GOP Strands Labor Dept. in Tip Pool, as the Left Swarms

By Ben Penn

Republicans and most of the business community are so far leaving the Labor Department to fend for itself in the battle over a tip sharing proposal that’s emerged as the most controversial workplace policy move of the Trump era.

The DOL is under fire from a growing number of Democratic lawmakers and left-leaning organizations for the December proposed rule, which would make it easier for employers to require servers and other workers who earn tips to share them with kitchen staff who don’t. The proposal would reverse an Obama-era regulation that asserted tips are the property of employees and can’t be distributed to the back-of-the house, including when tipped workers are paid the full federal minimum wage of $7.25 per hour. The opposition intensified following Bloomberg Law’s Feb. 1 report that the DOL buried from the proposal an internally conducted analysis projecting billions of dollars tips could change hands to management by allowing supervisors to participate in the pools.

But in a stark contrast to the typical Trump administration regulatory rollback championed by employer groups and GOP lawmakers, the tip pooling proposal so far has the DOL stuck on an island with hardly any stakeholders willing to offer a lifeboat. Bloomberg Law reached out to spokespeople for all House and Senate Republican politicians on the four subcommittees with jurisdiction over workers’ wages or over the agency regulatory process. Not a single office provided a comment for this story.

“You always want a voice out there saying that this is a tempest in a teapot,” Tammy McCutchen, the George W. Bush administration’s DOL Wage and Hour Division administrator, told Bloomberg Law. “When Republicans are in the White House, every agency wants Republicans on the Hill and their constituencies, whether that’s business or whoever, to support what they’re doing, to be a balancing voice on the other side of unions.”

The DOL—along with a major ally in this fight, the National Restaurant Association—argues the regulation is necessary to erase a 2011 rule that at least one appeals court has found invalid. NFIB, the American Gaming Association, and the Oregon Restaurant and Lodging Association were the only other organizations to join the NRA in writing letters in favor of the proposal. The NRA’s Restaurant Law Center wrote its letter on behalf of three state associations, plus individual restaurants and workers signed letters urging the DOL to proceed with the rule as well.

Measurement, Timing Questions

If the notice-and-comment period on the tip pool regulation were a game of tug-of-war, then unions, Democrats, and worker rights groups would have won in a landslide.

The advocacy organizations and Democratic politicians submitting comments opposing the rule outnumbered the business associations defending it 58-4, with heavyweights like the Chamber of Commerce sitting out entirely, according to a Bloomberg Law review of the comments posted online. The analysis covered only submissions from organizations, without reflecting the vast majority of the 375,000 overall comments. Those calling on the department to withdraw the rulemaking have rebranded it the “tip theft” rule, seizing on the fact that the proposal allows businesses to take part in the pool themselves.

The comment period expired four days after the news surfaced that the agency’s political leaders scrubbed the impact data. That revelation prompted the DOL’s Office of the Inspector General to initiate an audit of the tip pool rulemaking process.

The DOL says it wants the public to weigh in on how to measure impact in a final rule.

“Tip pooling is fair because it allows dishwashers, cooks, servers, and bussers to share in the tips for providing the same goal of creating a great customer service and a wonderful dining experience,” Angelo Amador, the NRA’s senior vice president and regulatory counsel, told Bloomberg Law. Amador declined to address why Republicans and most other industry associations aren’t on board.

The narrow coalition of supporters speaks to the technical nature of a rule that only applies to a subset of companies that employ tipped workers. Plus, the silence from GOP members came during a busy week with several urgent legislative priorities on Capitol Hill. Still, as the DOL proceeds toward a final rule under escalating external and internal scrutiny, the Democratic critics are firmly in control of the messaging as they continue their focus on wages heading into the midterm elections.

Dems Ready to Expand Opposition

A group of 24 Senate Democrats already expressed “deep concern” on this issue in a letter earlier this month to Labor Secretary Alexander Acosta.

Over on the House side, a small gang of labor-focused Democrats is hoping to bolster their coalition by inviting the entire caucus to a forum Feb. 15 on the DOL’s “proposal to allow employers to pocket their employees’ tips.” A panel of worker advocates will be on hand to field questions from members and their staffers.

“I think that it’s critical that Congress conducts robust oversight here and get to the bottom of what happened,” Amit Narang, a regulatory policy advocate at Public Citizen, told Bloomberg Law.

The DOL and White House regulatory affairs head Neomi Rao have pointed out that the public comments will still inform the inclusion of a full economic analysis in the final rule. Asked to comment for this story, a DOL spokesman said the agency “does not comment on deliberative processes.”

Narang, one of the scheduled panelists at the House forum, will have a strictly Democratic audience. But he said in theory this should be a bipartisan issue. “Clearly Republicans were very much interested in that kind of oversight in the Obama administration, and we’re not seeing that now,” Narang said.

Lawmakers have been willing to reach across the aisle on efforts to improve regulatory transparency, including a legislation co-sponsored by Sens. James Lankford (R-Okla.) and Heidi Heitkamp (D-N.D.) that would give the public a chance to participate in proposed rules at an earlier stage. A representative for Lankford did not respond to three emails seeking comment on whether congressional oversight is warranted on the tip pooling regulation.

The lack of interest among GOP lawmakers may be more out of deference to the DOL’s ongoing rulemaking, said James Plunkett, senior government relations counsel at management-side law firm Ogletree Deakins.

“This is why we have the APA—to govern the rulemaking process,” Plunkett told Bloomberg Law. “It is just at the proposed stage and to get all worked up at this point might not be worthwhile.”

Where Are the Trade Associations?

The Washington trade association community demonstrated a coordinated attack in response to Obama administration labor regulations. This played out most notably during another DOL wage-and-hour rule that would’ve expanded overtime pay to millions of workers—that is until industry groups successfully sued to block the regulation just days before it would’ve taken effect in 2016.

That same coalition, including the U.S. Chamber of Commerce and the National Association of Manufacturers, gladly offered support to the Trump administration’s moves to further unwind that overtime rule this past year.

But tip pooling between front-of-house and back-of-house workers is uniquely central to the restaurant industry, causing some other groups to defer to the NRA or ignore the rule altogether. The NRA has been litigating the Obama version of the rule since 2011 and asked the U.S. Supreme Court to overturn it last year.

Public Citizen’s Narang had his own take on why more businesses aren’t entering the fray.

“Consumers can be very sensitive to how restaurants treat their workers, and if there are certain restaurant chains that align themselves with this rule rollback, that might have an effect on their bottom line,” he said.

‘Limited in Scope’

The muted trade group backing may also be a symptom of the tip pool proposal’s provision that employers are excluded from the rule change if they continue to apply a tip credit that allows them to pay workers less than the federal minimum wage, so long as the gratuities make up the difference.

“The rule is really limited in scope,” Elizabeth Milito, senior executive counsel at the National Federation of Independent Business, told Bloomberg Law. “I know if you read the media stories you might just think this new rule is going to apply to all tipped employees but that is definitely not the case.”

NFIB, the American Gaming Association, and the Oregon Restaurant and Lodging Association were the only other organizations to join the NRA in writing letters in favor of the proposal. Individual restaurants and some workers signed letters urging the DOL to proceed with the rule as well.

The department now marches forward on a final rule in the face of overwhelming stakeholder criticism, but it has thus far resisted any urge to more forcefully rebut the Democrats’ onslaught. To Plunkett, a more aggressive DOL strategy on Capitol Hill might not be necessary because this is a regulatory, not a legislative, battle.

“I think they can really stick to their guns and stick to the process much more easily because it’s a regulation,” Plunkett said. “I’m not saying the optics don’t count here, but perhaps it’s less important.”