Restaurant Gripes Over Tip Credit Law Put on Ice

WASHINGTON (CN) - A federal judge upheld a law that makes restaurants liable for paying full minimum wage unless they tell employees that they can make up the difference with tips.

The Department of Labor issued its final rule on the tip credit requirements of the Federal Labor Standards Act in April 2011. The tip credit holds that the employer must disclose how much it will pay the tipped employee, and how much more the worker will make through tips.

The tip credit that the employer claims "may not exceed the value of the tips actually received by the employee," according to the rule. It also says "that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section."

Three industry trade groups - the National Restaurant Association, the Counsel State Restaurant Associations and the National Federation of Independent Businesses - took issue with the final provision about informing employees.

If the employer fails to inform the employee, then it is liable to pay the full wage.

The federal complaint claimed that the government violated the Administrative Procedure Act by not informing the public of its decision to issue a final rule on the tip credit requirements.

On Tuesday, U.S. District Judge Amy Jackson granted summary judgment to the government on three of the claims, and dismissed a final count that the trade groups had previously conceded.

"Since the agency complied with the APA notice requirements when it conducted this rulemaking exercise, and the public was fully and specifically informed of the subject matter under consideration, the court will deny plaintiffs' motion for summary judgment and grant defendants' motion," Jackson wrote.

The provision of the FLSA first showed up in 1966 and was reaffirmed in April 2011.

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