Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘pooled tips’

Trump Administration Should Rescind Proposal That Allows Bosses to Pocket Working People's Tips

Thursday, February 15th, 2018

As we previously reported, President Donald Trump’s Labor Secretary Alexander Acosta announced a new proposed regulation to allow restaurant owners to pocket the tips of millions of tipped workers. This would result in an estimated $5.8 billion in lost wages for workers each year?wages that they rightfully earned.

And most of that would come from women’s pockets. Nearly 70% of tipped workers are women, and a majority of them work in the restaurant industry, which suffers from some of the highest rates of sexual harassment in the entire labor market. This rule would exacerbate sexual harassment because workers will now depend on the whims of owners to get their tips back.

In a letter to Congress, the AFL-CIO opposed the rule change in the strongest possible terms, calling for the proposal to be rescinded:

Just days before the comment period for this [Notice of Proposed Rulemaking] closed, an extremely disturbing report appeared indicating that analysis of the costs and benefits in fact occurred, but was discarded. On Feb. 1, 2018, Bloomberg/BNA reported that the Department of Labor “scrubbed an unfavorable internal analysis from a new tip pooling proposal, shielding the public from estimates that potentially billions of dollars in gratuities could be transferred from workers to their employer.” Assuming these reports are correct, the Department of Labor should immediately make the underlying data (and the analyses that the Department conducted) available to the public. We call on the Department of Labor to do so immediately and to withdraw the related Notice of Proposed Rulemaking.

The AFL-CIO strongly urges the Department to withdraw the proposed rule, and instead focus its energies on promoting policies that will improve economic security for people working in low-wage jobs and empower all working people with the resources they need to combat sexual harassment in their workplaces.

The Department of Labor must provide an estimate of its proposed rules’ economic impact. However, while suspiciously claiming that such an analysis was impossible, it turns out that this wasn’t true:

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.

Democrats in Congress quickly responded that the rule change should be abandoned, as the new rule would authorize employers to engage in wage theft against their workers. Sen. Elizabeth Warren (D-Mass.) said:

You have been a proponent of more transparency and economic analysis in the rulemaking process. But if DOL hid a key economic analysis of this proposed rule—and if [Office of Management and Budget] officials were aware of and complicit in doing so—that would raise serious questions about the integrity of the rule itself, and about your role and the role of other OMB officials in the rulemaking.

Take action today and send a letter to Congress asking it to stop Trump’s tip theft rule.

This blog was originally published at AFL-CIO on February 15, 2018. Reprinted with permission. 

About the Author: Kenneth Quinnell is a long-time blogger, campaign staffer and political activist. Before joining the AFL-CIO in 2012, he worked as labor reporter for the blog Crooks and Liars.

Labor Department scrubbed analysis that said its proposal would rob billions from workers

Friday, February 2nd, 2018

The Department of Labor decided to scrub an analysis from its proposal affecting tipped workers after it found workers would be robbed of billions of dollarsaccording to former and current department sources who spoke to Bloomberg Law.

In December, the Labor Department proposed a rule that rescinded portions of Obama-administration tip regulations and would allow employers who pay the minimum wage to take workers’ tips. The department said the proposed rule would allow “back of the house” workers, such as dishwashers and cooks, who don’t typically receive tips, to be part of a tip-sharing pool. But the rule also wouldn’t prevent employers from just keeping the tips and not redistributing them.

The department never offered any estimate to the public of the amount of tips that would be shifted from workers to employers. The work of analyzing costs and benefits to proposed rules is legally required for the rulemaking process, Economic Policy Institute noted. EPI did its own analysis and found that tipped workers would lose $5.8 billion a year in tips as a result of this rule. Women in tipped jobs would lose $4.6 billion annually.

After seeing the annual projection showing that billions of dollars would transfer from tipped workers to their employers, senior department officials told staff to revise the methodology to lessen the impact, according to Bloomberg Law. After staff changed the methodology, Labor Secretary Alexander Acosta and his team were still not satisfied with the analysis, so they removed it from the proposal, with the approval of the White House.

Restaurant Opportunities Centers United, a non-profit that advocates for improvement of wages and working conditions for low-wage restaurant workers, has opposed the proposed rule and said it would push a majority-women workforce “further into financial instability.”

Heidi Shierholz, an economist at the Economic Policy Institute, told the Washington Post in December that “the administration is giving a windfall to restaurant owners out of the pockets of tipped workers.”

A department spokesman told Bloomberg Law that the department would likely publish an “informed cost benefit analysis” as part of any final rule but did not answer the reporter’s question about why the department wouldn’t allow the public to react to the analysis it created. The spokesman also claimed the department is acting in accordance with the Administrative Procedure Act, a federal statute governing the ways agencies move forward with regulations. Two purposes of the APA is to make sure there is public participation in the rulemaking process, including by allowing public commenting and make sure the public is informed of rules. The public only has until Feb. 5 to comment on the proposal without viewing the department analysis. But the public could view the Economic Policy Institute analysis created to replace the department’s shelved one.

Some senior attorneys at worker rights’ groups say that the lack of analysis could violate the APA if the department publishes the full analysis with the final rule, as the spokesman said it would, but doesn’t do so during its proposal. That would prove that the department could have created the analysis earlier but decided not to, lawyers told Bloomberg Law last week.

This wouldn’t be the first time the administration has been accused of not properly adhering to the ADA.  Many states are claiming the administration violated some part of the Administrative Procedure Act. Only a couple weeks into Trump’s presidency, Public Citizen, the Natural Resources Defense Council, and the Communications Workers of America sought to overturn an executive order mandating that federal agencies eliminate two regulations for every regulation they create. The executive order also required that net costs of regulations on people and businesses be $0 in 2017.

The groups argued that this clearly violates a clause the APA. Judge Randolph Moss of the U.S. District Court for the District of Columbia heard arguments in the lawsuit in August and said, “It’s like a shadow regulatory process on top of the regulatory process.” However, it’s not clear if the rule has been implemented in practice. Public Citizen, the Natural Resources Defense Council, and the Communications Workers of America are still waiting on a ruling.

Economists, labor experts, and worker advocates from the National Employment Law Project, Center on Budget and Policy Priorities, ROC United, and the Economic Policy Institute reacted to the news with outrage.

Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities and former Chief Economist to Vice President Joseph Biden, said he has developed a “high outrage bar” over the past year but “this failure to disclose handily cleared that bar.”

Heidi Shierholz, senior economist and director of policy at Economic Policy Institute, said she believes  EPI’s analysis is pretty close to whatever the department of labor came up with in its shelved analysis.

“The basic economic logic is that it is really unlikely that back-of-the house workers would get any more pay if this rule were to be finalized … If employers do share those tips with them, it is likely it will be offset by a reduction in base pay. I don’t think take-home pay would be affected by this rule at all,” Shierholz said.

Shierholz added, “It is likely that the DOL found something in this ballpark too and it’s not surprising that there is just no way to do a good faith estimate and also maintain the fiction that this rule is not terrible for workers, so in that light you can see why it is no wonder that they tried to bury it.”

When asked whether any group planned to sue the department over its decision not to show the analysis to the public, Christine Owens, executive director of the National Employment Law Project, said her organization sent a request to the department asking that it withdraw the rule but that she has not heard back from the department.

“We haven’t decided what further action we may take,” she said.

Sen. Patty Murray (D-WA) released a statement demanding that the department drop the effort to propose this rule:

“This botched cover-up of evidence proving President Trump’s policies help businesses steal billions from workers shows exactly what President Trump truly cares about: helping those at the top squeeze every last penny from families trying as hard as they can to get ahead. Now that their real priorities have been exposed, President Trump should tell Secretary Acosta to abandon this effort immediately.”

This story was updated with additional quotes from economists, labor advocates, and politicians.

This article was originally published at ThinkProgress on February 1, 2018. Reprinted with permission.
About the Author: Casey Quinlan is a policy reporter at ThinkProgress covering economic policy and civil rights issues. Her work has been published in The Establishment, The Atlantic, The Crime Report, and City Limits.

Trump Dept. of Labor Rule Would Legalize Employers Stealing Workers’ Tips

Friday, December 15th, 2017

Last week, the Trump administration launched yet another front in its war on workers when the Department of Labor (DOL) proposed a new rule that would allow restaurants and other employers of tipped workers to begin legally pocketing their workers’ tips. 

The DOL’s proposed rule would ostensibly allow restaurants to take the tips that servers and bartenders earn and share them with untipped employees, such as cooks and dishwashers. This may sound like as a reasonable change, since kitchen staff are essential to the dining experience. Indeed, we do need to reform how restaurant workers generally and tipped workers specifically are paid, including reducing pay disparities between “front of the house” workers and kitchen staff.

But this proposed rule is not really aimed at fixing these problems. How do we know? Because, critically, the rule does not actually require that employers distribute “pooled” tips to workers. Under the administration’s proposed rule, as long as tipped workers earn the minimum wage, employers could legally pocket those tips for themselves.

Evidence shows that even now, when employers are prohibited from pocketing tips, many still do. Research on workers in three large U.S. cities—Chicago, Los Angeles, and New York—finds that 12 percent of tipped workers had their tips stolen by their employer or supervisor. Recent research also shows that workers in restaurants and bars are much more likely to suffer minimum wage violations—meaning being paid less than minimum wage—than workers in other industries. In the 10 most populous states, nearly one out of every seven restaurant workers reports being paid less than the minimum wage.

In some cases, this is the result of employers illegally confiscating tips. In others, it may be the result of employers asking staff to work off the clock, taking illegal deductions from paychecks or paying less than minimum wage to workers who may feel they cannot speak up—such as formerly incarcerated individuals, undocumented workers or foreign guest workers. These violations amount to more than $2.2 billion in stolen wages annually—and that’s just in the 10 largest states.

With that much illegal wage theft occurring, it should be clear that when employers can legally pocket the tips earned by their employees, many will. And while the bulk of tipped employees work in restaurants, tipped workers outside the restaurant industry—such as nail salon workers, casino dealers, barbers and hair stylists—could also see their bosses begin taking a cut from their tips.

The Economic Policy Institute estimates that under the Trump administration’s proposed rule, employers would pocket nearly $6 billion in tips earned by tipped workers each year. Trump’s DOL even acknowledges that this could occur, stating “The proposed rule rescinds those portions of the 2011 regulations that restrict employer use of customer tips when the employer pays at least the full Federal minimum wage.” In other words, so long as servers, bartenders and other tipped workers are being paid the measly federal minimum wage of $7.25 per hour, employers can do whatever they please with those workers’ tips. The DOL claims that this is actually a benefit of the proposed rule because it “may result in a reduction in litigation”—that is, fewer tipped workers being able to sue employers who steal their pay.

The fact that Trump’s DOL would so brazenly work to undermine protections for one of the lowest-paid, most poverty-stricken segments of the workforce says a lot about this administration’s values. The federal DOL is many workers’ primary source of protection when mistreated by an employer. In fact, 14 states effectively defer their wage and hour enforcement capacity to federal officials—meaning that outside of a private lawsuit, the federal DOL is these workers’ only option for recourse.

An administration that genuinely cared about working people would crack down on employers stealing from workers, not propose to legalize it.

This blog was originally published at In These Times on December 15, 2017. Reprinted with permission. 

About the Author: David Cooper is a Senior Economic Analyst at the Economic Policy Institute.

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