Department of Labor Hid Data Revealing that Proposed Tip Rule Would Cost Workers Billions

The Department of Labor (DOL) intentionally hid internal analysis revealing that its proposal to allow tip pooling in restaurants and other businesses could cost minimum wage workers billions of dollars.

Bloomberg Law reported that the DOL failed to include unfavorable economic analysis in a proposal to reverse an Obama-era rule and allow employers who pay as little as $7.25 an hour to legally keep their employees’ tips. This rule change would permit employers to create tip pool arrangements that would allow employers to pocket a portion of their employees’ earned tips. The vast majority of tipped workers—around two thirds—are women and disproportionately women of color.

Government analysis revealed that workers could lose billions of dollars in tips as a result of the proposed rule reversal. In response to the unfavorable data, senior DOL officials ordered staff to lessen the expected impact by changing the methodology of the analysis. However, according to Bloomberg reporting, Labor Secretary Alexander Acosta was still unhappy with the results and got White House approval to publish a proposal that left the data out completely.

The Trump administration published its proposal to reverse the Obama-era tip pooling rule on December 5 and opened 30 days of public comment without including the economic analysis. Many workers’ rights advocates and women’s rights groups, including the Feminist Majority, the National Employment Law Project, and that National Women’s Law Center, are now demanding that the DOL immediately withdraw the proposed rule.

Following the Trump administration’s announcement in December, the Economic Policy Institute (EPI) released its own economic analysis of the proposal. EPI estimated that under this proposed rule reversal, employers would pocket $5.8 billion in tips each year. Of this $5.8 billion, almost 80 percent is expected to be gratuity earned by women. This is a total of $4.6 billion a year taken away from women in tipped jobs. Critics of the proposal say that the DOL hid their economic analysis because they likely found similar results.

Saru Jayaraman, co-founder and president of ROC United, says this rule reversal will have a disproportionate effect on women, who are more likely to be tipped workers than men. These women also suffer from the highest rates of sexual harassment, because women in tipped jobs are expected to put up with inappropriate behavior in order to earn the tips that support them and their families.

In response to the report that the DOL hid this economic data and knew about the negative impact it would have on workers, particularly women workers, Jayaraman said, “In a moment where the country is moving forward on issues of gender discrimination and sexual harassment, you’ve got an administration that is attempting to really codify gender discrimination and sexual harassment through legalized tip theft.”

The DOL has still not released its internal analysis, leaving workers and businesses to weigh in on the proposal without seeing the government’s data. The comment period on the rule change is set to end on February 5. The public can submit comments online here.

Senator Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor, and Pensions Committee, condemned the DOL on Twitter, and called on President Trump to directly tell Secretary Acosta to withdraw the rule change. Senator Murray tweeted, “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.”

Media Resources: Bloomberg Law 2/1/2018; The Economic Policy Institute 12/14/2017

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