Gov. Ned Lamont is quietly working to craft legislation that would clarify what is, and what is not, a class action lawsuit — a move that could shape a contentious restaurant wage battle in which Lamont vetoed a bill, earning himself ill-will from the business community.
It’s too soon for active talks about the class-action clarification. And there is not yet a proposed bill, just an exploration, according to a person familiar with the effort.
But if it succeeds, Lamont’s intervention could help remove the class-action status that Superior Court Judge Carl J. Schuman granted in March for one lawsuit among more than a dozen filed by servers against restaurants over pay. It could do that by affecting a rare, pretrial appeal the state Supreme Court is now hearing on whether Schuman acted incorrectly.
And that, in turn, could do more to help restaurant owners than the bill Lamont vetoed after the recent General Assembly session.
At issue whether the establishments — including Chip’s Family Restaurants, the subject of the class action — illegally underpaid the servers by paying them lower “tipped” wages for time they were not serving tables and earning tips. Restaurants could end up owing millions of dollars and some would face bankruptcy.
The bill Lamont vetoed would have undone the lawsuits, but, Lamont’s office contends, it would have been struck down as unconstitutional because it changed regulations retroactively.
It could also do more for the restaurants than whatever compromise bill Lamont and lawmakers come up with as they figure out how to handle this sticky mess in which restaurants relied in part on bad advice from the state Department of Labor, and one law firm is exploiting violations the restaurants say are bogus.
My interest here isn’t in these cases, though they are fascinating. Rather, it’s about what Lamont’s handling of the issue says about his attitude toward business in Connecticut. As with many centrist political leaders, it is not a simple picture and as I’ll show here, it’s hard for Lamont to control.
In vetoing the bill — which came as a surprise to Lamont as it was secretly buried in a larger bill at the very end of the spring legislative session — the governor appeared to side with the servers and with unions supporting them. “These workers are entitled to their day in court,” he said in comments reported by my colleague Emilie Munson. The bill, he added, “likely violates workers’ due process rights and other constitutional provisions.”
That sure sounds like the governor lining up against the restaurants, and he did little to dispel that idea.
But as the class-action effort and the negotiations show, the reality is much more complicated. In fact, Lamont has been working to advance the rights of both sides. But until recently he failed to communicate that, even as the Republican and Democratic leaders of the state House of Representatives lined up against him.
And it’s hardly the only issue in which Lamont is seen — rightly or wrongly — as going against business interests.
This is creating a confusing message. Lamont is reaching out to many CEOs in the state. He’s about to roll out an economic development program giving tax credits to any companies that meet certain hiring thresholds, not just those that cut deals with the state.
He’s creating much simpler and more streamlined regulations for the state Department of Energy and Environmental Protection.
In short, like many governors, Lamont is doing some things that rankle business interests, some that support them and some — like his strong support for highway tolls, a minimum wage increase and a paid family and medical leave — that have received a mixed reception from the corporate community.
The lesson in the restaurant case, and in two others I’m about to describe, is that Lamont needs to guard his business-friendliness reputation. Tht means not only in big, high-profile actions but also in individual cases that can and will bite him and form lasting scars.
And it means not only Lamont’s actions but also how he communicates, with the restaurant case an example of the governor letting pro-business moves go unheralded as he took a lot of heat.
In another seeming one-off instance, a mortgage lending company in East Hartford that had 178 employees just 15 months ago, and a $6 million deal to expand with the state Department of Economic and Community Development, is now virtually out of business amid an extremely aggressive enforcement action by the state Department of Banking.
In that case, 1st Alliance Lending has had its license suspended by the state of Connecticut, documents show — even before a hearing that has been scheduled for late September. The suspension came despite 1st Alliance contending it did nothing wrong and despite numerous other states clearing the firm after looking at the same facts.
The issue is whether 1st Alliance systematically violated state and national regulations, as the department claims, by allowing call-center employees not licensed to sell mortgages to take applications and negotiate the terms of home loans.
After launching its investigation in May, 2018, the banking department lobbied at least a dozen of those states against 1st Alliance, according to on-the-record comments by the firm’s founder, CEO and principal owner, John DiIorio, who cites extensive evidence — some of which I have reviewed. The department denied that it improperly tried to influence regulators in other states but has not refuted charges in my columns about the allegations.
Now, 1st Alliance is down to just a tiny handful of remaining people, said DiIorio, who has hired two of the most powerful lawyers in the state, with long experience in the nexus of government and business: Ross Garber and James Robertson. Documents show the department refused to accept the firm’s surrender of its license to sell mortgages in Connecticut, opting instead for the suspension — which forces other states to bar the firm from operating there.
Lamont’s office has not commented on the 1st Alliance case, and by several accounts the governor has not made any effort to guide or rein in his banking department — which launched the case eight months before Lamont took office under a commissioner Lamont reappointed. This could blow up in his face.
The third instance involves Farmington-based Companions & Homemakers, a privately owned company that hires and sends people to assist elderly and ill clients in their homes, typically with non-medical tasks.
In the waning hours of the General Assembly session — see the pattern here? — at the request of the state Department of Social Services and perhaps some labor groups, lawmakers tightened the rules on non-compete and non-solicitation agreements that Companions & Homemakers and similar firms can enforce.
Most of us would agree that home-care companies shouldn’t be allowed to limit where the low-wage workers they employ can work. And they don’t. Employees at Companions & Homemakers have long been allowed to work anytime for any other agencies or on their own for private clients.
They could, and still can, even approach Companions & Homemakers’ clients six months after leaving the firm, and steal those clients away.
But they could not steal clients while actually serving those clients — until the new rule was adopted this summer. The company contends that change will profoundly affect its ability to operate.
“Homecare agencies throughout the country rely on reasonable non-solicitation agreements to protect the value we provide,” the company said in a written statement, adding, “while the provision itself is just weeks old, we are already seeing caregivers we matched with specific clients...leaving our agencies with the clients following.”
Lamont supports that rule change, sticking to the principle that workers, especially low-wage ones, should have the freedom to offer their services wherever they like. Is it reasonable to extend that to workers filching active clients? I don’t think so.
The common bond in all these cases is that Lamont can attract, or has already attracted, barbs for anti-business behavior even as he works to burnish the state’s battered reputation for business. Cases like these three add up quickly in a small state and have effects that are hard to control even when a governor does the right thing.
In the restaurant case, Lamont’s hands were tied on the veto. No one came to negotiate the problem with the governor’s office before the bill passed. Now, The CT Mirror’s Keith Phaneuf suggested in a story, the negotiations are about what penalties the restaurants could face.
“Governor Ned Lamont is taking the lead on crafting a solution that benefits both the whole of the restaurant industry and is fair to workers,” spokesman Max Reiss said in an email. “The governor is a collaborator by nature, and he is listening to workers, restaurant owners, and others in the industry to create a piece of legislation that provides clarity for restaurants to thrive in Connecticut and for their employees to be treated fairly.”
The class-action status is probably a bigger deal for the restaurants than the penalties they might face in individual cases. “That’s a death sentence,” said Scott Dolch, executive director of the 1,200-member Connecticut Restaurant Association.
Hundreds of past and present servers could have claims into the tens of thousands of dollars each — with double damages and fees piled on top of that, under the class action. “If the class action goes away, this lawyer and other lawyers aren’t going to do it because it isn’t worth the money for them,” said Barry Jessurun, who, with his brother, Brian, owns three restaurants in Storrs, Putnam and Pomfret.
Lamont’s administration isn’t taking a role in the Supreme Court appeal over the class-action status, but — my deduction here — it’s likely the administration believes Schuman was wrong or it wouldn’t be working toward a clarification.
The point is that Lamont is trying to strike a middle ground on many of these issues, or, as spokesman Reiss outs it, “There are ways to both be pro-worker and pro-business and just because something is pro-worker, does not mean it is anti-business.”
That’s a delicate balance. The Jessuruns don’t blame Lamont for the veto, as they understand the legal picture better than most. But they are upset about the minimum wage rising to $15 by 2023, which affects most restaurant workers, if not servers.
“Our cost of doing business is just going to explode on us,” Barry Jessurun said.
Lamont doesn’t have the luxury of a public that understands subtlety when it comes to his attitude toward business. That’s why the black eye he wrongly sustained in the restaurant case could hurt despite the deeper story. And that’s why it matters what he does, or doesn’t do, in seeming one-off disputes such as the 1st Alliance case and the Companions & Homemakers issue.
Lamont would be smart to heed them better.