The Corner

Economy & Business

Will Restaurants Steal Employees’ Tips if the Feds Let Them?

Back in December, I wrote a piece making a few points about an initiative of Trump’s Labor Department:

The Trump administration is trying to loosen regulations on tipping, allowing businesses to require “tip pools” in which non-tipped employees such as cooks get some of the money. The proposal is 100 percent correct as a matter of law, and it’s mostly correct as a matter of policy, too. However, Congress and state governments should clarify the conditions — if any — under which employers can outright keep the tips their employees earn.

It’s 100 percent correct as a matter of law, I went on to explain, because the Obama-era regulation being undone was not authorized by any statute. But that last bit, about employers outright keeping tips if Congress and states fail to act, might be even more important than I realized.

According to an anonymously sourced report from Bloomberg Law, the Labor Department actually conducted an analysis estimating how much money workers would lose, and kept it out of the proposal because they didn’t like the results:

Senior department political officials — faced with a government analysis showing that workers could lose billions of dollars in tips as a result of the proposal — ordered staff to revise the data methodology to lessen the expected impact, several of the sources said. Although later calculations showed progressively reduced tip losses, Labor Secretary Alexander Acosta and his team are said to have still been uncomfortable with including the data in the proposal. The officials disagreed with assumptions in the analysis that employers would retain their employees’ gratuities, rather than redistribute the money to other hourly workers. They wound up receiving approval from the White House to publish a proposal Dec. 5 that removed the economic transfer data altogether, the sources said.

The move to drop the analysis means workers, businesses, advocacy groups, and others who want to weigh in on the tip pool proposal will have to do so without seeing the government’s estimate first. The public notice-and-comment period for the proposal is set to end Feb. 5.

. . .

The Labor Department “works to provide the public accurate analysis based on informed assumptions” a DOL spokesman told Bloomberg Law in an email. The spokesman noted that the department asked the public to comment with suggestions about how to quantify the rule’s impact as part of the proposal. “As previously stated, after receiving public comment, the Department intends to publish an informed cost benefit analysis as part of any final rule.”

The DOL did not address Bloomberg Law’s inquiry as to why the agency did not include the completed transfer analysis in the proposed rule.

There’s a lot of guesswork involved in this kind of analysis, to be sure. (The left-leaning Economic Policy Institute, for instance, has estimated that employers could keep “between $523 million and $13.2 billion in workers’ tips annually.”) And frankly, as far as the propriety of this rule is concerned, it doesn’t matter how much money in tips employers would keep, because the law doesn’t authorize the Labor Department to regulate the practice anyway. The rule simply eliminates a previous one that shouldn’t have been enacted to begin with, and that was being challenged in court with some success.

But it’s not a good look for the department to hide the consequences of its actions. As I reported in December, I couldn’t even get a spokesman to explicitly admit to me that the regulation would allow employers to confiscate tips, and now it appears the department worked up an analysis of that practice and then killed it. An honest discussion of these consequences is especially important when there are steps legislators could take to fix the problem.


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