Restaurant Groups Sue DoL over Tips Credit Regs

June 22, 2011 ( - Trade groups representing the restaurant industry are suing the U.S. Department of Labor, saying they were not allowed to comment on new rules governing "tip credits" that let them count employees' tips as part of their wages.

The National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Business claim that when the DoL first proposed making changes to the regulations in 2008, the proposed amendments regarding the tip credits were of a technical nature at that time and didn’t state anything about having to explain the specifics of the tip credit to employees, according to the Wall Street Journal.  

In April, the Labor Department amended the regulations in the Fair Labor Standards Act to state that restaurant owners now have to explain to each employee, in detail, the exact amount of tips that will be credited toward the minimum wage. The Journal said the new rules, which took effect in May, also state that the tip credit won’t apply to any employees who haven’t received such notification from their employer.   

If the restaurant fails to notify the employee of the tip credit, it would be liable to pay the employee cash itself to ensure the worker receives the $7.25 federal minimum hourly wage. Restaurants also could face civil penalties of $1,100 for each violation and potential criminal penalties.  

Restaurant owners “now face an unanticipated, increased and unnecessary regulatory burden and expense in complying with the new tip credit notice requirements,” the trade groups claim in their complaint, according to the news report.   

A department spokeswoman told the Journal all affected parties, including the plaintiffs, had a chance to comment when the proposed rule change first came about in 2008 and that the final rule the department issued in April was based on those comments.