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Tip pooling plan runs into a buzzsaw of public outrage

The Trump administration’s proposal to re-legalize tip sharing has drawn fierce protest and accusations the government is hiding key data about the likely impact, dimming hopes for a smooth adoption.

More than 215,000 people had formally filed feedback on the plan as of the morning of Feb. 5, the last day for submitting public comment to the Department of Labor. A quick review of the submitted opinions shows the overwhelming majority are negative.

The usual objection is that the plan will enable restaurant owners to pocket servers’ tips instead of redistributing the gratuities to staffers, the stated objective of the proposed rule change.

In December, the Department of Labor called for reverting back to tipping regulations that were in effect until 2011. Those rules allowed employers of waiters and waitresses to pool the servers’ gratuities and reallocate the money across the whole staff. The rationale was that kitchen employees would then get a share of what guests left in appreciation of their visit.

The Obama administration changed the policy, arguing that tips were the property of servers, not the house. The switch allowed servers to pool their gratuities, but prohibited restaurants from mandating the money be shared with back-of-house staff.

Restaurants welcomed the rollback of the Obama policy in part because the move would help in closing the gap between front-of-house and back-of-house pay. Full-service places say the disparity stymies their efforts to recruit kitchen workers. Potential hires apply for dining room jobs like serving or hosting, knowing they’ll make more money, and decline offers of a kitchen post.

The tip sharing proposal would only apply to restaurants that do not use a tip credit—those that pay servers the full minimum wage instead of counting tips toward the required pay.

The perception reflected in many of the filed comments is that restaurants hope to grab at least a share of employees’ tips. They contend that the language would permit an operation to suck tips into revenues, or permit management to share in the tip pool.

“The National Restaurant Association talks a good game about wanting to ‘fix pay disparity’ between cooks, etc. and waiters, but the industry knows that rescinding the restrictions would allow employers even more leeway to screw both sides of the house,” wrote Mary Keils, who identified herself as a former waitress and “a human being with compassion and morals.”

That sentiment was routinely sounded in the comments, which were extraordinary in their number and tone. Proposed rule changes are usually announced with a stipulation that the public can submit comments on them for 30 days. Typically the filings are technical, pointing out potential unforeseen results of the language being used by the relevant government agency. Comments on the tip pooling proposal were far more emotional and accusatory.

Many noted that the DOL had allegedly verified through research that servers would be cheated out of money if the rule change were adopted. They accused the department of burying that info at the urging of business lobbyists, as reported last week by Bloomberg Law, a website for the legal community.

The Bloomberg story alleged that a DOL study had concluded billions of dollars would be shifted from restaurant servers to owners if the rule change proceeded as planned. The agency decided not to air the finding because it would stoke opposition to the policy shift, reported Bloomberg. The news service cited four anonymous employees, former and current, as its sources.

Angelo Amador, regulatory counsel for the NRA and head of its affiliated Restaurant Law Center, commented to Bloomberg that the rule change successfully sought by the Obama administration was not accompanied by an impact study.

The NRA, a champion of the DOL’s proposed rule change, has been contesting the Obama administration’s revision in court since 2011. A request for review is currently before the Supreme Court.

Bloomberg said it had filed a Freedom of Information Act request for a copy of the DOL findings.

DOL declined to comment on the Bloomberg report, noting that it does not issue statements on rule-change processes that are underway.

Rule-making protocol calls for DOL to study the public comments, make adjustments it deems appropriate and then issue a final rule-making proposal for additional feedback.

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