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National Restaurant Association - NRA sues Labor Department over new tip-credit regulation

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NRA sues Labor Department over new tip-credit regulation

The National Restaurant Association --- joined by the Council of State Restaurant Associations and the National Federation of Independent Business -- has filed suit against the Labor Department over the agency’s new tip-credit-notice regulation.

The DOL regulation significantly changes the notice that businesses must give tipped employees about the tip credit. The new rule took effect on May 5. The DOL gave restaurants no chance to comment on the new notice requirements -- and then gave employers only 30 days to comply.

The National Restaurant Association met with DOL officials in early May to ask them to withdraw the rule or delay it by 120 days so our industry could provide input. The agency refused.

Among other grounds, our lawsuit argues that the DOL failed to comply with the federal Administrative Procedure Act, which requires federal agencies to solicit public comment on proposed regulations.

The stakes are tremendous: If an employer does not give the required notice, then use of the tip credit is invalid; in other words, the employer cannot take the tip credit. The impact of these new administrative obligations and the potential loss of the tip credit and assessment of civil and criminal penalties portend a huge and negative economic impact on the restaurant industry. Even one small misstep by an employer can result in substantial liability.

Employers face risks not only through DOL enforcement actions but separate plaintiffs’ lawsuits.

As we pursue the lawsuit, we continue to educate our members about the new rule. We have encouraged our members to immediately make efforts to comply in good faith with the new notice requirements, and offer suggested compliance guidelines at www.restaurant.org/tips for operators to discuss with their legal counsel, including sample notices members can use to provide written notice to their tipped employees.

Stay tuned to www.restaurant.org/tips for ongoing lawsuit news and compliance information. 

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