Restaurant Association Sues to Block Tip Credit Rules


On April 5, 2011, the U.S. Department of Labor published new final regulations that among other things require employers to give new detailed notices to tipped employees in order to credit tips toward the minimum wage. The new regulations took effect on June 5, 2011. Yesterday, June 16, 2011, the National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Businesses filed a lawsuit against the DOLseeking to block enforcement of the new rules. National Restaurant Association v Solis (PDF).

The Tip Credit and the New Rules

Under the Fair Labor Standards Act (FLSA), employers must pay all employees a minimum hourly wage, currently $7.25 per hour.

However, for tipped employees (i.e., those who customarily and regularly earn more than $30 per month in tips), the FLSA allows employers to pay a lower cash wage and take a "tip credit" to bring the employee's total compensation up to the minimum wage. Currently, federal law allows employers to take a tip credit of up to $5.12 per hour. (Many states provide for a higher minimum wage. In Illinois, for example, the minimum is $8.25 per hour. The tip credit in Illinois is limited to $3.30 per hour, and tipped employees must receive a cash wage of $4.95 per hour.)

The FLSA has long required employers to inform employees of the tip credit. However, the new final regulations published on April 5 provide that an employer may not take the tip credit unless it first provides all of the following information to each tipped employee...

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