The Department of Labor’s Inspector General on Monday launched an audit of the rulemaking process for proposed changes to tip-pooling rules amid growing opposition.
The announcement follows a report by Bloomberg Law last week citing unnamed sources indicating that an unfavorable economic analysis of the rule change was buried by department officials. The analysis reportedly would have shown that restaurant workers could potentially lose out on billions in tip money as a result of the rules change, in part because employers could pocket some of those gratuities themselves.
In a public memo, Elliot Lewis, assistant inspector general for the Department of Labor’s audit division, notified the wage-and-hour division that an audit would be initiated. The audit’s objectives, scope, methodology and timeframes are yet to be determined.
In addition on Monday, the attorneys general of 17 states issued a 12-page letter to Labor Secretary Alexander Acosta arguing that the proposed rule change could allow employers to potentially skim gratuities, a move that “would contradict centuries-old employee and customer expectations about tipping, create a conflict with many more-protective state wage laws, and lead to confusion in those states whose laws follow the Fair Labor Standards Act.
“More critically,” the letter argued, “it would harm low-wage tipped employees who can little afford to subsidize their employers.”
The letter also charged the DOL with violating the Administrative Procedures Act by failing to release relevant data to allow the public to provide meaningfully informed comment on the proposal.
The letter was signed by attorneys general from California, Illinois, Pennsylvania, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington and the District of Columbia.
Worker advocacy groups and some lawmakers called on the Labor Department to withdraw its proposed tip-pooling amendment, arguing that vital information was kept from the public during the public comment period, which ended Monday.
The proposed amendment to the Fair Labor Standards Act was pitched by DOL officials as a way to address the disparity in pay between back-of-the-house and front-of-the-house workers.
Currently workers outside the traditional line of service cannot legally share in tip pools.
The new rule proposes allowing back-of-the-house workers like dishwashers and line cooks to legally participate, if the restaurant so chooses. The rule, however, would only apply to employers that do not claim a tip credit and pay the federal minimum wage.
In a statement, Christine Owens, executive director of the National Employment Law Project, praised the inspector general for its decision to conduct the audit.
“After learning that senior political officials within the Labor Department ordered a damaging economic analysis of this proposal to be shelved and concealed, we have grave concerns about the integrity of the regulatory process and whether the department is fulfilling its mission to ‘promote the welfare of wage earners in the United States,’” she reportedly told The Hill.
Update, Feb. 6, 2018: This story includes new information about opposition from 17 attorneys general.