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Trade groups sue Labor Department over restaurant wage rules

Written by Julie Jaron WSJ Friday, 17 June 2011 09:25

alt Trade groups representing the restaurant industry are suing the U.S. Labor Department for allegedly not allowing them to comment on new rules governing the way restaurants pay their employees.

Many 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.

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 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.

The National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Business claim in a complaint filed Thursday in U.S. District Court in Washington, D.C., that the Labor Department instituted the final rules without allowing a public comment period.

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