DOL Urged to Withdraw Proposed Tip-Sharing Rule

Democrats claim cover-up of rule’s cost to employees

Allen Smith, J.D. By Allen Smith, J.D. February 5, 2018
DOL Urged to Withdraw Proposed Tip-Sharing Rule

​Congressional Democrats are calling for the U.S. Department of Labor's (DOL's) proposed tip-sharing rule—popular with business groups—to be withdrawn following news reports that the DOL buried internal analysis showing the regulation will cost workers billions.

Sen. Elizabeth Warren, D-Mass., sent a letter on Feb. 1 to Secretary of Labor Alexander Acosta, recommending that the regulation be postponed or withdrawn, while Sen. Patty Murray, D-Wash., said the rule should be abandoned. House Democrats sent a letter the next day asking whether the DOL prepared any troubling economic analysis, despite the agency saying in the proposed rule that it had not.

The DOL has announced it will publish a cost-benefit analysis as part of the final rule. But Warren asserted that this announcement fails to answer whether there was interference from top administration officials. We've gathered the most recent news from SHRM Online and other respected news and other outlets on the tip-sharing rule.

Tip-Sharing Rule Already Was Controversial

Even before the recent news, there was a debate between business groups and worker-advocacy groups about the rule. The proposed regulation, which was issued Dec. 5, 2017, would allow "back-of-the-house" restaurant workers—such as cooks and dishwashers—to share in servers' tips. Critics of the rule said employers could do whatever they want with the tips if such sharing were allowed, including keeping a portion for restaurant improvements or sharing them with salaried managers. (SHRM Online)

[SHRM members-only toolkit: Complying with U.S. Wage and Hour Laws and Wage Payment Laws]

Internal Report Hidden?

While an initial study indicated the rule would be costly for workers, subsequent calculations showed less dramatic losses. Acosta and his team reportedly questioned the assumptions in the analysis that employers would keep workers' tips. They presumably got White House approval to publish the proposed regulation without any of the disturbing data. (Bloomberg Law)

Call for Extended Notice-and-Comment Period

Warren expressed alarm at the alleged cover-up. She said that the public notice-and-comment period, scheduled to end Feb. 5, should be extended. Warren also requested a copy of all e-mail or correspondence possessed by DOL related to the internal reports, including any proposed drafts between the DOL, the Office of Management and Budget and the White House. (Letter from Warren to Acosta)

Democratic House Members Call for More Information

Reps. Bobby Scott, D-Va., Keith Ellison, D-Minn., Mark Takano, D-Calif., and Suzanne Bonamici, D-Ore., wrote a letter to Acosta on Feb. 2, asking whether there had been any draft economic analysis of the proposed rule and requesting a copy of every such version. They also requested a list of all DOL officials involved in reviewing or deciding whether to exclude the results of any economic analysis and their contact information. (The Hill)

DOL Inspector General Will Audit Rulemaking

The DOL Office of the Inspector General announced Feb. 5 that it is initiating an audit of the rulemaking process for DOL's tip-sharing rule. Elliot Lewis, DOL assistant inspector general for audit, made the announcement in a memorandum to Bryan Jarrett, acting administrator of the DOL's Wage and Hour DIvision. (Washington Post

Attorneys General Urge Withdrawal of Rule

Attorneys general in 17 states, including California, wrote a letter to DOL Feb. 5, opposing the tip-sharing rule and criticizing the department for reportedlly obscuring the unfavorable economic analysis. California Attorney General Xavier Becerra, D, vowed in a statement to use every tool at the California Department of Justice's disposal to protect hardworking Americans. (The Hill)

Rule Might Remedy Income Disparities

The rule has some strong proponents, however. Restaurateurs and business groups approve tip sharing and argue the proposed rule will decrease the income disparity between servers and cooks. "I don't think it's fair that waiters take home such significantly huge salaries that the kitchen does not," said Sara Jenkins, chef and owner of Porsena Restaurant in New York City. (Eater)


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