Who Benefits from the Trump DOL’s Proposed Rule on Tip Pooling?

 

On December 5, the Trump administration’s Department of Labor (DOL) announced its Notice of Proposed Rulemaking regarding tip regulations under the Fair Labor Standards Act (FLSA). The proposed rule would rescind an Obama-era regulation that bans employers from pooling tips received by servers and sharing them with non-tipped employees like cooks, dishwashers, and other back-of-the-house employees. According to the Trump DOL, “These ‘back of the house’ employees contribute to the overall customer experience, but may receive less compensation than their traditionally tipped co-workers.” Unfortunately, while sounding egalitarian, it is anything but. In fact, the proposed rule does not require tip-pooling employers to share these tips with any employees. As long as employees are paid the minimum wage, employers could legally pocket these tips for themselves.

Some background on the FLSA’s regulation of tips and the minimum wage. The current federal minimum wage is $7.25 per hour. However, there is an exception for employees who “customarily and regularly” receive more than $30 a month in tips. An employer is allowed to pay tipped employees as low as $2.13 an hour and receive a “tip credit” for the difference between the tipped and non-tipped minimum wage (i.e., $5.12), as long as the tipped employee makes at least the standard minimum wage in tips and wages combined. In order to take an advantage of the tip credit, an employer must allow the employee to retain “all tips received by such employee.” However, the FLSA also permits an employer to pool tips among all employees who “customarily and regularly” receive them.

The Trump DOL’s proposed rule and its Obama-administration predecessor arise out of an ambiguity in the statute. It is unclear whether the tip-pooling regulations apply only where employers take advantage of tip credit, or also when the employer decides to pay the standard, non-tipped minimum wage to tipped employees. Before the Trump administration, the DOL had taken the position since 1989 that the restrictions apply in either case. Under this interpretation, an employer who pays tipped employees the full, non-tipped minimum wage would still be barred from pooling tips and either retaining them or sharing them with non-tipped employees.

However, in 2010, the Ninth Circuit, in Cumbie v. Woody Woo, Inc., held that the tip-pooling restrictions only apply when employers claim the tip credit. In response, the Obama-administration DOL issued regulations in 2011, reaffirming that “[t]ips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA.” The Ninth Circuit upheld these regulations in its 2016 decision in Oregon Restaurant & Lodging Association v. Perez, saying that Cumbie did not bar them.

The controversy on tip pooling arises amid changes in the restaurant industry. In his 2010 book, Setting the Table, restaurateur Danny Meyer claimed that tipped employees were making about 300 percent more than they were 31 years ago. But compensation for non-tipped employees—cooks and dishwashers—had only increased 20 percent. If true, this certainly creates an income disparity between front-of-the-house and back-of-the-house employees. But that same disparity also exacerbates the employer’s temptation to appropriate the gains of the tipped employees for themselves.

Enter the Trump administration. The Trump DOL justifies its proposed rule by saying it would allow employers who do not claim a tip credit to share tips with lower compensated back-of-the-house employees. While true, the rule also does not bar employers from keeping the tips themselves. The National Restaurant Association, while strongly endorsing the proposed rule change, has acknowledged this loophole, but has not asked the DOL to close it. Furthermore, the economic consequences are substantial. The Economic Policy Institute (EPI) estimates that employers could pocket $5.8 billion in tips earned by tipped employees, a full 16.1 percent of the estimated amount that tipped employees earn in tips annually.

The possibility of employer appropriation has understandably alarmed worker advocates. Some employee-side attorneys, “ripping a page from the management bar’s playbook,” are considering suing the DOL to preserve the 2011 regulation. Agencies are required to conduct a quantitative assessment of the costs and benefits of rules that are “economically significant.” The DOL, however, did not provide any quantitative analysis of the proposed rule’s effect on workers’ compensation, claiming it was “‘unable to quantify how customers will respond to proposed regulatory changes.’” The EPI counters that there is “no question that DOL could have produced an estimate” and demonstrates that it is “routine” to do so by producing their own analysis. If, as expected, a quantitative analysis accompanies the final rule, this would also demonstrate that the DOL could have produced such an analysis at the proposal stage. That inconsistency makes the DOL’s rule-making look “arbitrary and capricious” and, if so, would violate the Administrative Procedure Act. In other words, the inconsistency would be evidence that the DOL was hiding something.

The comment period on the DOL’s proposed rule ends at 11:59 PM on Monday, February 5, 2018.

#Nothingburger Memo

 

The Nunes memo is public. Anyone can now read about a warrant application to conduct surveillance on former Trump campaign advisor Carter Page who in 2013 called himself “an informal advisor to the staff of the Kremlin in preparation for their Presidency of the G-20 Summit” according to a Time magazine story.

Let me save everyone the effort. The four-pager is a big nothingburger. There are no major reveals on the Justice Department’s investigation of Russia’s interference in the 2016 presidential election.

Perhaps most telling are the omissions. For example, the memo purports to critique the October 2016 FISA warrant application on Page without ever acknowledging that its subject had come under FBI scrutiny a full three years earlier for contacts with suspected Russian operatives. As the Minority of the House Permanent Select Committee on Intelligence notes, “...refusal to allow release of a comprehensive response memorandum prepared by Committee Democrats is a transparent effort to suppress the full truth.”

This amateurish effort appears to be simply another installment in the eight-month smear campaign against the Russia probe by Trump allies. In a prebuttal, ACS and CREW identify and describe the speciousness of several lines of attack against the Mueller investigation. This latest salvo, yet again, provides no grounds to discredit the Special Counsel’s inquiry or its leadership.

Nevertheless, the president appears poised to use the Nunes memo as grounds for firing Deputy Attorney General Rod Rosenstein, who established the order for a special counsel and oversees the inquiry. After the memo’s release, Trump was asked by reporters if he planned to fire Rosenstein. Reportedly, he said, “You figure that one out.”

We are now watching Trump’s Saturday Night Massacre in slow motion right before our eyes. This is shameful.

The Smear Campaign Against Mueller: Debunking the Nunes Memo and the Other Attacks on the Russia Investigation

Authors Noah Bookbinder, Norman Eisen, Caroline Fredrickson, and Kristin Amerling examine the facts and law relating to seven major allegations regarding the conduct of the Russia investigation that collectively amount to one of the most sustained smear campaigns against honest government officials since Senator Joe McCarthy’s attacks of the 1950’s.

The authors explain why:

(1) Mueller does not have conflicts of interest that disqualify him from being special counsel;

(2) Mueller’s investigative team does not face conflicts of interest;

(3) No DOJ employee actions have justified removal of Mueller;

(4) Trump transition materials accessed by the Special Counsel likely do not raise privilege concerns;

(5) The Mueller inquiry does not turn on opposition research funded by the Clinton campaign;

(6) Representative Devin Nunes’s memo claiming that the FBI improperly obtained a warrant to conduct surveillance on Trump campaign officials lacks credibility; and

(7) An additional special counsel is not warranted under applicable law.

Although this inquiry is still unfolding an any assessment is necessarily preliminary, the report concludes that based on what is publicly known, the Special Counsel has conducted an inquiry that fully complies with relevant laws, rules, and guidelines – and that is wholly consistent with Mueller’s reputation for playing by the book.

This memorandum was prepared for the Presidential Investigation Education Project, a joint initiative by ACS and CREW to promote informed public evaluation of the investigations by Special Counsel Robert Mueller and others into Russian interference in the 2016 election and related matters. This effort includes developing and disseminating legal analysis of key issues that emerge as the inquiries unfold and connecting members of the media and public with ACS and CREW experts and other legal scholars who are writing on these matters. Click here to view the report.

*All images from C-SPAN.

Presidential Pardons After Joe Arpaio

*This essay reflects only the author's own personal views.

Half a year ago, Joe Arpaio was a defeated incumbent facing possible jail time for misdemeanor criminal contempt of court – one consequence of him continuing to illegally detain people in violation of a court order. A racist anti-immigrant hardliner who brutally mistreated and humiliated his inmates, Arpaio is also the first and thus far only person to be pardoned by President Trump. The disgraced former Sheriff of Maricopa County in Arizona is now a candidate for the U.S. Senate.

It is a situation that continues to put progressive activists and commentators in an awkward position: condemning the candidacy of a convict and Trump's pardon as outrageous if not unconstitutional, while advocating for more executive clemency and more meaningful second chances for those with a criminal history. A country that aspires to be good and just also believes in redemption and mercy. So why is this particular pardon so bad?

To a lay observer, the blunt answer is that Arpaio isn't sorry for what he did and pardoning him didn't promote the broader public interest. That said, it is worth revisiting the details and legal themes, because surely Trump will issue more than one pardon during his presidency. (In December, the president also commuted the prison sentence of the former owner of a meatpacking company notorious for labor and immigrant abuses.)

If there is a replay of the pardon controversy, progressives should not ignore the greater good that executive clemency is supposed to achieve. At its best, the pardon power is an instrument of justice, mercy, and reconciliation in a fallible legal system run by fallible people. If a society's greatness is measured by the possibility of redemption it grants to the penitent, then we should want more pardons to keep second chances on the table.

A pardon is also sometimes the only meaningful intervention left when the law unjustly breaks a person for breaking the law. The American criminal justice system has banished people to prison for life without parole as a result of shoplifting three belts, possessing stolen wrenches, and attempting to cash a stolen check. If a 19 year old gets locked up for selling drugs, then spends two decades repenting, do we want to be a society that forces him to die in prison anyway? People make mistakes, but so does the criminal justice system.

Imagine another scenario where activists and public officials protest a destructive presidency in defiance of anti-protest statutes enacted in a civil liberties crackdown. Imagine they then kept defying a court order to stop or to follow other instructions. Perhaps they'd feel compelled to engage in civil disobedience to expose the cruelty of a new unjust law, or to defend their neighbors and loved ones against it. They all could be driven by the sense that people's fundamental rights were under assault, but a prosecutor could still file criminal charges and a judge could still find them in contempt of court. If these guilty parties sought a pardon, should a president have the power to forgive contempt of court convictions in the first place?

Considered important enough to expressly write into the Constitution, the presidential power to remedy miscarriages of justice was always meant to be part of our system of government. As future Supreme Court Justice James Iredell remarked at the North Carolina Ratifying Convention, "an inflexible adherence" to a law, "in every instance, might frequently be the cause of very great injustice" because it's impossible to foresee all potential circumstances. Then "justice would wear a countenance too sanguinary and cruel" without the mercy of the government, wrote Alexander Hamilton wrote in the Federalist Papers.

Hamilton also saw the pardon as a means for restoring "tranquility of the commonwealth" after civil strife or violent conflict. Indeed, the aftermath of war turned out to be a common moment for clemency for presidents seeking national calm and unity, not just the routine administration of mercy and justice: Washington pardoned Whiskey Rebellion leaders, Madison pardoned War of 1812 deserters, Lincoln and Johnson pardoned Confederate soldiers, and Ford and Carter pardoned Vietnam War draft resisters.

That is not to say all pardons have been noble in motive. But what makes the Arpaio pardon particularly unusual in light of the lay understanding of executive clemency is that he didn't suffer an outrageous miscarriage of justice; he's no Jean Valjean sentenced to five years of hard labor for stealing a loaf of bread. He had not been sentenced yet and would've faced six months in jail at most. Arpaio's conviction was not a pedestrian contempt of court decision either. In his case, the court was trying to stop him from trampling on people's constitutional rights.

To be clear, that single pardon has not constituted the annihilation of the judiciary's accountability measures. The judicial orders in the civil case against Arpaio are still in force and the court later rejected his attempt to erase the judicial record of his conviction. (A pardon does spare a person from punishment, lessen the stigma of a conviction, and restore civil rights, such as the right to vote and hold public office in some states. A pardon was not necessary for Arpaio's candidacy, however, because Arizona's felony disenfranchisement rules do not apply to misdemeanors.)

Even so, Trump undermined the judiciary's efforts to hold Arpaio accountable for violating people's basic rights when he was a public official entrusted to protect them. That is why his first pardon was subversive. It perverted a core part of our system of civil liberties and civil rights in a way that threatens the constitutional firmament itself.

In the Trump era, such warnings resonate more urgently because the president has been scornful of rules other than his own and hostile towards those who confront him over it. Moreover, as shown by his personal attacks against judges who've ruled against his policies, that enmity is especially fierce when it is provoked by the judiciary asserting its independent authority and challenging his transgressions against the Constitution.

That should alarm all of us who cherish the fundamental rights guaranteed by our country's founding document. But that is reason to focus on the constitutional liberties underpinning the criticisms of Trump's first pardon, not to broadly denigrate executive pardons as shameful acts no president should consider. The pardon power was originally enshrined into the Constitution for a good purpose – and we would do well to remember that, especially as we criticize its particular misuses.

#TrumpUnderOath

Trump will eventually answer questions from Special Counsel Robert Mueller in the Russia probe. What is unclear is when, what topics and what format the interview will take. At this point, the negotiations are ongoing.

In the meantime, evidence mounts regarding obstruction of justice and contacts with Russia, with two people indicted, two pleading guilty, and numerous public misstatements so far. And the list of key questions grows longer:

  • Mr. President: Why did you fire former FBI Director James Comey?
  • Mr. President: Did you ask former FBI Director Comey to drop an investigation into former National Security Adviser Michael Flynn?
  • Mr. President: Why did you dismiss General Michael Flynn, former National Security Adviser?
  • Mr. President: Have you asked lawmakers leading congressional investigations into election interference by Russia to curtail their inquiries?
  • Mr. President: What role did you play in crafting Donald Trump, Jr.’s misleading public statement regarding his meeting with Russian lawyer Natalia Veselnitskaya?
  • Mr. President: Did Donald Trump Jr. or anyone else who attended the June 2016 meeting with Russian lawyer Natalia Veselnitskaya at Trump Tower tell you about that meeting on that day and if so when and what did they communicate to you?
  • Mr. President: In late December 2016 did you authorize Michael Flynn to communicate with Russian ambassador Sergey Kislyak about U.S. sanctions on Russia? What do you remember about any conversations you had in that time frame regarding Flynn contacts with Russian officials?
  • Mr. President: Did Donald Trump Jr. inform you about contacts he received from Wikileaks representatives during the 2016 campaign and if so when and what did he communicate to you about this?
  • Mr. President: Did you instruct your campaign advisors to modify the Republican platform provisions regarding Ukraine?
  • Mr. President: In your meeting with campaign national security advisors on March 31, 2016, what do you recall about any discussion of a proposal to arrange a meeting between you and Vladimir Putin?
  • Mr. President: Regarding the information your campaign advisor George Papadopoulos reportedly received in April 2016 that Russia had “dirt” on Hillary Clinton in the form of emails, did anyone share that tip with you and if so when?
  • Mr. President: Does The Trump Organization have any business relationships with Treasury’s newly released list of senior foreign political figures and oligarchs in the Russian Federation, as determined by their closeness to the Russian regime and net worth?
  • Mr. President: Why are you personally interviewing certain nominees for US Attorney? Are you requesting loyalty pledges from interim US Attorneys?
  • Mr. President: Do you see any conflicts in interviewing nominee for US Attorney districts that include Trump properties?

NY Watchdog Could Take a Bite of Trump Probe

*This piece was originally published by Times Union

If it has not already done so, the New York State Department of Financial Services (DFS) could vigorously pursue what Congress has so ponderously avoided: whether Deutsche Bank aided, abetted, or facilitated the Trump Organization in possible Russian money laundering.

As New York's bank regulator, DFS supervises Deutsche Bank's New York branch office. With its broad regulatory authority, and its numerous statutory tools that pare away obfuscation with surgical precision, DFS could very likely get to the bottom of this matter faster than Special Counsel Robert Mueller can alone.

On January 2, Glenn R. Simpson and Peter Fritsch published an astonishing opinion piece in the New York Times. Simpson and Fritsch founded Fusion GPS, the commercial research and strategic intelligence firm responsible for the now infamous "Steele Dossier" — a collection of intelligence reports that, among other things, recounts deeply troubling efforts by Russia to interfere with the 2016 United States presidential election in order to help then-candidate Donald Trump win. Simpson and Fritsch wrote that they had advised congressional investigators that their research had found "widespread evidence that Mr. Trump and his organization had worked with a wide array of dubious Russians in arrangements that often raised questions about money laundering." They also told Congress to "look into bank records of Deutsche Bank and others that were funding Mr. Trump's businesses." They concluded that Congress has been "uninterested in that tip," even though Simpson told the Senate Judiciary Committee that the retired British spy who authored the Steele Dossier — on his own — felt compelled to advise the FBI in July 2016 that then-candidate Trump could be subject to Russian blackmail. A week later, Sen. Diane Feinstein publicly released the transcripts of Simpson's Senate testimony.

Less than two weeks later, the House Intelligence Committee released transcripts of much earlier testimony by Simpson in which he similarly warned about the Trump Organization's possible involvement in Russian money laundering. Just as the Senate Judiciary Committee had, the House Intelligence Committee likewise declined to pursue Simpson's recommendation to investigate.

DFS could now take the torch and run with it. That certainly would not be a rash or unreasonable response. Alarms are sounding in all quadrants. Steve Bannon — Trump's former campaign CEO and Chief White House Strategist (but apparently his present nemesis) — was recently quoted by Michael Wolff as implicating Deutsche Bank in financial misconduct involving the Trump family. In 2014, Trump's son Eric was quoted as saying that the Trump Organization "didn't rely on American Banks" to finance business projects because "[w]e have all the funding we need out of Russia." And before that, in 2008, the president's eldest son, Donald Trump Jr., stated that "Russians make up a pretty disproportionate cross-section" of investors in Trump Organization assets, adding that "we see a lot of money pouring in from Russia."

Nor would this be the first time that DFS had investigated Deutsche Bank for Russian money laundering. Just one year ago, in January 2017, DFS fined Deutsche Bank $425 million for the bank's involvement in a scheme that laundered $10 billion in Russian funds. At best, Deutsche Bank has a prior record of woeful money laundering controls that undoubtedly gives New York (and likely federal) regulators indigestion. To date, it has also had a confounding and impenetrable business relationship with the Trump Organization — fraught with litigation and debt refinancing that surpassed hundreds of millions of dollars in prior unpaid Trump loans. Indeed, in his recent book "Collusion," investigative reporter Luke Harding seriously questions whether the Trump Organization's relationship with Deutsche Bank is connected to the Russian money-laundering scheme for which the bank was punished by DFS. The smoke has gotten thick.

So what can DFS do to clear the air? New York state law gives the agency extraordinary power. It can order Deutsche Bank's New York Branch to prepare a "special report" detailing all transactions in which the bank engaged involving the Trump Organization, its affiliates, and Russian-related entities or individuals. It can assign forensic bank examiners to analyze relevant bank files. It can subpoena bank records. It can subpoena documents from third-parties involved in those transactions, including perhaps other banks, consultants, brokers, and business associates of both the Trump Organization and Deutsche Bank. It can take sworn testimony from witnesses and hold hearings (potentially public) in which Deutsche Bank must appear before DFS to explain apparent violations of law, such as the purposeful or negligent facilitation of money laundering. Any or all of these regulatory actions may be warranted. And Deutsche Bank would risk its life-line to the New York financial markets if it were to mislead the agency.

The enforcement of anti-money laundering rules is a core function of every bank supervisor. Violation of those laws threatens the safety and soundness of banking institutions and the integrity of global financial markets. In these extraordinary circumstances, it also may have struck at the heart of American democracy.

The governing maxim for the Manhattan real estate industry — well known to the Trump Organization — has always been "location, location, location." Because New York is a global financial center, that same principle has made DFS responsible for supervising some of the world's largest financial institutions, Deutsche Bank among them. That is a solemn responsibility.

A divided Congress may have chosen to ignore a hot "tip," but DFS need not. Whatever the outcome, this investigation is far too important — for both New York and the nation — for it to go cold in a Russian winter.