Trump's New Rule Could Take Billions in Tips From Workers and Give It to Their Bosses

President Donald Trump's Department of Labor wants to give restaurant owners greater control over pooled tips, but reportedly agency officials purposefully hid evidence that shows this rule change could take billions from restaurant workers and give the money to their bosses.

The Labor Department announced in December that it would work to undo an Obama-era regulation that stopped employers from collecting and redistributing workers' tips however they wanted if the workers earned the federal minimum wage of $7.25 per hour. Department officials say the new rule would allow back-of-house staff to get a share of tips generated by the waiters and other service employees.

Restaurant industry lobbying groups have long fought for the repeal of this rule to help workers such as busboys. But studies show it's unlikely these workers were receiving redistributed tips before the rule. 

Worse, there's no way to know, because senior officials at the Labor Department apparently withheld studies showing that workers could lose billions under this plan and that restaurant managers and owners would likely benefit from the rule change, Bloomberg reported. Experts say the omission of serious analysis undermines the Labor Department's entire process.

“When the proposed rule came out it, was stunning that there was no economic analysis in it. The agency claimed there was too much uncertainty, but that seemed profoundly fishy,” said Heidi Shierholz, who was chief economist at the Labor Department under President Barack Obama. She is now director of policy at the Economic Policy Institute.

Shierholz ran a study at the left-leaning think tank, which found that the rule change could cost workers billions, as employers will likely fail to redistribute the money as proposed.

"We believe employers will pocket between $523 million and $13.2 billion in workers’ tips annually, with $5.8 billion being our best estimate," according to the study. It based its analysis on the notion that employers would pocket anything their tipped workers earn that is over the hourly wage that these same workers could get in a non-tipping job.

Shierholz said that when she worked at the Labor Department this kind of analysis was standard—but the fact that it was not conducted in this case reveals a larger scarier truth about the Trump administration.

"It’s very clear that there’s been a major culture shift at the political level away from a mission of protecting workers towards a mission of making things easier for their employers,” she said.

Another former official at the Labor Department also questioned why the agency failed to provide proper analysis.

“When you really believe in the policy [that] you’re putting forward, you put out the analysis because you want to test it,” said Raj Nayak, a former deputy chief of staff for the labor secretary and now director of research at the National Employment Law Project. “If they’re not putting the analysis out there, you wonder if they’re proud of this policy.”

The Department of Labor says it will take the Economic Policy Institute study into consideration while writing the final rule after the close of public comments on Monday. “The department requested public input regarding how to best quantify the costs and benefits in the notice of proposed rulemaking,” a spokesperson said. “After receiving public comment, the department intends to publish an informed cost-benefit analysis as part of any final rule.”

But this statement deviates from regulations for rule issuing. An Obama-era executive order states that before being submitted to the public, each rule “must take into account benefits and costs, both quantitative and qualitative.”

David Weil, former head of the Labor Department’s Wage and Hour Division and dean of Brandeis University's Heller School for Social Policy and Management, called that "backwards."

“This is unlike anything we ever did during the Obama administration,” he said. It’s standard for the agency to present its own economic analysis for comment, not to pick and choose from outside think tanks’ analyses. Omitting policy analysis “undermines the whole process of the rulemaking," Weil added.

GettyImages-860674444 President Donald Trump, with Labor Secretary Alex Acosta standing behind him, to his right. Getty Images

It’s easy to conclude that officials at the Department of Labor knew an analysis would look bad so they either obscured the data or didn’t collect it in the first place, said Weil. In either case, it's a problem for the very people that the department is meant to protect.

“For an administration that was saying they were out there going to fight for forgotten workers, so many of their policies only make the position harder,” he said.

House Democrats agree with Weil’s position. In a letter last Friday, Representatives Bobby Scott, Keith Ellison, Mark Takano and Suzanne Bonamici asked to see all economic analysis on the proposed rule and a copy of each draft. They will review these documents to see if any rules were broken.