PUNCHING IN: Tip Pool Hide-and-Seek

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By Chris Opfer and Ben Penn

Monday morning musings for workplace watchers

Tip Pool Fallout | Randi, Rich, and the Future of the AFL-CIO | Talking Nondisclosure at EEOC

Ben Penn: Could last week’s revelation that the Labor Department didn’t release internal estimates about the proposed tip pool regulation be distracting us from the much bigger story?

It’s unclear what forces were behind the decision to shelve an economic analysis that the proposal would cause workers to potentially lose billions in tips to their bosses. The answer may offer a troubling signal about the Trump administration’s approach to the regulatory—and, more crucially, deregulatory—process.

People who’ve spent their careers studying regulations tell me it’s quite unusual for the White House Office of Information and Regulatory Affairs staff to sign off on an economically significant proposal sans cost-benefit data. And that’s especially true if OIRA knew the agency had already gone to the trouble of compiling the data.

Trump’s OIRA Administrator Neomi Rao has taken the mainstream approach of preaching the importance of transparency during notice-and-comment rulemaking. That includes new rules that erase existing rules, Rao said at her confirmation hearing last year. So does the news that the White House cleared a proposal without including impact data square with her comments?

“Economic analysis increases transparency by making apparent to the public the costs and benefits of actions. So yes, it’s surprising here” that Rao let this through, Stuart Shapiro, a former career OIRA analyst who now researches regulation as a Rutgers University professor, told me.

OIRA, thought of as the most powerful little office nobody knows of, is run mostly by career staff and is always considered a thorn in the side of rulemaking agencies. The office’s work reviewing deregulatory proposals is only beginning in this White House. If more details surface on the tip pool mystery, they may reveal whether we can expect this administration to give us a full understanding of how people’s lives will be affected by its deep regulatory rollback mission.

No use speculating further on how this all went down inside the White House. But to the OIRA-nians, other OMB staff, or anyone else with information listening, there are several ways to reach me listed in my Twitter profile.

Chris Opfer: One of the biggest rumors swirling in the labor world last summer was that teachers’ union leader Randi Weingarten was thinking about challenging Rich Trumka for AFL-CIO president. That would have made for a heavyweight showdown with all sorts of political maneuvering. Unions were still licking their wounds after their 2016 election-season split over Bernie v. Hillary and division in the race between Tom Perez and Keith Ellison for Democratic National Committee chairman. They were also still looking for a response to declining unionization rates in the private sector.

Weingarten didn’t wind up making a play to lead the 12.5-million-member umbrella organization and Trumka was re-elected in a landslide last October. Some four months later, Weingarten confirmed that she had considered throwing her hat in the ring. She said she scrapped the idea after she and Trumka sat down and hashed out a path forward for organized labor.

“I was considering it,” Weingarten told me last week. “What Trumka and I did was we got to a meeting of the minds on the importance of the future of unions and the future of work.”

Weingarten pointed specifically to a resolution approved at the AFL-CIO’s annual convention as a product of those talks. The measure doesn’t offer much in the way of specifics, but it does call for the creation of a Commission on the Future of Work and Unions. It also orders the group to present recommendations to the federation’s leadership in February--of 2019.

I’m going to go out on a limb and say maybe there’s a little more to that story. Weingarten said she has no immediate plans to take another shot at the AFL-CIO presidency when Trumka’s term expires in a little less than four years.

BP: The workweek begins in abnormal fashion at Labor Department headquarters. This afternoon, restaurant workers and their advocates are scheduled to swarm the Frances Perkins Building perimeter to protest the agency’s tip pooling proposal.

Check in with Bloomberg Law’s Jacquie Lee for more on the protest and calls for the DOL to withdraw its proposed rule in the final hours before the public comment period closes tonight.

The demonstrators have extra ammo in their rally cries: last week’s revelation that the department shelved its internal estimates that the regulation would lead to up to billions in employee tips changing hands to their bosses. There’s been some heated reactions to this news throughout Washington. The National Review offered some conservative commentary that while reversing the Obama rule is the sound legal move, “it’s not a good look for the department to hide the consequences of its actions.”

As Democrats continue to pile on with oversight requests and demands for the department to scrap the rule entirely, the DOL, Republicans, and the business community have offered surprisingly faint responses.

I found someone who is anything but shy in his forceful defense of the new rulemaking.

“This secretary, this department, is trying hard to come up with the best estimate that it can on what’s likely to happen, and it’s not going to put a number out there that it does not think sheds light on the reality of the situation,” Paul DeCamp, the attorney representing the National Restaurant Association in litigation challenging the 2011 rule, told me.

Here’s what else is likely driving the DOL political leaders to proceed with this rule:

  • They are convinced that the vast majority of employers simply won’t “steal” workers’ tips, even if the Fair Labor Standards Act technically were to allow it.
  • They dismiss the economic analysis transparency argument by pointing to the Obama department’s 2011 rule on tips, which also lacked a quantitative costs-benefits projection (although that earlier rule wasn’t considered to have nearly the same impact on the economy).
  • Labor Secretary Alex Acosta doesn’t think the agency has the legal authority to allow the Obama administration’s 2011 tip-pooling rule, which the new proposal eliminates, to stay on the books. Several appellate courts agree with him.
  • If Acosta wanted to backtrack, his hands might be tied by the Justice Department. Don’t take my word for it. Listen to the attorneys I talked to last summer who say this administration may want the DOL to advance the new rule to help them moot a pending Supreme Court case with huge implications for executive branch rulemaking authority.

Now whether these factors gave the administration clearance to put out a proposed rule without any quantitative costs-benefits analysis at all will probably be determined by a judge one day.

Anyways, the DOL’s side of the story won’t satisfy the workers outside the department today, but it does help us understand why agency leaders almost certainly will be ignoring the protesters’ demands and proceeding with the rule.

CO: Nondisclosure agreements are under fire these days, thanks largely to the wave of public attention to sexual harassment allegations that started with the Harvey Weinstein saga and shows no sign of cresting. The agreements are fairly standard provisions in employment contracts, settlement pacts, and severance deals. But a whole host of critics say they allow sexual harassers—and in some cases, maybe predators--to continue to operate without most folks knowing about the accusations against them.

I was interested to hear what EEOC Chairwoman Victoria Lipnic would have to say about it when she spoke on sexual harassment prevention at New York University last Friday.

Four years ago, the commission caught a lot of attention when it sued CVS Pharmacy over nondisclosure, nondisparagement, and other provisions in the company’s standard severance agreements. The case was dismissed over conciliation issues. The judge also seemed to be a tad skeptical about the theory of the EEOC’s case, but we didn’t get a true sense of how the argument might hold up in court. At least not yet. In her talk at NYU, Lipnic said the EEOC’s enforcement approach to the nondisclosure issue hasn’t changed.

“Yes,” Lipnic said when I asked her if CVS still represent EEOC’s enforcement position. She later hedged by saying that it depends on the specific situation. “Of course the CVS agreements—if you looked at the language—were pretty restrictive in terms of whether people could then come to the EEOC with a charge,” Lipnic said.

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.com and bpenn@bloomberglaw.com or on Twitter: @ChrisOpfer and @BenjaminPenn.

Coming Up in Daily Labor Report
Bloomberg Law’s Jon Steingart tells us this is a big week in court for gig economy watchers. Today, the Ninth Circuit is hearing arguments in a case challenging a Seattle ordinance that would let Uber and Lyft drivers unionize, despite their independent contractor status. Tomorrow, the California Supreme Court considers whether to adopt a new way of looking at the employee or contractor question in the Dynamex case. Meanwhile, Jacklyn Wille has an interesting look at social media monitoring that anyone with a Facebook, Twitter, Instagram, SnapChat, or MySpace (just kidding) account might want to check out.

See you back here next Monday.

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