Congress Willing to Aid Labor Dept., Ban Tip Skimming (1)

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By Ben Penn

A congressional solution is potentially in the works to muffle the Labor Department’s tip pooling controversy.

Labor Secretary Alexander Acosta and the GOP chairman of the House labor appropriations panel, with early support from a few Democrats, are pushing a legislative fix to block employers from retaining their workers’ tips, which they’d be permitted to do under a recent regulatory proposal. It comes after the department drew heated opposition from the left after scrapping an economic proposal showing that tip skimming by managers could cost workers as much as billions of dollars.

Acosta, addressing the House subcommittee on labor spending March 6, announced that the White House Office of Management and Budget recently added a proposed solution to the list of items for appropriators to review as part of the ongoing budget process. This could come as a rider to the fiscal year 2018 spending bill that Congress is currently negotiating.

“No one wants this; this is a question of statutory authority,” the secretary said of enabling businesses to pocket tips. “I fully support a provision that says establishments should not be permitted to keep any portion of a tip.” Acosta, in his first public remarks since contention over the tip pooling rule has escalated this year, described the measure as adding “a simple sentence” to the Fair Labor Standards Act.

Without this new language, the secretary said he’s persuaded by a recent ruling from the U.S. Court of Appeals for the Tenth Circuit that the DOL doesn’t have the authority to block employers from controlling tips when they pay workers the full minimum wage.

Rep. Tom Cole (R-Okla.), the subcommittee chairman, said he’d support an appropriations addendum. “This is something we really want to do,” Cole told Bloomberg Law after the hearing. “I sense there’s real bipartisan consensus in moving something. Whether it’s 2018, I don’t know. We certainly ought to be able to get it done in the 2019 bill.”

The chairman added that the discussions are at a nascent stage. He had just discussed the rider with Acosta before the hearing, but he said he hasn’t had a chance to bring the tipping language to the Senate’s attention.

A faster resolution would likely be welcomed by the DOL, because it would help quiet some of the critics on what has arguably been the agency’s most contentious rulemaking action in the Trump era.

Reversing 2011 Rule

The December proposal would reverse a 2011 Obama rule that stated tips are the property of employees. The new rule would enable tip sharing between front-of-house workers, such as servers, who are traditionally tipped, and back-of-house workers, such as cooks and dishwashers, who are normally paid an hourly wage without gratuities. The new rule would only apply when businesses pay employees the full minimum wage of at least $7.25 per hour.

But the rule wouldn’t expressly prohibit restaurants from keeping a portion of the tips for themselves, which has sparked heated criticism from Democrats and worker groups. A Bloomberg Law report Feb. 1 found that the agency buried from the proposed rule an economic analysis that showed the rule could cost workers billions of dollars in tips.

Acosta didn’t address the existence of internal analysis when pressed by the panel’s top Democrat. But he did say he doesn’t have the legal authority to leave the 2011 rule on the table.

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