There are two things we have learned during the first year of the Department of Labor under the Trump Administration: it isn’t afraid to court controversy; and anything promulgated under the Obama administration has a big bull’s-eye on it.
A recent effort that could force waiters and waitresses to share gratuities with non-server co-workers falls under both categories.
In December, the Department of Labor announced a Notice of Proposed Rulemaking regarding the tip regulations under the Fair Labor Standards Act . Under the proposed rule, workplaces “would have the freedom to allow sharing of tips among more employees” and “help decrease wage disparities between tipped and non-tipped workers,” an option that is currently restricted by a rule promulgated in 2011 and subsequently challenged in a number of courts.
The Department’s proposal only applies where employers pay a full minimum wage and do not take a tip credit and “allows sharing tips through a tip pool with employees who do not traditionally receive direct tips, such as restaurant cooks and dish washers.”
“These ‘back of the house’ employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers,” the proposal says.
A comment period on the rule reached its deadline late last month, but furor over the plan has been amplified in recent days. Critics charge that the Department intentionally hid data on the economic effects of the rule.
California Attorney General Xavier Becerra, alongside a coalition of 17 Attorneys General, has filed strong opposition to the rule, and ignoring “long-established cultural and legal understanding, gratuities are the sole property of employees.”
“The Department of Labor, which is spearheading the rule change, reportedly decided to shelve an economic analysis that highlighted the billions in gratuity earnings that workers could lose,” the letter claims.
Under the Fair Labor Standards Act (FLSA), employers are required to pay their employees the federal minimum wage. Employers can meet this requirement either by paying employees the full cash federal minimum wage (currently $7.25 per hour) or by paying a lower cash wage, no less than $2.13 per hour, and making up the difference with the tips that the employee earns. The latter practice is known as a “tip credit.” The Trump Administration’s proposed rescission of the 2011 rule would allow employers who pay employees the federal minimum wage to claim the employees’ tips for any purpose.
Congressional Democrats are also taking on the fight.
Rep. Bobby Scott (D-Va.), ranking member of the Education and the Workforce Committee, Rep. Keith Ellison (D-Minn.), vice chair of the Congressional Progressive Caucus, Rep. Mark Takano (D-Calif.), ranking member of the Subcommittee on Workforce Protections, and Rep. Suzanne Bonamici (D-Ore.), vice ranking member of the Committee on Education and the Workforce, sent a letter to Department of Labor Secretary Alexander Acosta requesting the Department “share any and all economic analyses they have on the effects of the tip rule.”
This request is in response to a Feb. 1 Bloomberg BNA report that the Department of Labor intentionally withheld estimates that its proposed tip rule would cost workers billions of dollars in lost income.
The article claims that the DOL “scrubbed an unfavorable internal analysis from” the NPRM, and also states that “senior department political officials—faced with a government analysis showing that workers could lose billions of dollars as a result of the proposal—ordered staff to revise the data methodology to lessen the expected impact.”
“If the Department has withheld such analysis and then misrepresented this relevant fact in the NPRM, such conduct raises serious questions about the integrity of the Department’s rule making process,” the letter says.
The letter requests that the Department provide information related to the economic analyses that are or have been in its possession and a list of the names of all officials who were involved in reviewing or deciding whether to include or exclude the results of such economic analysis in the NPRM.
“Has there been any draft, interim, proposed or completed quantitative or economic analysis, including any cost-benefit analysis, that was prepared, procured or otherwise,” the letter asks.
In related news, the Department of Labor’s watchdog, Its Inspector General, has announced its intention “to audit the rulemaking process in wake of the agency’s suppression of tip rule impact analysis.”
As for what economic costs the rule may create, the Economic Policy Institute has its own calculation. EPI is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions.
“We estimate that under this rule, employers would pocket $5.8 billion in tips earned by tipped workers each year,” it says. “This is 16.1 percent of the estimated $36.4 billion in tips earned by tipped workers annually. We believe employers will pocket between $523 million and $13.2 billion in workers’ tips annually, with $5.8 billion being our best estimate.”