Restaurant groups sue Obama administration over tip rules

(NewsCore) - WASHINGTON -- Trade groups representing the restaurant industry sued the Department of Labor Thursday 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 will not apply to any employees who have not received such notification from their employer. This leaves the restaurant liable for the difference between the minimum $2.13 per hour cash wage required under federal law and the $7.25 federal minimum wage for every hour worked for up to three years.

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

The NRA met with the Labor Department on May 3 and asked that it either withdraw the tip-credit notice regulations or delay implementation by 90 days to allow the industry to submit comments, but said the Labor Department refused.

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.

The Labor Department could not be reached for comment.

Read more: online.wsj.com