White House Weighing Repeal of Limits on Restaurant Tip Pools

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Ben Penn

A Labor Department proposal to cancel its 2011 regulation that prohibited certain employer tip-pool arrangements in restaurants and bars is now under White House review, the last stop before it’s finalized.

The proposed change is being reviewed by the White House Office of Management and Budget, according to a notice posted early Oct. 25 on the OMB website. The DOL in its regulatory agenda in July said it would “rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.” Upon clearance from the White House, the rule would be subject to public comments, before the DOL writes a final rule to cement the rescission.

The Obama administration rule prohibits restaurants, bars, and other service industry employers from requiring front-of-house employees, such as servers, to share tips with back-of-house workers, such as cooks and dishwashers, including when the tipped employees are paid the full minimum wage. Enforcement of the rule has stalled amid lengthy litigation that’s led to a split among the U.S. circuit courts of appeal, making the case ripe for U.S. Supreme Court review.

Supreme Court Deadline

The high court is considering the National Restaurant Association’s petition to reverse the rule. That may create a sense of urgency for the OMB’s Office of Information and Regulatory Affairs to sign off and publish the proposal in the Federal Register. The Trump administration has until Nov. 7 to file a Supreme Court brief in response to the industry petition, although that deadline has been delayed five times and could be moved back again.

If the rescission proposal is published by Nov. 7, it would allow the Justice Department’s solicitor general to tell the high court it shouldn’t take the case because the DOL is already in the process of eliminating the rule.

However, the Restaurant Association has previously said it still wants the high court to take the case regardless of the DOL’s move to eliminate the rule. A Supreme Court ruling to invalidate the regulation would curtail a future administration from reissuing a similar rule and thwart plaintiffs’ lawsuits alleging tip pools are illegal.

Some attorneys theorize that the petition’s potential to serve as a vehicle to rein in the administrative law doctrine of Chevron deference is one reason the administration wants to keep it out of the justices’ hands. Chevron is the high court’s 1984 doctrine that judges must defer to agency interpretations of ambiguities in the laws they administer, unless the rulemakings are unreasonable.

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

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

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Labor & Employment on Bloomberg Law