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Labor Department Under Attack for Tip Pooling Rule

By: Adam Merrill

The U.S. Department of Labor’s (“DOL”) Office of the Inspector General (“OIG”) is investigating the rule-making process relating to the DOL’s new tip pool regulation in response to reports that the DOL buried internal estimates regarding the proposal’s impact on workers.

On February 5, 2018, the OIG informed the DOL’s Wage and Hour Division that OIG will audit the DOL’s rule-making process regarding the tip-pooling rule. The DOL’s internal oversight office launched the review on February 2, 2018.

Also on February 5, Democratic state attorneys general from 17 states — led by California, Illinois, and Pennsylvania—wrote to the DOL threatening litigation on the grounds that the DOL’s failure to release regulatory data on tip pooling violates the federal rulemaking law, and may also violate the Administrative Procedure Act. The letter further expresses concern that the DOL refused to release an internal analysis regarding the rule’s projected impact on worker tips.

Employee advocates have also expressed serious reservations regarding the tip pooling rule, as media reports suggest that the DOL’s internal analysis of the rule indicated employees could receive fewer wages as tips. 

The rule would allow tip pooling among restaurant servers and other workers who earn gratuities and back-of-the-house employees who do not, reversing a 2011 regulation providing that tips are the property of the workers who earn them. In addition, if an employer pays tipped workers at least the federal minimum wage of $7.25 per hour, the employer could also share in the tip pool. 

The DOL is currently soliciting comments regarding the regulation’s economic impact.  Employers in the restaurant business would do well to pay attention to further developments regarding the rule, which will be posted here. Stay tuned