Sen. Warren Turns Attention to White House on Tip Pool Rule

Feb. 12, 2018, 8:51 PM

Sen. Elizabeth Warren (D-Mass.) wants the White House regulatory review office to explain its role in the removal of economic data from the Labor Department’s tip sharing proposal.

The senator, who has been leading the Capitol Hill charge against the proposal, gave the Office of Information and Regulatory Affairs until Feb. 26 to detail all correspondence betwen OIRA and the Office of Management and Budget, the White House and DOL on the rule.

The December proposal would reverse a 2011 Obama regulation, which declared tips are the property of employees who earn them. The new rule would free restaurants to structure their own tip pools between front-of-house workers and those in the back of house who typically don’t receive tips. But the regulation doesn’t forbid employers from retaining the gratuities for themselves. Sources told Bloomberg Law that the department dropped an analysis showing the rule could cost workers billions of dollars before it made the proposal public.

“You have been a proponent of more transparency and economic analysis in the rulemaking process,” Warren wrote to OIRA Administrator Neomi Rao Feb. 12. “But if DOL hid a key economic analysis of this proposed rule—and if OMB officials were aware of and complicit in doing so—that would raise serious questions about the integrity of the rule itself, and about your role and the role of other OMB officials in the rulemaking.”

Exclusion of Analysis Under Audit

Warren’s letter excerpts passages from a Feb. 1 Bloomberg Law report on the DOL data scrubbing. The White House ultimately approved a version of the proposal that excluded this analysis, four current and former DOL sources told Bloomberg Law. Several of the sources said OIRA was working with the DOL on its data methodology, but it’s not clear whether Rao and her staff were involved in or on board with that decision.

The DOL Office of the Inspector General Feb. 5 initiated an audit of the department’s Wage and Hour Division related to this rulemaking.

A representative for Rao did not immediately respond to a request for comment. Asked at a Feb. 8 conference call how the tip sharing proposal squares with her emphasis on regulatory transparency, Rao said: “We would expect to see the full quantitative analysis in the final rule, and hope that the comments can shed some light on what the scope of that is.”

The Warren letter also asks Rao whether she was aware of the economic analysis on gratuities transferred to businesses and if yes, who she discussed it with.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com

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