• Inform employees about tip pooling arrangements. Unlike other states, Connecticut does not legally require employers to provide written notices for tip pooling arrangements. However, they must still inform employees about the existence, structure, and rules of the establishment’s tip pooling arrangement.

Legal consequences of violating Connecticut tip laws

The legal consequences of violating Connecticut tip laws depend on the offense and its severity. Penalties can include repaying lost wages, losing the right to claim a tip credit, paying civil fines, and covering employees’ legal fees.

Offense: Tip credit violations

If an employee’s tips cannot bring total earnings to the full minimum wage, it is the employer’s responsibility to make up the difference. Employers who wrongly claim a tip credit in these cases are liable for back wages on all affected hours.

Offense: Unlawfully keeping tips

Employees have the right to sue employers who withhold their tips unlawfully. Depending on the severity of the case, employers may also face liability for damages, attorney fees, and interest.

Offense: Including non-tipped employees in tip pools

Employers who include non-tipped employees in tip pools must pay back tip credits paid on the affected wages. This means they need to pay all affected tipped employees full minimum wage retroactively. They may also lose the right to claim tip credit for any employees within the impacted pay period.

 

Additionally, employers may face legal claims for damages, interest, and attorneys’ fees. In severe cases, they could also be subject to civil penalties or Department of Labor audits.

Offense: Breaking the 80/20 rule

Employees who spend more than 20% of their time on non-tip-generating activities no longer qualify as tipped employees. Therefore, employers are not allowed to claim tip credit on their wages and must then pay full minimum wage for all hours impacted by misapplied tip credits.

Offense: Failure to obtain a written tip credit agreement

Connecticut law prohibits employers from claiming a tip credit from employees who have not provided a written attestation for a given pay period. Violating this rule exposes employers to wage underpayment claims.

Offense: Misreporting tips

Misreporting tip income can lead to serious tax consequences for both employers and employees. Employers may face IRS penalties, interest charges, and liability for unpaid payroll taxes on unreported tips.

Meanwhile, employees risk underpaying their personal income taxes, which can result in audits, fines, or loss of eligibility for certain benefits. Inaccurate reporting also reduces Social Security and Medicare contributions, consequently reducing retirement benefits.

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