Tag Archive for: tip credit

Colorado Court of Appeals holds that a banquet service fee is not a tip and therefore banquet server is not a tipped employee

The Colorado Court of Appeals held that a banquet server was entitled to overtime because he was not exempt under Colorado’s wage-hour laws as a tipped employee. The employer charged a service fee of 22% that was shared with all the servers, including plaintiff, allowing him to earn between $11.36 and $33.05 per hour depending on the amount of banquet sales.

Even though the service charge varied with the amount of sales, as a tip generally does, and even though in the, in the aggregate, it was well in excess of minimum wage, the court held that it did not constitute a tip because, because unlike a tip, which must be voluntary, banquet clients could not decide whether or how much of it to pay. Rather the company simply charged all banquet clients 22% of food and drink.

Additionally, the court rejected the company’s argument at the banquet server was exempt as a sales employee. The company had argued that by providing excellent service the banquet server enhanced sales, but the Court noted he had no actual sales responsibilities.

The case is of particular interest, because it illustrates how Colorado’s new wage-hour laws are likely to be applied by the CDLE and Colorado courts.

First the court was very clear that it was not deciding the case from scratch (“de novo”). Rather than the court explained, it was required to defer to the CDLE’s hearing officer’s decision, unless it was proven to be unsupported by substantial evidence or contrary to the plain meaning of Colorado’s wage-hour laws. The court went to some length to explain that it thought the company had raised a good argument that the service charge should have been considered a tip. But because the issue was arguable either way, the court felt it was required to defer to the CDLE’s hearing officer. 

Second the court noted that the case actually began with the plaintiff, incorrectly, trying to argue that he was, in fact, tipped. When he filed his claim, he argued that he had been shorted the amounts due him under Colorado’s tipped employee laws. When the CDLE investigated, it determined he was wrong, that he wasn’t tipped. But the CDLE didn’t stop there. Rather, it restructured his claim, then reconsidered his circumstances under the non-tipped employee wage-hour laws, and under those laws, laws that the plaintiff apparently had not himself put at-issue, the CDLE awarded him overtime under its own theory.

Thus, the case illustrates how the new Colorado wage-hour laws allow the CDLE broad discretion not only to decide the wage-hour claims filed before it, but also to decide how to structure those wage-hour claims in order to best award relief it determines is owed.

The case was Brennan v. Broadmoor Hotel, Inc.

CDLE issues more new information for Colorado employers

Implementing its most recent batch of rules on a variety of topics, the CDLE just issued yet more information for Colorado employers on those topics.

Are your ready for January 1, 2021?

  • Looking for more information about the CDLE’s latest batch of rules?

Join us for a complimentary, engaging and interactive webinar.

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When: Wednesday, December 16, 2020 Noon 12:00 PM Mountain Time (US and Canada) 

Register in advance for this webinar: https://us02web.zoom.us/webinar/register/WN_vGmrkeFcQ6iaM26Hg3iMGQ 

After registering, you will receive a confirmation email containing Zoom’s information for joining the webinar.

Where to find the CDLE’s latest information

The Colorado Department of Labor and Employment’s latest information is available at its website.

As noted in recent posts on this blog, look for the CDLE’s latest rules on its Rulemaking page, to include the following rules:

  • Colorado Overtime And Minimum Pay Standards (“Comps”) Order #37, 7 CCR 1103-1;
  • Wage Protection Rules, 7 CCR 1103-7;
  • Direct Investigations Rules, 7 CCR 1103-8;
  • Colorado Whistleblower, Anti-Retaliation, Non-Interference, And Notice-Giving (“Colorado Warning”) Rules, 7 CCR 1103-11;
  • Colorado State Labor Relations Rules, 7 CCR 1103-12; And
  • Equal Pay Transparency Rules, 7 CCR 1103-13.

Look for its latest posters on the CDLE’s Poster page (the following list is quoted from CDLE)

  • The “Colorado Overtime and Minimum Pay Standards” (“COMPS”) poster and notice, covering wage and hour law — see COMPS Rule 7.4, Posting and Distribution Requirements, unchanged from the 2020 COMPS Order, which requires employers to display the annually revised poster (and send it to off-site employees), plus include either the poster or COMPS itself in any handbook or manual the employer has.
  • The “Colorado Workplace Public Health Rights Poster: Paid Leave, Whistleblowing, & Protective Equipment” poster and notice, covering HFWA and PHEW since their enactment in July 2020 — see Colorado WARNING Rule 4, Notice and Posting Rights and Responsibilities, unchanged from the temporary WARNING Rules in effect since September 21, 2020, which requires employers to post and give employees notice of these rights.
  • Translations of posters and INFOs — to implement requirements for employers to provide posters and notices to non-English-fluent workers, DLSS in 2020 posted translations of its posters in 12 languages and Spanish translations of INFOs (on the same pages as the English posters and INFOs), with new translations of the 2021-updated posters to be posted later this month, and translations of INFOs coming thereafter.
  • With translations into Spanish and other language.

Look for informational summaries on the CDLE’s INFO page, where the CDLE provides the following information summaries (again quoting the CDLE):

  • INFO# 1: Colorado Overtime &, Minimum Pay Standards Order (COMPS Order) #37 [In Spanish:Hoja Informativa y Opinión Formal (INFO por sus siglas en inglés) # 1: Orden de COMPS #37] (Próximamente)
  • INFO# 2:DLSS Wage Claim Investigation Process
  • INFO# 3: Tips (Gratuities) and Tipped Employees Under Colorado Wage Law
  • INFO# 4: Meal and Rest Period
  • INFO# 5: Public Health Emergency Whistleblower Rights [In Spanish:Hoja Informativa y Opinión Formal (INFO por sus siglas en inglés) # 5: Ley de Protección al Denunciante de Emergencias de Salud Pública] (Próximamente)
  • INFO# 6A: Paid Leave Under the Healthy Families and Workplaces Act, through December 31, 2020 [In Spanish:Hoja Informativa y Opinión Formal (INFO por sus siglas en inglés) # 6A: Pago por Ausencia Laboral bajo el Acta de Familias y Lugares de Trabajos Saludables, vigente hasta el 31 de diciembre, 2020]
  • INFO# 6B: Paid Leave Under the Healthy Families and Workplaces Act, as of January 1, 2021 [In Spanish:Hoja Informativa y Opinión Formal (INFO por sus siglas en inglés) # 6B: Pago por Ausencia Laboral bajo el Acta de Familias y Lugares de Trabajos Saludables, a partir de 1º de enero] (Próximamente)
  • INFO# 7: Payment of Wages & Required Record-Keeping
  • INFO #8: Colorado Chance to Compete Act (“Ban the Box”)

The CDLE also invites interested individuals to sign up for the agency’s email alerts.

Highlights from the CDLE’s latest information

In recent posts, this blog has summarized a number of the CDLE’s latest rules. Some of the highlights from this most recent information just posted by the CDLE implementing its new rules includes the following:

  • INFO #1: The new hourly minimum wage in Colorado will be $12.32. The new minimum guaranteed salary for exempt workers will be $40,500.
    • Employers are reminded they must distribute a copy of the COMPS poster or the entire COMPS Order 37 (new for this year) with any policies/handbooks that are being distributed otherwise. Signatures must be obtained.
  • INFO #4: The CDLE has taken a strict approach to meals and rest periods, summarized in INFO #4.
    • Employers are responsible for not only “authorizing” workers to take breaks, but they must “permit” them to do so, and CDLE explains a rest break is “authorized” if the company has an adequate policy for example, but even if “authorized,” it is not “permitted” if the employee is “unable or discouraged” to take the break. Evidence that the employee is not “permitted” to take a break may simply be the employee’s own statement that they “felt pressure from the employer not to take the break.
    • It is the employer’s obligation, not the employee’s, to track and record and keep records of employee breaks. An employer cannot simply say it assumed the breaks were being taken as “authorized” where an employee claims not to have been “permitted” to take the break.
    • When a break is missed, it counts as work time, must be paid as such, even if that triggers daily or weekly overtime.
  • INFO #5: In its rules and now in its INFO implementing Colorado’s new PHEW law (already in effect), the CDLE has take the position that an employer who provides no PPE (mask) in a time of a public health emergency may not prohibit an employee from using an unsafe mask. PHEW allows employers to prohibit employees from using masks that do not meet the company’s requirements, only if — according to the CDLE’s interpretation — the employer has first provided its own mask to the worker. Employers should consider making appropriate disposable masks available in their workforces, so that they can later prohibit inappropriate masks that employees might otherwise wish to wear.
  • INFO #7: The CDLE summarized rules regarding the payment of wages, the establishment of pay periods, payment of final wages at separation, pay statement requirements and recordkeeping requirements.
  • INFO #8: The CDLE explained Colorado’s new ban-the-box law. Companies may not state in job applications or advertisements “that a person with a criminal history may not apply,” nor ask about the person’s criminal history on an application, nor require the applicant to disclose any criminal history on the application. Additionally, the CDLE says this prohibits an employer from stating that background checks will be required. Although an employer may require background checks as part of a conditional offer of employment, that may not be stated in an application or advertisement. The CDLE explains the limited exceptions available where employers are otherwise required by law to inquire into these matters.

Follow-up on new COMPS Order information from CDLE – 4 of 4

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

As previously discussed on this blog, the Colorado Division of Labor and Employment recently finalized its new wage order, titled COMPS Order 36. COMPS Order 36 has proven to be an overhaul of existing Colorado law, reaching many employers previously exempt from prior wage orders. The COMPS order has left many unanswered questions. In response this blog noted that the CDLE has just issued some additional information. AS explained in that post, employers should review the CDLE’s summary that it emailed out regarding its new information, which email is copy-pasted into that blog post.

Employers curious how the CDLE will interpret the new order’s tip credit rules, including its continued use of the 80/20 rule that is being eliminated at the federal level but now being maintained at the Colorado state level, should review the CDLE’s Interpretive Notice & Formal Opinion (INFO) #3, which details the CDLE’s anticipated process for claims handling.

As a reminder, this blog recently noted an article by Bloomberg BNA surveying last year’s court decisions, which reflect an unwillingness by lower courts to accept even the federal government’s efforts to eliminate the 80/20 rule.

Restaurants and other employers with tipped employees, beware relying on DOL opinion letter

As previously posted, the DOL issued an opinion letter in 2019, purporting to jettison the Obama Administration’s 80-20 rule and expanding the ability to claim tip credits for tipped employees, specifically, during time when they do not earn tips (example, while wait staff vacuum and clean). Bloomberg BNA reports that opinion letter has met with rejection in the courts:

Restaurant chains have lost at least seven decisions over the last year in which federal district court judges refused to give deference to a 2018 Labor Department opinion letter advising restaurants to pay a lower minimum wage to tipped workers for tasks that don’t yield gratuities.

In most of those decisions, judges held that DOL wasn’t justified in turning its back on a standard that’s been in place for more than three decades.

Also as previously posted, the DOL issued a propose regulation to the same effect, which if finalized would become law, to which courts should defer in lawsuits.

Employers are reminded that Colorado law requires additional notice-posting to employees if a tip credit is to be claimed.

COMPS Order 36, SOME of what you need to know

As previously posted here, the Colorado Division of Labor and Employment has issued its COMPS Order no. 36. Here’s some of what you need to know:

  • It probably applies to your company. As previously explained, Colorado Wage Orders have historically been limited to certain industries, now their successor, this “COMPS Order” is generally applicable to all employers with only some exceptions, most notably some aspects of the agricultural industry.
  • It’s long, but you should take the time to read it and review it with experienced employment counsel. If you read the draft, the CDLE published a redline with changes from the draft to the final version.
  • It will be effective March 16, 2020.
  • Ensure your overtime-exempt personnel still qualify for exemption under Colorado law, especially that each is earning more than the required minimum salaries, effective the following dates:

July 1, 2020 $684.00 per week ($35,568 per year)
January 1, 2021 $778.85 per week ($40,500 per year)
January 1, 2022 $865.38 per week ($45,000 per year)
January 1, 2023 $961.54 per week ($50,000 per year)
January 1, 2024 $1,057.69 per week ($55,000 per year)

Effective January 1, 2025, the CDLE advises that salary minimums will increase commensurate with Colorado’s minimum wage, as adjusted by the CPI.

  • Employers must now “authorize and permit” non-exempt workers to take at least one 10-minute paid break as close to the middle of each 4-hour shift. What does “authorize and permit” mean? No one knows, and worse, the phrase is not defined elsewhere in the law. Some options employers might consider, in an abundance of caution, include requiring employees take such breaks, disciplining employees who fail to do so and requiring employees to mark down their break times on timecards even though such time must be paid.
    • Note: The COMPS order has different break requirements for employers that have contrary union-negotiated collective bargaining agreements and some Medicaid-funded service providers.
  • Employers must now pay for certain pre- and post-shift activities, which federal law does not consider compensable time, to include some aspects of time related to donning and doffing (changing in and out of certain clothes and gear), briefings, security screenings, safety and travel-related time, and clocking-in and -out.
  • Companies that use independent contractors in their workforce will want to review this blog’s previous post, as COMPS Order 36, as explained by its Statement of Basis, Purpose, Specific Statutory Authority, and Findings in support of COMPS Order #36, seems to have dramatically narrowed the ability of companies to do so, apparently in an attempt to convert such workers, by administrative fiat, into statutory “employees” of joint employers.
  • COMPS Order 36 has revised the definitions for which salaried personnel may be exempt. Employers should review their current exemptions against this new law. Notably, COMPS Order 36 actually expands the availability of exemptions in some instances for computer professionals and some seasonal camp and outdoor education programs.
  • Post the CDLE’s new COMPS Order 36 poster. Indeed the new poster is so new, that the CDLE hasn’t issued one yet. Recently on a call to CDLE the CDLE advised that it does not know when or if it will issue the poster it refers to itself in its own new order.
    • Not only must it be posted, but the poster or the entire COMPS Order itself must be included in handbooks and signed for.
    • And that non-existent poster and expansive COMPS order must be so distributed not only in English but in Spanish or such other language as workers may speak. Although the COMPS Order suggest the CDLE will distribute the order in such other languages, there are none on CDLE’s website.
  • As noted, review this expansive order in its entirety. Other provisions for example address meal, lodging, top credit, uniform deposits.

DOL issues proposed rule re tip-pooling

In a November 2019 opinion letter the DOL reversed position on tip-pooling. As explained there, the DOL lifted the Obama-era DOL’s 80-20 rule, making it easier for employers (like restaurants) to pool tips among tipped employees, including even those who perform some non-tipped work during their day (like waiters who vacuum, set up and clean up the restaurant as well as work tables). In this proposed rule the DOL is proposing to codify its new approach into a formal regulation. Codification of this approach into a regulation — rather than simply setting it forth in an opinion letter — will have at least two effects: It will generally require courts to defer to this interpretation and make it more difficult for future administrations to deviate.

Reminder, Colorado employers must now provide notice if tip-sharing

Colorado employers are reminded to post a notice, if tip-sharing, for example on menus, at tables, or on receipts, to patrons that “gratuities are shared by employees.” This new posting requirement, Colorado HB 19-1254, took effect August 2, 2019.

DOL confirms that employers may claim tip credit even for time tipped employees spend on non-tipped work

Confirming an approach announced in a recent opinion letter, the DOL has amended its Field Handbook, the manual for its enforcement personnel, that employers (like restaurants) may claim a tip credit for time that tipped employees spend on non-tipped work (such as a waiter who may vacuum) if performed contemporaneously (or nearly so) with tipped customer duties.

An employer may take a tip credit for any amount of time that an employee spends on related, non-tipped duties performed contemporaneously with the tipped duties—or for a reasonable time immediately before or after performing the tipped duties—regardless whether those duties involve direct customer service.

As explained in two recent blog posts, this lifts the DOL’s Obama-era 80-20 rule for tipped employees.

Source: DOL Field Assistance Bulletin 2019-2 (2/15/19).

Colorado minimum wage increase effective 1/1/18 to $10.20/$7.18

Effective 1/1/18, Colorado increased its minimum wage to $10.20 or, for tipped employees, $7.18.

Source: Colorado Department of Labor Minimum Wage web page.

DOL proposes reversing course on Obama-era tip-pooling rule

The U.S. Department of Labor has issued a proposed rule that would reverse an Obama-era tip-pooling rule, which has proven controversial since its issuance. As previously reported in this blog, the courts have split over whether — and the Tenth Circuit has joined the majority that hold that — employers need not comply with the tip-pooling rule if they otherwise meet the Fair Labor Standards Act’s minimum wage requirements. These courts hold that the tip-pooling rule is merely a condition of claiming the credit for tips against the minimum wage; if an employer does not claim the tip credit — if the employer pays at or above the minimum wage — then the tip-pooling rule does not apply. One part of the tip-pooling rule prohibits employers from sharing tips with any worker in a position that is not customarily and regularly tipped, such as dishwashers, cooks, etc. Thus, by paying tipped employees (e.g., waiters) at or above the minimum wage, without claiming the tip credit, employers are free to require a tip pool that is shared with other employees, even dishwashers, cooks, etc. This proposed rule would confirm this view in the formal FLSA regulations, in other words, that the tip-pooling rule only applies as a condition of claiming the tip credit. The proposed rule would codify the approach already taken by the Tenth Circuit.

Employer may share in tips if it does not claim a tip credit, at least in Tenth Circuit

The Fair Labor Standards Act (FLSA) is the country’s leading wage-hour law. Among other things, FLSA imposes a federal minimum wage. The federal minimum wage is a baseline; states and local governments are free to adopt higher minimum wages. Employers can, even under federal law, pay tipped employees a lower minimum wage if certain conditions are met. One condition is that the employer not share in the tips. To put it (overly) simply), tips can be pooled among other tipped employees, but not with the company or management.

What if the employer decides it wants the tips and doesn’t care about claiming the tip credit? In other words, can a company take some or all of the tips so long as it pays the full applicable minimum wage? The Tenth Circuit read the law and held, yes, in Marlow v. The New Food Guy, Inc., 861 F.3d 1157 (10th cir. 2017) (Employer that does not claim tip credit may take share of tips; FLSA’s prohibition against same is merely a condition for claiming a tip credit). The U.S. Department of Labor and Ninth Circuit say otherwise. See Oregon Restaurant & Lodging Assoc. v. Perez, 816 F.3d 1080 (9th Cir. 2016) (Employer may not whether or not a tip credit is claimed).

While the Tenth Circuit’s opinion is clear, well reasoned and based on the language of FLSA, employers outside the Tenth Circuit should be aware of the distinction in the event they wish to share in tips.