02.21.18

By: Ben Penn
Source: Bloomberg BNA

Labor Dept. Tip-Pooling Response Doesn’t Satisfy Top Democrat

The Labor Department responded to a House Democrat’s oversight request on the tip pooling proposal by firmly defending the rulemaking in the face of criticism, according to a letter provided to Bloomberg Law.

The letter was deemed inadequate by its recipient, Rep. Bobby Scott (D-Va.).

“The Department failed to even address reports that this information was withheld, an action, that if true, compromises the integrity of the rulemaking process,” Scott said in a statement provided to Bloomberg Law.

Scott’s office wrote to the agency twice to seek information explaining a Feb. 1 Bloomberg Law report that the DOL’s Wage and Hour Division completed, and then shelved, an analysis showing billions of dollars in worker tips could be transferred to bosses each year as a result of the recent proposed rule.

The December proposal would make it easier for employers to require servers and other workers who earn tips to share them with kitchen staff who don’t. The regulation would reverse an Obama-era rule asserting that tips are the property of employees and can’t be distributed to back-of-the house employees, including when tipped workers are paid the full federal minimum wage of $7.25 per hour.

Scott and other Democrats are critical of the new rule because it doesn’t expressly forbid businesses from participating in the pool themselves, provided they pay workers at least $7.25.

The agency responded to Scott Feb. 20 in a letter that reiterates and elaborates upon many of the DOL’s previous statements in support of the rule.

“Employees with wages starting below the federal minimum wage without tips would not be impacted,” Katherine McGuire, the DOL’s assistant secretary for congressional and intergovernmental affairs, said in the oversight response. “The proposed rule reflects federal courts’ and the Department’s serious concern that the Department exceeded its authority when promulgating the 2011 final rule.”

Plus, “the prior administration’s 2011 final rule did not include any quantitative economic analysis of the rule’s impact,” McGuire added. The Obama rule wasn’t tagged as “economically significant” and was intended to codify the agency’s interpretation of the law.

‘Misguided View’ Repeated, Scott Says

Scott, the top Democrat on the House Education and the Workforce Committee, issued a statement Feb. 21, calling the DOL’s answers “disappointing” and “insufficient.”

“The Department reaffirmed its misguided view that the public will only get to know how the rule will impact workers once it has been finalized,” Scott said. “We will continue to press the Department of Labor for any excluded analysis and urge it to abandon its ill-advised rule to let employers confiscate their workers’ tips.”

The DOL repeated its pledge to produce an “informed cost-benefit analysis as part of any final rule.” This analysis will reflect the agency’s review of some 375,000 comments submitted by the public. The vast majority of the organizations to file a comment opposed the agency’s rulemaking and called on DOL to withdraw it altogether.

In response to the public controversy over revelations that the agency had completed a full quantitative analysis but opted not to include it in the proposed rule, the DOL’s Office of the Inspector General is now auditing the WHD’s rulemaking process.