Democrats Still Want Oversight on ‘Botched’ Tip Pool Process

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By Ben Penn

Democratic lawmakers want more scrutiny into how the Labor Department and the Office of Management and Budget buried data from a proposed rule on tip pooling, even as Congress is close to resolving the most contentious piece of the rulemaking.

Sen. Elizabeth Warren (D-Mass.) asked the Senate labor committee March 22 to conduct an oversight hearing to learn more about a March 21 Bloomberg Law report. The news article described how Labor Secretary Alexander Acosta and OMB Director Mick Mulvaney shelved an analysis showing the December rule proposal would’ve transferred $640 million in tips per year from workers to their bosses.

Five House Democrats have also signaled they will be seeking a similar hearing in their chamber.

In response to the controversy over the rule’s allowance for managers to participate in employee tip pools, a bipartisan team of lawmakers and the DOL brokered a deal to ban employers from pocketing gratuities. This language is included as a policy rider in the fiscal year 2018 spending bill that is now on track to become law.

But the Massachusetts senator isn’t letting Acosta and Mulvaney off the hook.

The policy rider in the omnibus spending bill “will solidify legislative protections for tipped workers,” Warren wrote to the panel Chairman Lamar Alexander (R-Tenn.). “But this Committee—and the American public—have a responsibility to identify what went wrong at DOL and OMB during the rulemaking, and to learn the lessons so that future rulemakings are conducted in a fair and transparent fashion.”

Warren asked the Senate Health, Education, Labor and Pensions Committee to query Acosta and Mulvaney and collect all documents and communications between the DOL, the Office of Management and Budget, and the White House related to the regulation. The DOL’s Office of the Inspector General is already auditing this process.

The proposed rule, which reverses a 2011 regulation, generally makes it easier for restaurants to implement tip-sharing arrangements among workers who directly earn gratuities and those who don’t.

The OMB’s Office of Information and Regulatory Affairs attempted to block the proposal until it estimated the amount of tips that workers would lose to their managers, three current and former executive branch officials told Bloomberg Law. That prompted Acosta and his team to elevate the dispute to Mulvaney, who gave the department approval to issue the regulation with language asserting that the DOL was unable to quantify the impact until the final rule stage.

In a separate letter March 22, Warren told Acosta that he and Mulvaney owe the public “an explanation of this botched rulemaking process.”

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