February 04, 2018

The Trump administration is moving to give restaurants and other employers more control over workers’ tips. But critics have denounced the plan as legalizing wage theft and accuse the administration of suppressing evidence that lends credence to the charge.

In December, the administration announced a proposal to undo portions of a 2011 regulation that blocked employers from collecting tips and distributing them to anyone other than the workers who customarily receive them.

Under the new proposal, for which the public comment period ends on Monday, employers could use workers’ tips for essentially any purpose, as long as the workers were directly paid at least the federal minimum wage of $7.25 an hour.

The restaurant industry, which has fought the Barack Obama administration regulation for years, argues that the change would allow employers to share the tips of waiters and waitresses with so-called back-of-the-house workers like cooks and dishwashers.

But labor advocacy groups and former Obama administration officials argue that the regulation would legalize a vast income transfer from workers to employers, who would be permitted to pocket the tips.

Adding to the controversy is the Labor Department’s failure to include a numerical analysis of the costs and benefits of the rule when it formally released the proposal. A longstanding executive order typically requires such an analysis for regulations that would have an economic impact of at least $100 million.

On Thursday, Bloomberg Law reported that the department had, in fact, produced an economic analysis, but that Labor Secretary Alexander Acosta and his aides had chosen not to release it after it showed that the cost to tipped workers could be substantial.

The department declined to comment. But two former Labor Department officials said they had been briefed on the analysis by people currently at the department and echoed this account.

Michael Hancock, another former top official in the division that produced the proposal, said he found it unimaginable that the department would not have produced an economic analysis because officials at the Office of Management and Budget, who must typically sign off on new regulations, would refuse to do so without one.

“At least during my time, O.M.B. jealously guarded the executive order,” said Mr. Hancock, who worked at the department for two decades beginning in 1995. “They always insisted if it’s even close to the threshold that you’ve got to do an economic analysis, no matter how challenging.”

The restaurant industry contends that the Obama-era regulation is illegal because it goes beyond what the underlying law supports. It asked the Supreme Court to review the Obama rule after appellate courts in different parts of the country split on the issue.

But Mr. Hancock said the proposed change would be highly vulnerable to a legal challenge if completed because omitting an economic analysis denied the public a chance to comment.

“The rule-making process is designed to give the public an opportunity to have their voices heard,” he said. “If you don’t include the economic analysis that underlies all of this, the public never had an opportunity to do that. I think it’s going to create legal problems.”

The complete article can be accessed here.