Groups from the restaurant industry are suing the U.S. Labor Department over new rules governing the way restaurants pay their employees. The National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Business filed a complaint in U.S. District Court in Washington, D.C., claiming that the Labor Department instituted the final rules without allowing a public comment period.
The issue with the rules centers on the fact that most restaurants take tip credits that allow them to count employees’ tips as part of their wages. In the past, employers only had to inform workers that their tips would be used as a credit toward the minimum wage. Two months ago the Labor Department changed the regulations in the Fair Labor Standards Act to require restaurant owners to explain to each employee the exact amount of tips that will be credited toward the minimum wage their would earn.
The new rules mean that the tip credit won’t apply to any employees who haven’t received the proper notifications from their employers. If a restaurant does not notify an employee of the tip credit amount, the restaurant would have to pay the employee any wage difference in cash to ensure the worker receives the $7.25 federal minimum hourly wage. The new rules also mean that restaurants will face civil penalties of up to $1,100 for each violation and other criminal penalties could apply depending on the situation.
The National Restaurant Association says the Labor Department refused requests to withdraw the tip-credit notice regulations or delay implementation of the rule by 90 days to allow the restaurant industry to submit their own comments.
There was a public-comment period back in 2008 when the Labor Department first proposed making changes to the regulations, but the National Restaurant Association says the proposed amendments regarding the tip credit did not say anything specific about restaurants having to explain the details of the tip credit to their employees at that time. The National Restaurant Association complaint maintains that the new regulations mean that restaurant owners in the United States now must face increased and unnecessary regulatory burdens and expenses in complying with the new tip credit notice requirements.
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