Becerra, other state AGs call on DOL to scrap tip-pooling rule

Attorneys general in California and 16 other states are pushing the Labor Department to withdraw its proposed tip-pooling rule.

In a 12-page letter Monday led by California Attorney General Xavier Becerra (D), Illinois Attorney General Lisa Madigan (D) and Pennsylvania Attorney General Josh Shapiro (D), the state officials said the rule contradicts centuries-old employee and consumer expectations about tipping, and threatens to seriously injure workers and deceive consumers.

The attorneys general said if recent reports are true, the Department of Labor (DOL) could have broken the law in rolling out its plan to rescind the Obama-era ban on tip-pooling.

Bloomberg Law reported last week that senior agency officials scrubbed a report showing workers could lose billions in gratuities if the rule is adopted.

The attorneys general said the Administrative Procedure Act “requires the agency to make available to the public, in a form that allows for meaningful comment, the data the agency used to develop the proposed rule.”

Becerra, who routinely challenges the Trump administration’s policies in court, said in a statement the California Department of Justice is prepared to use every tool at its disposal to protect hardworking Americans.

“We file our opposition today with a particular sense of urgency, given that the U.S. Department of Labor reportedly took action to obscure the unfavorable economic analysis showing that workers could lose billions in earnings if the proposed change goes into effect,” he said.

Becerra has sued the Trump administration over its travel ban, border wall and proposal to ban transgender people from the military, to name a few efforts.

DOL’s rule would change the Fair Labor Standards Act and allow employers to pool the tips of workers who make at least the federal minimum wage, which is $7.25 an hour, and share them with nontipped workers.

The agency’s proposal does not include employees who make less than the federal minimum wage and earn tips to supplement their pay, known as a tip credit.

But the attorneys general argue nothing in the rule prevents employers from simply pocketing gratuities as additional profit.

“In fact, the Notice itself acknowledges that rescinding the 2011 rule would permit employers to use gratuities left for servers to ‘make capital improvements’ or ‘lower restaurant menu prices’ and notes that tips may be ‘utilized in part (or in full) by the employer,’” they note in their letter.

The letter comes shortly after the Labor Department’s Office of Inspector General announced it will conduct an audit of the agency’s process in issuing the rule.

In addition to Becerra, Madigan and Shapiro, attorneys general from Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New York, North Carolina, Oregon, Rhode Island, Washington, Virginia, Vermont and the District of Columbia joined the letter.