No Fireworks: Appellate Court Strikes Down Past Tip Credit Recordkeeping Claims But Employers Can’t Claim Victory

In a decision that will be officially released tomorrow, the Connecticut Appellate Court waded back in the tip credit waters, providing clarity for hospitality employers regarding some pre-2022 tip credit recordkeeping requirements. While this ruling is a victory for a few restaurant employers in the short run, legislative changes in 2022 make the victory essentially a moot point.

The case, Anderson v. Reel Hospitality LLC, involved servers at Dakota’s Steakhouse in Rocky Hill who sued their employer, alleging violations of Connecticut’s tip credit regulations. Specifically, they claimed the restaurant failed to:

• Record the amount claimed as a tip credit for each server on a weekly basis as a separate item in wage records
• Obtain signed weekly tip statements from servers confirming they received the claimed gratuity amounts

The servers argued these recordkeeping failures should give them a private right to sue for damages. The trial court disagreed, and the Connecticut Appellate Court affirmed.

The appellate court confirmed that Connecticut’s tip credit recordkeeping requirements under regulation § 31-62-E3, as they appeared prior to 2020, are “directory” rather than “mandatory.” This technical legal distinction is crucial:

• Directory requirements are procedural guidelines that don’t create private rights to sue when violated
• Mandatory requirements create enforceable rights that can lead to lawsuits and damages

The court relied heavily on its 2023 decision in Nettleton v. C & L Diners, LLC, which first established this principle. The Anderson court made clear this ruling applies broadly to all tip credit recordkeeping violations, not just the specific facts of either case.

What does this mean for restaurants?

Well, on first glance, it seems to indicate that employees can’t bring any private lawsuits for recordkeeping failures alone. And poor recordkeeping wouldn’t automatically invalidate a restaurant’s ability to claim tip credits against minimum wage obligations.

But recent legislation makes the victory very short-lived.

Indeed, this decision has extremely limited practical impact for restaurants today. The Connecticut General Assembly effectively overruled this court precedent by enacting Public Act 22-134, which became effective September 24, 2022. According to the court, this law explicitly creates a private right of action for violations of tip credit recordkeeping requirements occurring after that date. The legislation, however, was not retroactive.

Beyond that Connecticut completely overhauled its tip credit regulations in late 2020, creating a new compliance landscape that hospitality employers must navigate carefully. In some instances, they give employers more flexibility. For example, employers can report tip credits on a daily, weekly, or bi-weekly basis instead of the previous weekly-only requirement.

Because most of the wage/hour claims arising before September 24, 2022 are time barred, the Anderson decision doesn’t have much impact today.

For current operations, maintaining proper records is more important than ever.

Employers should still record tip credits claimed as separate line items on a daily, weekly, or bi-weekly basis. Moreover, employers should continue obtaining signed statements from tipped employees confirming gratuities received. Be sure to track non-service duties carefully and familiarize yourself with the 23 specific tasks defined as “incidental to service” where tip credits remain valid.