Daily Labor Report ®

Labor Dept. Hiding Tip Pool Rule Data Is Illegal, 17 States Say

Feb. 5, 2018, 8:50 PM

Democratic state attorneys general offered the Labor Department Feb. 5 a sneak peek at potential litigation alleging the agency’s failure to release regulatory data on tip pooling violates federal rulemaking law.

Chief legal officers from 17 states—led by California, Illinois, and Pennsylvania—wrote to the DOL in strong opposition to the agency’s proposal to undo an Obama-era rule that restricted tip-pooling arrangements. Their letter, submitted on the final day of public comment, expresses outrage over the revelation in Bloomberg Law’s Feb. 1 report that the DOL shelved an internal analysis on the rule’s projected impact on worker tips.

“If recent press accounts are true that the Department conducted but refused to disclose an analysis of the economic impact of this NPRM, the public’s opportunity to provide meaningful comment on the proposal has been undermined in violation of the” Administrative Procedure Act, the attorneys wrote.

By removing the economic data from the proposed rule, the DOL is asking the public to submit comments without knowledge of the agency’s own estimates that employees could lose out on up to billions of dollars in gratuities. The new rulemaking would legalize tip pooling arrangements that involve restaurant servers and other workers who make tips and back-of-the-house workers who don’t. The regulation would only apply to businesses that pay tipped workers at least the full minimum wage of $7.25 per hour.

“After receiving public comment, the Department intends to publish an informed cost benefit analysis as part of any final rule,” a DOL spokesman told Bloomberg Law in a statement. “The Department acts in accordance with the APA and does not comment on deliberative processes.”

Worker advocate critics say the rule would embolden managers to essentially skim the tips of workers by participating in the pools themselves. The DOL and industry supporters say the rule will boost wages for lower-earning employees, such as cooks and dishwashers, and that the Obama rule was an illegal overreach of executive branch authority.

The state attorneys general didn’t specifically threaten to sue the DOL after it finalizes the proposal, but sent a signal of their oversight on the issue.

“The California Department of Justice is prepared to use every tool at our disposal to protect these hardworking Americans,” California Attorney General Xavier Becerra said in a statement. “We file our opposition today with a particular sense of urgency, given that the U.S. Department of Labor reportedly took action to obscure the unfavorable economic analysis showing that workers could lose billions in earnings if the proposed change goes into effect.”

The public comment letter comes hours after the DOL’s Office of the Inspector General announced it had begun a probe into the Wage and Hour Division’s handling of this rulemaking.

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.

To read more articles log in. To learn more about a subscription click here.