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 dollars,Â according to former and current department sources whoÂ spoke toÂ 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In December, the Labor Department proposed a rule that rescinded portions of Obama-administration tip regulations and would allow employers who pay the minimum wage to take workersâ€™ tips. The department said the proposed rule would allowÂ â€śback of the houseâ€ť workers, such as dishwashers and cooks, who donâ€™t typically receive tips, to be part of a tip-sharing pool. But the rule also wouldnâ€™t prevent employers from just keeping the tips and not redistributing them.
The department never offered any estimate to the public ofÂ 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 InstituteÂ noted. EPI did its own analysis and found thatÂ 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,Â 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 workforceÂ â€śfurther into financial instability.â€ť
Heidi Shierholz, an economist at the Economic Policy Institute,Â toldÂ the Washington Post in December that â€śthe administration is giving a windfall to restaurant owners out of the pockets of tipped workers.â€ť
A department spokesman told Bloomberg Law that the department would likely publish an â€śinformed cost benefit analysisâ€ť as part of any final rule but did not answer the reporterâ€™s question about why the department wouldnâ€™t allow the public to react to the analysis it created. The spokesman also claimed the department is acting in accordance with theÂ 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 departmentâ€™s shelved one.
Some senior attorneys at worker rightsâ€™ groups say that the lack of analysis could violate the APA if the departmentÂ publishes the full analysis with the final rule, as the spokesman said it would, but doesnâ€™t do so during its proposal.Â That would prove that the department could have created the analysis earlier but decided not to, lawyersÂ toldÂ Bloomberg Law last week.
This wouldnâ€™t be the first time the administration has been accused of not properly adhering to the ADA.Â Many states areÂ claimingÂ the administration violated some part of the Administrative Procedure Act. Only a couple weeks into Trumpâ€™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 groupsÂ arguedÂ that this clearly violates a clause the APA.Â Judge Randolph Moss of the U.S. District Court for the District of Columbia heard arguments in the lawsuit in August andÂ said,Â â€śItâ€™s like a shadow regulatory process on top of the regulatory process.â€ť However, itâ€™s not clear if the rule has been implemented in practice.Â 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 â€śhigh outrage barâ€ť over the past year but â€śthis failure to disclose handily cleared that bar.â€ť
Heidi Shierholz, senior economist and director of policy at Economic Policy Institute, said she believes Â EPIâ€™s analysis is pretty close to whatever the department of labor came up with in its shelved analysis.
â€śThe 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 â€¦ If employers do share those tips with them, it is likely it will be offset by a reduction in base pay. I donâ€™t think take-home pay would be affected by this rule at all,â€ť ShierholzÂ said.
ShierholzÂ added, â€śIt is likely that the DOL found something in this ballpark too and itâ€™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.â€ť
When asked whether any group planned to sue the department over its decision not to show the analysis to the public,Â 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.
â€śWe havenâ€™t decided what further action we may take,â€ť she said.
Sen. Patty Murray (D-WA) released a statement demanding that the department drop the effort to propose this rule:
â€śThis botched cover-up of evidence proving President Trumpâ€™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.â€ť
This story was updated with additional quotes from economists, labor advocates, and politicians.