The 2014 Legislative session might have been a short session, but there was no shortage of bills impacting the hospitality industry. The CRA followed over 60 bills during this three-month session, many of which did not become law, but we expect will be proposed again next year during the longer 2015 session.
The major piece of legislation which will impact restaurants is an increase in the minimum and tipped wages. Connecticut's minimum and tipped wages will increase in increments in each of the next three years until 2017, when the minimum wage will increase to $10.10 per hour.
On the positive front, there were changes made to the paid sick leave law in an attempt to make it more workable in determining who must comply.
There were also several bills which did not pass that would have adversely impacted restaurants, including: a per employee tax for all franchises with 500 or more employees in CT, a mandatory cash-back rule on gift cards with a minimum balance left after purchase, and a bill that would have banned the common practice of servers being charged for their portion of the credit card processing fee.
The Connecticut General Assembly convened, as scheduled, on February 5, 2014 and adjourned on May 7, 2014. Levin, Powers & Brennan tracked 64 bills on behalf of the CRA during this “short” legislative session.
Of most significance to the Connecticut Restaurant Association were the following bills:
- PUBLIC ACT 14-1, SENATE BILL 32 AN ACT CONCERNING WORKING FAMILIES’ WAGES
- PUBLIC ACT 14-217, AN ACT IMPLEMENTING PROVISIONS OF THE STATE BUDGET FOR THE FISCAL YEAR ENDING JUNE 30, 2015 (FORMERLY SENATE BILL 249 AN ACT PROMOTING RETIREMENT SAVINGS)
- SENATE BILL 60 AN ACT CONCERNING EMPLOYEE GRATUITIES
- PUBLIC ACT 14-167, SENATE BILL 61 AN ACT CONCERNING WORKERS’ COMPENSATION AND LIABILITY FOR HOSPITAL AND AMBULATORY SURGICAL CENTER SERVICES
- SENATE BILL 83 AN ACT CONCERNING MUNICIPAL NOTICE OF ALCOHOLIC LIQUOR PERMIT RENEWALS
- HOUSE BILL 5069 AN ACT CONCERNING LOW WAGE EMPLOYEES
- PUBLIC ACT 14-128, HOUSE BILL 5269 AN ACT CONCERNING PARITY BETWEEN PAID SICK BENEFITS AND OTHER EMPLOYER-PROVIDED BENEFITS
- AN ACT CONCERNING CASH REFUNDS FOR GIFT CARD BALANCES
- PUBLIC ACT 14-1, SB 32 AN ACT CONCERNING WORKING FAMILIES’ WAGES
Under current law, the state's minimum hourly wage is scheduled to increase from $8.70 to $9.00 on January 1, 2015. Governor Malloy proposed Senate Bill 32 and with the help of President Obama, this bill passed both the House and Senate in March. The CRA vehemently opposed this proposal.
This bill increases the minimum wage by $0.45 to $9.15 on that date, by an additional $0.45 to $9.60 on January 1, 2016, and by an additional $0.50 to$10.10 on January 1, 2017. The bill does not change the “tip credit” allowed by law. Thus, it will automatically increase the employer's share of minimum wages for wait staff. The table below reflects the increases 2014 2015 2016 2017
Tip credit 34.6%
Tip credit 36.8%
Tip credit 36.8%
Tip credit 36.8%
Tip credit 15.6%
Tip credit 18.5%
Tip credit 18.5%
Tip credit 18.5%
PUBLIC ACT 14-217, AN ACT IMPLEMENTING PROVISIONS OF THE STATE BUDGET FOR THE FISCAL YEAR ENDING JUNE 30, 2015 (FORMERLY SENATE BILL 249 AN ACT PROMOTING RETIREMENT SAVINGS)
Senate Bill 249 would have created a state-run, public retirement plan for private-sector employees employed by a company with 5 or more employees that does not currently offer a retirement plan. This bill was championed by the House and Senate Majority Leaders. The CRA was part of a large coalition of business and insurance companies and trade associations opposing SB 249, which a watered down version eventually became part of a final budget deal.
The bill creates the Connecticut Retirement Security Board and requires it to (1) conduct a market feasibility study on implementing a public retirement plan and (2) develop a comprehensive proposal for implementing the plan that must include certain goals and design features. The board must submit: two reports on the feasibility study's status to the governor and Labor Committee, by May 1, 2015 and January 1, 2016, respectively and the comprehensive proposal to the governor, General Assembly, Senate president pro tempore and House speaker by April 1, 2016.
SB 60 - AN ACT CONCERNING EMPLOYEE GRATUITIES
The original version of this bill would have decreased the minimum wage “tip credit” for wait staff from 36.8% to 33% on January 1, 2016, and to 30% on January 1, 2017. In effect, the bill requires hotels and restaurants to pay their service employees at least 67% of the minimum wage in 2016 ($6.43) and 70% of the minimum wage in 2017 ($7.07). It also would have prohibited employers of any tipped employees from applying the tip credit if they reduce or impose a surcharge on an employee's tips paid through a credit card transaction.
In the final days of session, there was an effort to move only the latter section of the bill, which would have prohibited what is common practice in the restaurant industry of employers charging wait staff the tipped portion of the credit card processing fee. The CRA worked to educate legislators that this issue has already been contemplated by the federal government which has decided that this practice is permissible. The bill did not move forward but we do expect it to return during the 2015 session.
PUBLIC ACT 14-167, SB 61 AN ACT CONCERNING WORKERS' COMPENSATION AND LIABILITY FOR HOSPITAL AND AMBULATORY SURGICAL CENTER SERVICES
The original version of this bill would have set default rates for workers' compensation-related services at hospitals and ASCs at 200% of the service's Medicare reimbursement rate.
The compromise version changes how the default rates for workers' compensation-related services at hospitals and ambulatory surgical centers (ASC) are determined when an injured employee's employer or workers' compensation insurance carrier (the “payor”) does not negotiate rates with the hospital or ASC. Current law requires the payor to pay a hospital for its actual costs of treating an injured worker, as determined by a workers' compensation commissioner. In practice, the payor and hospital or ASC generally negotiate discounted rates for the hospital's or ASC's services. If they do not negotiate, the payor must pay the hospital's or ASC's billed rates.
The bill instead requires the Workers' Compensation Commission chairman, by January 1, 2015, to establish and publish Medicare-based formulas for determining rates for workers' compensation-related services at hospitals and ASCs. The formulas must be for services covered by Medicare. In establishing them, the chairman must consult with employers and their insurance carriers, self-insured employers, hospitals, ambulatory surgical centers, third-party reimbursement organizations, and any other entities the chairman deems necessary. After initially publishing the formulas, the chairman must annually publish them on January 1.
Starting 90 days after the chairman publishes the formulas, the bill caps the default rates at the reimbursements listed in the formulas. If the services are not covered by Medicare (and therefore do not have an applicable formula) the rates must be determined by the chairman, in consultation with the above consulting entities. The payor can also negotiate different rates with the hospital or ASC.
PUBLIC ACT 14-48, SB 83 AN ACT CONCERNING MUNICIPAL NOTICE OF ALCOHOLIC LIQUOR PERMIT RENEWALS
The original version of this bill would have mandated that anyone renewing a liquor permit for on-premise alcohol consumption with the Department of Consumer Protection give simultaneous written notice of the application to the chief law enforcement official in the town where the business is located.
The compromise version allows municipalities to adopt ordinances requiring anyone applying to renew a liquor permit for on-premises alcohol consumption with DCP to simultaneously give written notice of the application to the chief law enforcement official the municipality where the business is located. The official or designee may send written comments on the application to the DCP commissioner within 15 days after receiving the notice. The commissioner must consider the comments before renewing the permit.
HB 5069 AN ACT CONCERNING LOW WAGE EMPLOYERS
This bill, back for the second time in a different version, would have assessed a quarterly fee on employers with 500 or more employees and franchisors whose franchisees collectively employ 500 or more employees. These employers and franchisors (“covered employers”) must pay a $1- per- work-hour fee for each person who was (1) on the employer's payroll, or the payroll of one of the franchisor's franchisees, for the last 90 days of the most recently completed calendar quarter and (2) paid wages by the employer or franchisee that were less than 130% of the state's minimum wage.
The CRA, along with other businesses and trade associations, worked to defeat this bill in the Finance Committee. The bill failed in the Finance Committee 16-27. We expect it to be back again next year.
PUBLIC ACT 14-128, HB 5269 AN ACT CONCERNING PARITY BETWEEN PAID SICK LEAVE BENEFITS AND OTHER EMPLOYER-PROVIDED BENEFITS
This bill changes the method for determining if a nonmanufacturing business is exempt from providing paid sick leave. Under current law, it must provide the leave if it employs 50 or more people in Connecticut during any of the previous year's quarters. It must determine if it exceeds this threshold by January 1 annually based on the quarterly reports it submits to the labor commissioner. Under the bill, the business must determine if it meets the annual 50-employee threshold base on the number of employees on its payroll for the week containing October 1.
The bill also prohibits the business from taking certain actions to avoid providing paid sick leave. Specifically, the business cannot fire, dismiss, or transfer an employee from one job site to another to come under the 50-employee threshold. Workers aggrieved by such practices may file a complaint with the labor commissioner, as the law allows.
The bill changes the timeframe for accruing paid sick leave. Under current law, employees accrue one hour of sick leave for every 40 hours worked per calendar year. Under the bill, they accrue one hour of paid sick leave for every 40 hours worked during whatever 365-day year the business uses to calculate employee benefits. This allows the employer to start the benefit year on any date, rather than only on January 1.
HB 5473 – AN ACT CONCERNING CASH REFUNDS FOR GIFT CARD BALANCES.
The original version of this bill would have required anyone accepting a gift card to provide a cash refund after a purchase when there is a balance and when the purchaser requests it. A violation of this would have been deemed an unfair or deceptive trade practice.
The bill was strongly opposed by the CRA and the CT Food Association and was eventually changed to require those restaurants and retailers accepting gift cards to provide a cash refund on gift cards with a balance of $5 or less. Eventually, the House passed a version of the bill which lowered the cash refund to $1 or less remaining on a gift card and changed the penalty to a fine. The CRA and CFA continued to oppose the bill and it was not called in the Senate. We expect this bill to be proposed during the 2015 session.
The following is a list of other monitored bills that also passed:
PUBLIC ACT 14-111, SB 269 AN ACT CONCERNING A SINGLE ALCOHOLIC LIQUOR PERMIT FOR MULITPLE EVENTS IN A CALENDAR YEAR
This bill allows certain organizations seeking temporary or daily liquor permits to apply to DCP for a permit for multiple events, rather than applying each time they wish to hold an event and increases the number of times such organizations can apply each year to 12. The affected liquor licenses are the temporary beer, temporary alcoholic liquor, charitable organization, and nonprofit corporation permits. This law is effective July 1, 2014.
PUBLIC ACT 14-9, SB 57 AN ACT CONCERNING THE DIRECT DEPOSIT OF WAGES
This bill expands the types of deposits that automatically exempt up to $1,000 from bank executions against a judgment debtor's account to include electronic direct deposits that are readily identifiable as wages. Current law requires this automatic exemption if, within 30 days before the execution order, the judgment debtor's account received electronic direct deposits that are readily identifiable as federal veteran's benefits, Social Security benefits, supplemental security income benefits, or child support payments under the Social Security Act. The bill extends the same exemption, including its notice requirements and limitations, to accounts that received electronic direct deposits readily identifiable as wages within 30 days before the execution order.
The bill also requires an employer, its agent, or representative paying an employee's wages by direct deposit into any bank, Connecticut credit union, or federal credit union, to electronically identify the deposit as wages. This law is effective October 1, 2014.
PUBLIC ACT 14-135, HB 5099 AN ACT CONCERNING CATERER, BREW PUB MANUFACTURER AND BEER AND BREW PUB MANUFACTURER ALCOHOLIC LIQUOR PERMITS
This bill allows those holding manufacturer for a brew pub and manufacturer for beer and brew pub permits to also hold caterer liquor permits. Under current law these manufacturer permittees can serve alcohol only on their own premises. The bill allows them, if they obtain a caterer's permit, to sell and serve liquor, beer, spirits, and wine for on-premises consumption at any outside activity, event, or function for which they are hired. By law, they may only sell and serve alcohol during the allowable hours for on-premises alcohol sale.
By law, caterer liquor permittees must notify DCP at least one business day before an event of the event's date, hours, and location. The notice must be given on a DCP-prescribed form, or, if the caterer is unable to do so due to exigent circumstances, by telephone. The annual caterer liquor permit fee is $440. This law is effective July 1, 2014.
It has been a pleasure to represent the Connecticut Restaurant Association at the state legislature and we look forward to our continued relationship in Hartford.
If you have any questions or concerns on any of these matters please do not hesitate to ask.
Levin, Powers & Brennan, LL