Restaurant Groups Sue Labor Department

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.
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 it says the Labor Department refused.
A department spokeswoman said 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. "The plaintiffs were not among those that commented," the spokeswoman said in a statement.
The changes come at a difficult time in the restaurant industry. The economic downturn has resulted in fewer people dining out and customers spending less when they do go to restaurants. Restaurants also are facing more expenses associated with posting calorie counts to their menu boards.
The cost of almost every commodity, from gasoline to cheese, is on the rise, putting a further dent in restaurants' profits. And as part of the new health-care law that takes effect in 2014, employers with 50 or more full-time workers would have to provide affordable health insurance to those who work more than 30 hours per week.
The Labor Department first proposed making changes to the regulations in 2008, during which time there was a public-comment period. But the restaurant groups claim the proposed amendments regarding the tip credit 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.
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.
Angelo Amador, the NRA's vice president of labor and work-force policy, says laying out exactly how much of an employee's wages will be paid out of tips is burdensome because the amount differs for each employee and the amount of tips an employee collects changes from week to week.
"Under the new regulations, the additional information required is so specific and detailed that one small misstep by an employer can result in substantial liability while not providing employees with additional helpful information," Mr. Amador says.