House Dems Demand Labor Dept. Details on Tip Pooling Rule(1)

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By Ben Penn

The Labor Department is under heightened scrutiny today from Democrats, who are demanding the release of economic data that Bloomberg Law reported were scrubbed from the agency’s tip pool proposal.

Four House Democrats, in an oversight letter sent Feb. 2 to Labor Secretary Alexander Acosta, asked the DOL to fork over copies of all analyses completed as part of the tip pool rulemaking process. Their letter cites Bloomberg Law’s reporting that the department conducted, and then shelved, estimates that up to billions of dollars in worker tips could flow to employers as a result of the December proposal.

“Such conduct raises serious questions about the integrity of the Department’s rule making process,” wrote the top Democrat on the House Education and Workforce Committee, Rep. Bobby Scott (Va.) and his colleagues. The lawmakers gave the DOL a Feb. 5 deadline to submit a response.

Sen. Patty Murray (D-Wash.), the Senate labor committee’s ranking member, then followed up with a letter to the DOL’s Office of the Inspector General. She requested that IG Scott Dahl conduct a probe to learn more about the actions agency officials took during the rulemaking.

“If these reports are correct, it appears DOL may have deliberately misled the public in its NPRM,” Murray wrote. The senator was referring the to proposal’s language that the department “lacks data to quantify possible reallocations of tips.”

Through its proposal to reverse a 2011 regulation, the DOL wants to allow tip pooling among restaurant servers and other workers who earn gratuities and back-of-the-house employees who don’t. But if businesses pay tipped workers the full minimum wage of at least $7.25 per hour, the rule wouldn’t prohibit employers from taking part in the tip-pool themselves. The agency, however, deemed it too speculative at the proposed rule stage to quantify a projected transfer of tips to employers.

“Through the proposal, the Department requested public input regarding how to best quantify the costs and benefits in the NPRM,” a DOL spokesman told Bloomberg Law in a statement Jan. 31.

On Feb. 2, the spokesman added that after reviewing public comment, the DOL “intends to publish an informed cost benefit analysis as part of any final rule, unlike the previous administration.”

The 2011 final regulation also lacked a quantitative economic analysis, but the White House didn’t tag it as “economically significant” as it did in the 2017 proposed rule to reverse it. An economically significant regulation generally entails having a projected annual impact of $100 million more on the economy. The Obama-era rule was seen as an effort to add statutory clarity to the agency’s longstanding enforcement position that tips are the property of employees.

OMB Communications Sought

In addition to demands for the DOL to divulge its analyses, the Democrats want a copy of all communication between the DOL and White House Office of Management and Budget pertaining to the quantitative economic analysis.

Bloomberg Law’s report, based on four current and former DOL sources, also noted that the OMB was aware of the department’s internal analyses and was working with the agency on its methodology. Ultimately, after successive methodologies gradually lessened the transfer impact, Acosta was still too uncomfortable with its inclusion in the published proposal. The secretary then got the White House to approve the data’s deletion, sources said.

A Democratic staffer, speaking with Bloomberg Law Feb. 2, said the letter marks just the starting point in a broader congressional effort to seek more information on the White House-agency regulatory process. This is especially the case because of the slew of deregulatory actions the Trump administration is taking to roll back rules from the Obama White House.

Democratic Reps. Mark Takano (Calif.), Keith Ellison (Minn.), and Suzanne Bonamici (Ore.) also signed the letter.

Sens. Murray, Warren Weigh In

The pair of letters follows pressure Feb. 1 from Sen. Elizabeth Warren (D-Mass.) for the DOL to explain why the analysis is hidden from the public. Murray, a day before her IG letter, also called on the administration to scrap the proposal entirely.

Mike Woeste, a spokesman for House Education and the Workforce Committee Chairwoman Virginia Foxx (R-N.C.), declined to provide a comment on the matter.

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

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

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