Daily Labor Report®

Inspector General Probes Labor Dept. on Tip Pool Rulemaking

Feb. 5, 2018, 6:34 PM

The Labor Department’s Office of the Inspector General is investigating the agency’s handling of a tip pool regulation, following a Bloomberg Law report that the DOL buried internal estimates on the proposal’s impact on workers.

The OIG sent a memo to the DOL’s Wage and Hour Division Feb. 5, alerting the agency’s acting administrator that an audit will commence on the tip pool rulemaking process. The department’s internal oversight office launched the review Feb. 2 in response to the media controversy generated by the news that the department conducted, and then shelved data from the proposal, an OIG spokesman told Bloomberg Law. The spokesman said the investigation, which is in an early stage, was already in the works before Sen. Patty Murray (D-Wash.) asked the inspector general Feb. 2 to initiate one.

Murray, the top Democrat on the Senate labor panel, wrote to the IG requesting a probe into “actions by officials at the Department of Labor (DOL) regarding exclusion of an internal economic analysis” from the December proposal. Her letter referenced Bloomberg Law’s Feb. 1 reporting that the agency political leadership shelved an analysis that up to billions of dollars in worker tips would go to their bosses as a result of the proposal. The public comment period on the rulemaking expires midnight Feb. 5.

Through its proposal to reverse a 2011 regulation, the DOL wants to allow tip pooling among restaurant servers and other workers who earn gratuities and back-of-the-house employees who don’t. But if businesses pay tipped workers the full minimum wage of at least $7.25 per hour, the rule wouldn’t prohibit employers from taking part in the tip pool themselves. The agency, however, deemed it too speculative at the proposed rule stage to quantify a projected transfer of tips to employers.

Instead, the department is soliciting comments on the regulation’s economic impact to inform a final rule. But worker advocates and regulatory experts have said deleting the data from the proposal may expose the DOL to an Administrative Procedure Act lawsuit. Democratic attorneys general from 17 states wrote to the DOL Feb. 5, alleging that if the report of a buried analysis is true, the final rule would violate the APA.

But the DOL has questioned the legality of the Obama rule, which asserted tips are the property of workers who earn them. Several circuit courts have found the 2011 rule was an illegal overreach of executive branch authority.

Tammy McCutchen, a WHD administrator in the George W. Bush White House, refuted the notion that the department is concealing data. “DOL is not hiding anything,” she wrote in a Federalist Society blog Feb. 5. “They chose not to publish an economic analysis that can only be very flawed. This is not new or shocking.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com.To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com.

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