Punching In: Choppy Waters in the Tip Pool and at the Labor Board

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By Chris Opfer and Ben Penn

Monday morning musings for workplace watchers

Tip for Tat |The Wind Cries Terry | Robb’s Role in Joint Employer Case

Ben Penn: For now, let’s turn the heat down to a light simmer on the tip pool drama that has been unfolding at the Labor Department. That’s thanks to a rare Washington development last week – a regulatory agency worked with a bipartisan team of lawmakers to reach a swift, commonsense compromise. Just like that, the Fair Labor Standards Act has a few fresh lines.

As a lifelong Washingtonian, I was skeptical this policy rider to ban restaurants from keeping workers’ tips would become law. Maybe I underestimated the influence that Democrats and worker advocacy opposition would have on this administration. Or perhaps it had more to do with DOL political leaders desperate to eradicate an Obama-era rule that they didn’t think they had the authority to keep on the books.

Like any compromise, there’s grumbling from people on both sides. Either the language doesn’t go far enough to protect workers or it codifies enforcement mechanisms that are unfair to well-intentioned businesses.

For Labor Secretary Alex Acosta and his team behind the brokering of this deal, the passage of the rider must provide a sigh of relief. The revelations first reported in Bloomberg Law that the agency had scrubbed impact data from the proposed rule gave more confidence to lawyers who were chomping at the bit to challenge the regulation as arbitrary and capricious.

Now the department can pull the 2017 proposal in response to the statutory change and will then be left with a few options, such as issuing a new rule or guidance that conforms with the omnibus language. Whatever direction it goes the DOL won’t be under nearly the same level of scrutiny.

If we go deeper into the weeds, the wage-hour management and plaintiff bar will still be calling attention to what the new language means for restaurant industry litigation. And the subdued climate on this topic could all change the day the DOL Inspector General releases a report to the public on the tip pool rulemaking process.

But for the most part, the surprise runaway leader for most contentious Trump-era DOL action – excluding Andy Puzder’s nomination – will likely return to obscurity.

Chris Opfer: Bill Emanuel (R) is sticking to his guns, despite some Democrat calls for him to resign in the wake of conflict-of-interest questions. The National Labor Relations Board member has no intention to throw in the towel after a second inspector general report pegged him with ethics violations, sources close to Emanuel tell me.

Inspector General David Berry says Emanuel breached a White House ethics pledge twice: First when he participated in the Hy-Brand Industrial Contractors case and then when he joined the board in directing NLRB General Counsel Peter Robb to ask an appeals court to drop its review of the board’s decision in Browning-Ferris Industries. That’s because Emanuel’s former law firm, Littler Mendelson, represented a staffing company in the Browning-Ferris case. The Republican-majority board used Hy-Brand to reverse a Democrat-majority 2015 decision in Browning-Ferris. Both cases focus on the high-charged question of whether one business can be considered a joint employer of another’s workers for unionizing and unfair labor practice purposes.

Emanuel’s ethics snafu has some critics seeing shades of Terry Flynn (R), or at least raising the former board member’s name in talks about the current cloud over NLRB headquarters. Flynn resigned from his board seat in 2012 after Berry found that he improperly leaked drafts of board decisions to two former board members while Flynn was still working as an NLRB staff attorney.

Even some of Emanuel’s sharpest detractors still say he hasn’t yet entered into Flynn territory. Berry himself found no reason to believe that Emanuel purposely lied to the IG, although the agency watchdog said Emanuel’s interview statements and claim that there was no conflict “lack a level of credibility.”

Expect business-side folks to continue to come to Emanuel’s defense, including by pointing out Littler’s minimal role in the Browning-Ferris case. Emanuel’s response to the latest report, filed by private lawyer Dwight Bostwick, offers his view of the events. Bostwick said no one in the board’s ethics office originally questioned Emanuel’s participation in Hy-Brand. He also argued that Emanuel was not aware of the firm’s representation of staffing company Leadpoint, which has largely stopped participating in the Browning-Ferris case.

“Member Emanuel should not in any circumstance consider resigning,” Roger King, a senior lawyer for the HR Policy Association, told me. Sen. Elizabeth Warren’s (D-Mass.) call for Emanuel to leave the board is “part of a coordinated plan—political in nature—to destabilize the NLRB and prevent a Republican majority from being formed on the board,” King said.

Emanuel supporters are certainly hoping that he hangs on for dear life, at least partly because the White House might think twice about tapping big firm lawyers for agency posts if Democrats use the client list to claim a scalp. The only way the mood changes is if those calling for Emanuel to sit out all cases involving joint employment and workplace rules have their way. That sort of issue preclusion would be a new approach at the NLRB. It would render Emanuel’s seat so powerless that Republicans may start looking for new blood.

Bloomberg Law’s Hassan Kanu will have more today.

BP: Our regular “Where’s Pat?” feature may be coming to an end after the unexpected announcement from Mitch McConnell early Friday morning that he’s teeing up a confirmation vote for deputy labor secretary nominee Pat Pizzella – and NLRB member nominee John Ring – the week of April 9.

In other words, assuming the Senate votes him into the DOL’s No. 2 spot, Pat will soon be easily located running the operations at the Frances Perkins Building – at just about the 10-month mark since Trump nominated him for the gig last year.

We’ll explore more in the coming weeks what having a deputy secretary on board will mean for the department’s ability to implement this administration’s agenda. Even after he were to arrive, some of the DOL’s key business-side stakeholders will still be displeased that the nominees to head the Wage and Hour Division and Occupational Safety and Health Administration haven’t been called to the floor by Mitch.

Those were two of the Obama DOL’s most active regulatory agencies, and the hopes for more aggressive policy reversals at some point before the midterms are starting to dwindle unless Cheryl Stanton (WHD) and Scott Mugno (OSHA) are sworn in soon.

Let’s put things in perspective. It’s now spring 2018. Last Oct. 2, the DOL leaders briefed stakeholders on the agency’s regulatory reform initiative at a Small Business Administration-coordinated event titled, “Cut the Red Tape Summit, Eliminating Excessive Regulation to Create Jobs and Growth.”

The press wasn’t invited but the department seems to have little to show for whatever was discussed that day. The secretary is still taking the deliberate approach on deregulation, but that can change the moment Senate-confirmed officials are given clearance to report for duty. When they do, you better believe Stanton and Mugno will be meeting with some of the same attendees who were in the DOL auditorium last fall, and they will be eager to educate the new administrators on the state of play.

I can’t report when WHD and OSHA leaders will be confirmed, but I do have exclusive access to a consolation prize that I’ll be sharing later this week. I’ve obtained a list of the RSVP’d guests invited by DOL agencies to the reg reform meeting. The Small Business Administration may have been the co-host, but this list hardly reads like a conference for mom-and-pop shops.

We often talk about management and business community stakeholders who are influencing the department, but rarely get into specifics on who these figures are. Stay tuned.

CO: Just when you thought the joint employer jumble couldn’t get juicier, Peter Robb appears to be ready to weigh in on the Hy-Brand case as soon as this week.

After Berry’s first report on Emanuel’s ethics violations, the board’s three other members decided to scrap the previous decision in Hy-Brand. The board members said that decision—which overturned Browning-Ferris—was tainted by ethics questions. But lawyers for Hy-Brand say the board violated federal law by keeping Emanuel out of the loop on move. They also allege that Member Mark Gaston Pearce (D) inappropriately gave a group of attorneys a heads up that a new decision in Hy-Brand was coming before Emanuel found out.

Now Robb will have a say in that dispute. The NLRB general counsel’s office recently filed a notice that it intends to respond to Hy-Brand’s request that the Board reconsider its latest decision in the case. What we don’t know is whose side the general counsel will come down on.

We’re punching out. Daily Labor Report subscribers can check in during the week for updates. In the meantime, feel free to reach out to us: copfer@bloomberglaw.comand bpenn@bloomberglaw.com or on Twitter: @ChrisOpfer and @BenjaminPenn.

See you back here next Monday.

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