[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






                     IMPROVING THE FEDERAL WAGE AND
                       HOUR REGULATORY STRUCTURE

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, JULY 23, 2014

                               __________


                           Serial No. 113-63

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Robert C. ``Bobby'' Scott, 
Joe Wilson, South Carolina               Virginia
Virginia Foxx, North Carolina        Ruben Hinojosa, Texas
Tom Price, Georgia                   Carolyn McCarthy, New York
Kenny Marchant, Texas                John F. Tierney, Massachusetts
Duncan Hunter, California            Rush Holt, New Jersey
David P. Roe, Tennessee              Susan A. Davis, California
Glenn Thompson, Pennsylvania         Raul M. Grijalva, Arizona
Tim Walberg, Michigan                Timothy H. Bishop, New York
Matt Salmon, Arizona                 David Loebsack, Iowa
Brett Guthrie, Kentucky              Joe Courtney, Connecticut
Scott DesJarlais, Tennessee          Marcia L. Fudge, Ohio
Todd Rokita, Indiana                 Jared Polis, Colorado
Larry Bucshon, Indiana               Gregorio Kilili Camacho Sablan,
Trey Gowdy, South Carolina             Northern Mariana Islands
Lou Barletta, Pennsylvania           Frederica S. Wilson, Florida
Joseph J. Heck, Nevada               Suzanne Bonamici, Oregon
Mike Kelly, Pennsylvania             Mark Pocan, Wisconsin
Susan W. Brooks, Indiana             Mark Takano, California
Richard Hudson, North Carolina
Luke Messer, Indiana
Bradley Byrne, Alabama

                    Juliane Sullivan, Staff Director
                Megan O'Reilly, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                    TIM WALBERG, Michigan, Chairman

John Kline, Minnesota                Joe Courtney, Connecticut,
Tom Price, Georgia                     Ranking Member
Duncan Hunter, California            Raul M. Grijalva, Arizona
Scott DesJarlais, Tennessee          Timothy H. Bishop, New York
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Mark Pocan, Wisconsin
Richard Hudson, North Carolina       Mark Takano, California




















                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on July 23, 2014....................................     1

Statement of Members:
    Courtney, Hon. Joe, Ranking member, Subcommittee on Workforce 
      Protections................................................     3
        Prepared statement of....................................     6
    Walberg, Hon. Tim, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Conti, Judith, Federal Advocacy Coordinator, National 
      Employment Law Project, Washington, DC.....................    41
        Prepared statement of....................................    43
    Decamp, Hon. Paul, Shareholder, Jackson Lewis P.C., 
      Washington, DC.............................................    55
        Prepared statement of....................................    57
    McKeague, Nancy, Senior Vice President of Employer and 
      Community Strategies, and Chief Human Resources Officer, 
      Michigan Health & Hospital Association.....................    29
        Prepared statement of....................................    31
    Sherrill, Andrew, Dr., Director of Education, Workforce and 
      Income Security, U.S. Government Accountability Office, 
      Washington, DC.............................................     8
        Prepared statement of....................................    11

Additional Submissions:
    Mr. Courtney:
        Letter from Weil, David, Dr., Administrator, Wage and 
          Hour Division..........................................    71

 
                  IMPROVING THE FEDERAL WAGE AND HOUR
                          REGULATORY STRUCTURE

                              ----------                              


                        Wednesday, July 23, 2014

                       House of Representatives,

                 Subcommittee on Workforce Protections,

               Committee on Education and the Workforce,

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 2175, Rayburn House Office Building, Hon. Tim Walberg 
[chairman of the Subcommittee] presiding.
    Present: Representatives Walberg, Kline, Rokita, Hudson, 
Courtney, Pocan, and Takano.
    Staff present: Janelle Belland, Coalitions and Members 
Services Coordinator; Ed Gilroy, Director of Workforce Policy; 
Christie Herman, Professional Staff Member; Nancy Locke, Chief 
Clerk; James Martin, Professional Staff Member; Daniel Murner, 
Deputy Press Secretary; Krisann Pearce, General Counsel; Molly 
McLaughlin Salmi, Deputy Director of Workforce Policy; Alissa 
Strawcutter, Deputy Clerk; Loren Sweatt, Senior Policy Advisor; 
Alexa Turner, Legislative Assistant; Tylease Alli, Minority 
Clerk/Intern and Fellow Coordinator; Melissa Greenberg, 
Minority Labor Policy Associate; Eunice Ikene, Minority Labor 
Policy Associate; Brian Kennedy, Minority General Counsel; 
Leticia Mederos, Minority Director of Labor Policy; and Richard 
Miller, Minority Senior Labor Policy Advisor.
    Chairman Walberg. Good morning. A quorum being present, the 
Subcommittee on Workforce Protections will come to order.
    Let me begin by welcoming our guests and thanking our 
witnesses for joining us today. At the very least, it is a way 
to get in out of the humidity outside. Coming from Michigan, I 
am not used to the humidity being inside along with air 
conditioning. But we adjust to it, and I am sure my colleagues 
at the dais here would recognize the same issue.
    The issue today, we probably continue some heat to be 
generated; discussion of creative juices flowing. And that is a 
good thing to take place in this room. So thank you for joining 
us.
    For more than 75 years, the Fair Labor Standards Act has 
provided America's workforce with crucial federal wage and hour 
protections. Every day, the vast majority of employers do their 
part--and I say that again--every day, the vast majority of 
employers do their part to ensure workers enjoy these vital 
protections. Unfortunately, that is becoming an increasingly 
difficult challenge.
    The current rules and regulations surrounding the law are 
exceptionally complex and outdated. Too often, a maze of 
confusing regulatory requirements promotes the interests of 
trial lawyers rather than working families. A report issued by 
the nonpartisan Government Accountability Office reveals a 
broken regulatory structure that fosters unnecessary and costly 
litigation. According to the report, and I quote--``The number 
of FLSA lawsuits filed nationwide in federal district courts 
has increased substantially, with most of these increases 
occurring in the last decade.''
    The GAO report continues, ``Since 1991, the number of FLSA 
lawsuits filed has increased by 514 percent, with a total of 
8,148 FLSA lawsuits filed in fiscal year 2012.'' A more than 
500 percent increase in litigation during the last two decades; 
clearly, something isn't right. You would think employers are 
engaged in some coordinated national conspiracy to deny workers 
their rights. The truth is, the vast majority of employers want 
to do the right thing and follow the law. But too often, they 
unknowingly step into a regulatory trap. Even the Department of 
Labor has run afoul of wage and hour regulations, and they are 
responsible for writing the rules and enforcing the law.
    As litigation has increased, the number of guidance 
documents issued by the department has sharply declined. 
Between 2001 and 2009, the department released an average of 37 
guidance documents each year, yet in the last three years the 
Obama administration has issued a total of seven; just seven 
during the last three years. As GAO notes, improving guidance 
could increase the efficiency and effectiveness of the 
department's efforts to help employers voluntarily comply with 
the law.
    What is the harm in assisting employers in understanding 
their legal responsibilities? Why wouldn't we want to help 
employers understand their obligations so they can stop 
spending time inside a courtroom and, instead, invest their 
resources in growing a successful business and creating jobs?
    We have heard a lot in recent months and years about 
executive authority. We are told this is supposed to be a so-
called ``year of action.'' Too often, these actions stretch the 
limits of the law and even our Constitution. Yet when it comes 
to using a pen and a phone to help employers understand a 
complex and confusing regulatory scheme, the Department of 
Labor can't be bothered.
    Earlier this year, the President issued an executive 
memorandum directing the Secretary of Labor to revise federal 
wage and hour regulations. There is obviously some agreement 
the rules are outdated and need to be improved.
    At that time, Chairman Kline and I said that if the 
President was beginning a sincere attempt to modernize current 
regulations, then the Committee would support such an effort. 
In fact, we hope we can be a partner in that effort, and 
today's hearing should certainly inform that work. We need 
responsible change that will bring these rules into the 21st 
century, while also safeguarding worker protections.
    The Committee stands ready to assist, but more can be done 
to help employers comply with the law. The department has a job 
to do, and we hope this government accountability report will 
encourage the agency to get to work. Again, I want to thank our 
witnesses for joining us today.
    With that, I will now yield to the senior Democrat of the 
Subcommittee, my friend and colleague, Representative Joe 
Courtney, for his opening remarks.
    [The statement of Chairman Walberg follows:]

   Prepared Statement of Hon. Tim Walberg, Chairman, Subcommittee on 
                         Workforce Protections

    Good morning. Let me begin by welcoming our guests and thanking our 
witnesses for joining us.
    For more than 75 years, the Fair Labor Standards Act has provided 
America's workforce with crucial federal wage and hour protections. 
Every day the vast majority of employers do their part to ensure 
workers enjoy these vital protections. Unfortunately, that is becoming 
an increasingly difficult challenge.
    The current rules and regulations surrounding the law are 
exceptionally complex and outdated. Too often a maze of confusing 
regulatory requirements promotes the interests of trial lawyers, rather 
than working families. A report issued by the nonpartisan Government 
Accountability Office reveals a broken regulatory structure that 
fosters unnecessary and costly litigation.
    According to the report, ``The number of FLSA lawsuits filed 
nationwide in federal district courts has increased substantially, with 
most of this increase occurring in the last decade.'' The GAO report 
continues, ``Since 1991, the number of FLSA lawsuits filed has 
increased by 514 percent, with a total of 8,148 FLSA lawsuits filed in 
fiscal year 2012.'' A more than 500 percent increase in litigation 
during the last two decades; clearly something isn't right.
    You would think employers are engaged in some coordinated national 
conspiracy to deny workers their rights. The truth is the vast majority 
of employers want to do the right thing and follow the law, but too 
often they unknowingly step into a regulatory trap. Even the Department 
of Labor has run afoul of wage and hour regulations and they are 
responsible for writing the rules and enforcing the law.
    As litigation has increased, the number of guidance documents 
issued by the department has sharply declined. Between 2001 and 2009, 
the department released an average of 37 guidance documents each year. 
Yet in the last three years, the Obama administration has issued a 
total of seven - just seven during the last three years.
    As the GAO notes, improving guidance ``could increase the 
efficiency and effectiveness of [the department's] efforts to help 
employers voluntarily comply with the law.'' What's the harm in 
assisting employers in understanding their legal responsibilities? Why 
wouldn't we want to help employers understand their obligations, so 
they can stop spending time inside a courtroom and instead invest their 
resources into growing a successful business and creating jobs?
    We've heard a lot in recent months and years about executive 
authority. We are told this is supposed to be a so-called year of 
action. Too often these actions stretch the limits of the law and even 
our Constitution. Yet when it comes to using a pen and phone to help 
employers understand a complex and confusing regulatory scheme, the 
Department of Labor can't be bothered.
    Earlier this year, the president issued an executive memorandum 
directing the secretary of labor to revise federal wage and hour 
regulations. There is obviously some agreement the rules are outdated 
and need to be improved. At that time, Chairman Kline and I said that 
if the president was beginning a sincere attempt to modernize current 
regulations, then the committee would support such an effort.
    In fact, we hope we can be a partner in that effort and today's 
hearing should certainly inform that work. We need responsible change 
that will bring these rules into the 21st century, while also 
safeguarding worker protections. The committee stands ready to assist, 
but more can be done to help employers comply with the law. The 
department has a job to do and we hope this government accountability 
report will encourage the agency to get to work.
    Again, I want to thank our witnesses for joining us. With that, I 
will now yield to the senior Democrat of the subcommittee, my colleague 
Representative Joe Courtney, for his opening remarks.
                                 ______
                                 
    Mr. Courtney. Thank you, Chairman Walberg, and I want to 
thank you for calling today's hearing to examine the important 
work of the Wage and Hour Division at the Department of Labor. 
I also want to thank the witnesses for their participation and 
testimony today, regarding the department's efforts to ensure 
workers are fairly compensated for their hard work.
    The Wage and Hour Division at the Department of Labor plays 
a vital role in enforcing our nation's wage and hour laws. This 
division is responsible for enforcing the federal minimum wage, 
overtime pay, recordkeeping and child labor requirements of the 
Fair Labor Standards Act as well other important laws like the 
Family and Medical Leave Act; in essence, bedrock protections 
that have a direct impact on workers' quality of life and 
economic security.
    Hardworking Americans who are cheated out of their wages 
need to be able to turn to the Department of Labor for help 
when their employers are refusing to give them their due. Wage 
theft is most common in low-wage industries and, as a result, 
disproportionately impacts the workers who are the least able 
to afford to take action on their own. For many of these low-
wage workers, any diminishment of their take-home pay can make 
the difference between getting by and not being able to provide 
for their families. As a result, the department's actions on 
behalf of low-wage workers is critically important.
    Since 2009, the department has recovered over $1 billion in 
wages to more than 1.2 million workers, including helping 
108,000 low-wage workers recover nearly $83 million in back 
wages. This represents a 44 percent increase in the amount of 
back wages recovered, and a 40 percent increase in the number 
of low-wage workers being provided compensation. And just last 
month, the Department of Labor announced the result of a 
multiyear initiative resulting in the recovery of over $1 
million in wages and damages for 1,518 restaurant workers in 
the Tampa area.
    I understand that one focus of today's hearing will be a 
recent GAO report on the increase in the number of wage and 
hour lawsuits over the past 10 years. While there has been a 
dramatic increase over this period, the reasons for this 
increase are unclear. The department initiated suits comprise 
only a small fraction of the total FLSA lawsuits brought 
against employers, and the GAO study did not conclusively point 
to the cause for this increase. I also understand, though, that 
the GAO report focused on improving the department's approach 
to developing guidance through a more data-driven approach.
    The department has agreed to this recommendation and is 
working on its implementation. And I want to emphasize this 
point at the outset. If you read the GAO report, like any other 
GAO report--whether it is on the House Armed Services Committee 
or any other committee--the department is asked to react to the 
GAO recommendations. And the reaction, which is in the report, 
says that the department agrees with the conclusions of the GAO 
report and is willing to work to address the issues that GAO 
has recognized.
    I can say from personal experience in terms of GAO studies 
on the Navy, on the Air Force, that is not always the case. 
That there--in many instances, there is strong pushback by 
administrative agencies and departments by GAO reports.
    But Secretary Perez in the Department of Labor has said, we 
agree. So, you know, I think it is important at the outset here 
to make sure that we aren't drawing lines in the sand here 
between what GAO is recommending and the Department of Labor. 
And I would point out that this is not atypical. Since 
Secretary Perez has taken over, he agreed with this Committee's 
criticisms on the Office of Contract Compliance enforcement 
actions against hospitals; terminated the initiative that the 
department had been following for a number of years; withdrew 
an enforcement lawsuit in federal district court in Florida; 
and issued a five year moratorium, again based on the 
legitimate questions that this department--this Committee 
raised.
    Secondly, in terms of the Service Compliance Act--which, 
again, was an issue that was raised in the Armed Services 
Committee--that DOL was forcing an unreasonable level of 
compensation for fringe benefits at contractor services at 
military bases around the country. The Navy appealed DOL's 
report, and they cut their recommendation to like a quarter of 
what was initially the case. This Secretary listens, and I 
really think it is important for people to understand.
    And this Subcommittee has had direct experience. And 
frankly, I think the GAO report, which shows that DOL accepts 
the findings in the GAO report, and agrees to work with it, is 
just another indication of the Secretary's willingness to work 
with outside parties, members of Congress, you name it in terms 
of tying to show that this department is, in the give and take 
of an administrative agency, actually responsive.
    Perhaps, I would suggest, a more fruitful use of today's 
hearing would be to examine proposals that would strengthen 
wages for hardworking Americans to assure that no one who is 
working full-time has to live in poverty. And that is the issue 
of the day out there for low-income Americans across the 
country. This administration has taken steps to raise the 
minimum wage for federal contract workers, supports the Miller-
Harkin Minimum Wage Act, which has roughly 200 cosponsors in 
the House, expanded FLSA protections to home health care 
workers, taking them out of below minimum wage status to the 
protections of minimum wage, taken steps to ensure pay equity 
for women, and is in the process of updating their overtime 
regulations.
    We should build on these efforts by passing H.R. 1010, the 
Fair Minimum Wage Act. Raising the minimum wage is not only 
good for millions of workers that would directly benefit, but 
also for our economy as a whole. And again, as a member of the 
House Agriculture Committee, we just went through this Farm 
Bill agony over the level of spending on food stamps in this 
country. You want to cut food stamps in this country? Raise the 
minimum wage. That will reduce the allotment that, again, low-
income workers today have to use in food stamps to put food on 
the table for themselves and their kids. Again the CBO has 
verified this.
    You want to cut the deficit in the agriculture account, in 
food stamps accounts, SNAP? Raise the minimum wage. You will 
reduce spending for SNAP overnight by doing that. And you won't 
do it by denying people access to critically needed nutrition. 
In fact, data from the Department of Labor shows that 13 states 
that have raised the minimum wage have higher job growth than 
those that do not. Including my own state of Connecticut, which 
recently passed a minimum wage increase to $10.10. We just had 
our job numbers come out for the month of June. Again, 
thousands of new jobs added in the Connecticut economy after 
the minimum wage bill was passed by the state legislature under 
Governor Malloy's leadership.
    The poster to my right shows the hundreds of thousands of 
constituents represented by members of this subcommittee who 
would benefit from this important legislation. In my district, 
a total of 42,000 workers would benefit, including 24,000 
women. Again, luckily, Connecticut is ahead of the curve. So 
that is happening as we speak. Passing this law would make a 
real difference in the lives of many people who we represent. 
And as a result, it deserves to be debated and a hearing at 
least needs to be held on this subcommittee. And hopefully, at 
some point, voted on in this chamber before the end of the 
113th Congress.
    Thank you, Mr. Chairman, and thanks again to our witnesses 
for your participation.
    [The statement of Mr. Courtney follows:]

  Prepared Statement of Hon. Joe Courtney, Senior Democratic Member, 
                 Subcommittee on Workforce Protections

    Good morning. I want to thank Chairman Walberg for calling today's 
hearing to examine the important work of the Wage and Hour Division at 
the Department of Labor.
    I also want to thank the witnesses for their participation and 
testimony today regarding the Department's efforts to ensure workers 
are fairly compensated for their hard work.
    The Wage and Hour Division at the Department of Labor plays a vital 
role in enforcing our nation's wage and hour laws. This division is 
responsible for enforcing the Federal minimum wage, overtime pay, 
recordkeeping, and child labor requirements of the Fair Labor Standards 
Act, as well as other important laws like the Family and Medical Leave 
Act - in essence, bedrock protections that have a direct impact on 
workers' quality of life and economic security.
    Hard-working Americans who are cheated out of their wages need to 
be able to turn to the Department of Labor for help when their 
employers are refusing to give them their due.
    Wage theft is most common in low-wage industries and as a result, 
disproportionately impacts the workers who are the least able to afford 
to take action on their own. For many of these low-wage workers, any 
diminishment of their take-home pay can make the difference between 
getting by and not being able to provide for their families. As a 
result, the Department's action on behalf of low-wage workers is 
particularly important.
    Since 2009, the Department has recovered over $1 billion in wages 
to more than 1.2 million workers, including helping 108,000 low-wage 
workers recover nearly $83 million in back wages. This represents a 44 
percent increase in the amount of back wages recovered and a 40 percent 
increase in the number of low-wage workers provided compensation. And 
just last month, the Department of Labor announced the results of a 
multi-year initiative resulting in the recovery of more than $1 million 
in wages and damages for 1,518 restaurant workers in the Tampa area.
    I understand that one focus of today's hearing will be to a recent 
GAO report on the increase in the number of wage and hour lawsuits in 
the past ten years. While there has been a dramatic increase over this 
period, the reason for this increase is unclear. Department initiated 
suits comprise only a small fraction of total FLSA lawsuits brought 
against employers and the GAO study could not conclusively pinpoint the 
cause for this increase.
    I also understand that the GAO report focused on improving the 
Department's approach to developing guidance through a more data driven 
approach. The Department has agreed with this recommendation and is 
working on its implementation.
    Perhaps, a more fruitful use of today's hearing time would be to 
examine proposals that would strengthen wages for hard-working 
Americans to ensure that no one working full-time has to live in 
poverty.
    This administration has taken steps to raise the minimum wage for 
federal contract workers, supported the Miller-Harkin Minimum Wage Act, 
expanded FLSA protections to home health care workers, taken steps to 
ensure pay equity for women and is in the process of updating their 
overtime regulations.
    We should build on these efforts by passing H.R. 1010, the Fair 
Minimum Wage Act. Raising the minimum wage is not only good for the 
millions of workers that would directly benefit, but also for our 
economy as a whole.
    In fact, data from the Department of Labor shows that the 13 states 
that have raised the minimum wage have higher job growth than those 
that do not, including my own state of Connecticut - which recently 
passed a minimum wage increase to $10.10.
    The poster to my right shows the hundreds of thousands of 
constituents represented by members of this subcommittee who would 
benefit from this important legislation.
    In my district, a total of 42,000 workers would benefit, including 
24,000 women who disproportionately make up the low-wage workforce. 55% 
of minimum wage workers who would benefit from a $10.10 increase are 
women, and raising the minimum wage to $10.10 would also close roughly 
5% of the gender pay gap.
    Passing this law would make a real difference in the lives of many 
people who we represent, and as a result, it at least deserves to be 
debated and voted on by this chamber.
    Thank you Mr. Chairman. And thanks again to our witnesses for your 
participation.
                                 ______
                                 
    Chairman Walberg. I thank the gentleman.
    Pursuant to committee rule 7(c), all members will be 
permitted to submit written statements to be included in the 
permanent hearing record. And without objection, the hearing 
record will remain open for 14 days to allow such statements 
and other extraneous material referenced during the hearing to 
be submitted for official hearing record.
    It is now my pleasure to introduce our panel of 
distinguished witnesses. First, with us today is Dr. Andrew 
Sherrill; he is the director of education, workforce and income 
security at the U.S. Government Accountability Office here in 
Washington, D.C. Dr. Sherrill's responsibilities with the 
agency include GAO's work on employment and training programs 
and worker protection issues. Welcome.
    Ms. Nancy McKeague is senior vice president of employer and 
community strategies, and chief human resources officer with 
the Michigan Health and Hospital Association in Okemos, 
Michigan. Ms. McKeague will testify on behalf of the Society 
for Human Resource Management. It is a pleasure to have Nancy, 
you, in front of us. Long-time experience together watching you 
give leadership to a number of crucial organizations supplying 
jobs, opportunity in Michigan, both in the public and private 
sector.
    Ms. Judith M. Conti, welcome. You are familiar with this 
subcommittee. Glad to have you back. She is the federal 
advocacy coordinator at the National Employment Law Project 
here in Washington, D.C., where she advocates on issues related 
to unemployment insurance, enforcement of workplace standards, 
and civil rights.
    The Honorable Paul DeCamp is a shareholder with Jackson 
Lewis PC here in Washington, D.C., within the firm's wage and 
hour practice group. Prior to joining the firm in 2008, he 
served as administrator of the U.S. Department of Labor's Wage 
and Hour Division. Welcome.
    Before I recognize each of you to provide your testimony, 
let me briefly explain our lighting system. It is simple. Think 
of your time at the wheel, coming to a stoplight, the same 
thing. Green, go, keep proceeding, you have five minutes to 
give your testimony. We hope to keep as close to that as 
possible due to the number of witnesses here and the questions 
I am sure that will want to be asked. When you see the yellow, 
you have a minute remaining. When it turns red, wrap up as 
quickly as you can your thought, and then we will go on. And 
there will be plenty of opportunity for questions, I am sure. 
Members will be kept to that same policy as strictly as I can 
swing the gavel on that. But we want to give opportunity for 
good review of our discussion topics today.
    And so having said that, let me recognize now, for five 
minutes of testimony, Dr. Sherrill.

   STATEMENT OF DR. ANDREW SHERRILL, DIRECTOR OF EDUCATION, 
WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY 
                    OFFICE, WASHINGTON, D.C.

    Dr. Sherrill. Chairman Walberg, Ranking Member Courtney, 
and members of the Subcommittee, I am pleased to be here today 
to discuss our work on the recent increase in the number of 
lawsuits filed by individuals or groups alleging violations of 
the Fair Labor Standards Act. GAO reviewed this increase and 
examined the factors that potentially affected the number of 
lawsuits filed. GAO also examined the Department of Labor's 
Wage and Hour Division's plan; how it plans its Fair Labor 
Standards Act enforcement and compliance assistance efforts.
    Using data compiled by the Federal Judicial Center, the 
Research and Education Agency of the federal judicial system, 
we reported the number of lawsuits filed in district court over 
the past two decades that allege violations of the FLSA. To 
obtain more information about these lawsuits, we also reviewed 
a nationally representative sample of all FLSA-related lawsuits 
filed in fiscal year 2012. Over the past two decades, there has 
been a substantial increase in the number of lawsuits filed, 
with most of the increase occurring in the last 10 years.
    In 1991, the total number of lawsuits filed was around 
1,300. In 2012, that number had increased over 500 percent, to 
over 8,100. FLSA lawsuits can be filed by the Department of 
Labor on behalf of employees, by individuals, or by a group of 
individuals known as a ``collective action.'' Lawsuits filed by 
a group of individuals, collective actions, must be certified 
by the court. And if a collective action is decertified, the 
members of the group may then file separate lawsuits as 
individuals. Fifty-eight percent of all FLSA lawsuits filed in 
fiscal year 2012 were filed by individuals and 40 percent were 
collective actions.
    Large increases in FLSA were concentrated in three states: 
Florida, New York, and Alabama. In 2012, these three states 
accounted for 53 percent of all FLSA lawsuits. Since 2001, the 
number of lawsuits filed in both Florida and New York rose 
steadily. But in Alabama, the increases were concentrated in 
two years--2007 and 2012--and were generally thought to be 
related to the decertification of collective actions, which 
later resulted in many individual lawsuits being filed by 
individuals involved in those actions.
    We also looked at the types of FLSA violations alleged in 
the lawsuits filed in 2012; 95 percent of them alleged 
violations of the overtime payment provision, and almost a 
third alleged violation of the minimum wage provision. While it 
was not possible to determine the exact cause of the increase 
in the number of lawsuits, we interviewed a number of 
stakeholders to obtain their views, including federal judges, 
Wage and Hour Division officials, and plaintiff and defense 
attorneys who specialize in these cases. The most frequently 
cited factor for the increases was attorneys' increased 
willingness to take on such cases.
    Financial incentives, combined with the fairly 
straightforward nature of many FLSA cases, may make attorneys 
receptive to taking these cases. In Florida, for example, where 
nearly 30 percent of all the FLSA lawsuits were filed in 2012, 
several stakeholders told us that plaintiffs' attorneys 
advertise for wage and hour cases via billboards, radio, 
foreign language press, and other methods. Stakeholders cited 
several other potential factors for the increase in lawsuits. 
Evolving case law: stakeholders cited the 1989 Supreme Court 
decision in the Hoffman case, which made it easier for 
plaintiffs' attorneys to identify potential plaintiffs and 
reduce the work needed for them to form collective actions.
    Recent economic conditions: stakeholders said these may 
have led to reduced payment of the minimum wage or overtime, as 
required, or to an increased likelihood that workers would file 
lawsuits.
    State wage and hour laws: while the federal statute of 
limitations for filing these claims is two years, or three 
years if the violation is willful, New York State law provides 
a six-year statute of limitations for filing wage and hour 
lawsuits, which may increase potential damages in such cases.
    Ambiguity in applying laws and regulations: ambiguity, 
particularly the exemption for executive administrative and 
professional workers, the white collar workers, was cited as a 
factor by a number of stakeholders.
    Department of Labor updated its regulations in 2004 to 
provide more guidance on this topic. But a few stakeholders 
told us there is still significant confusion among employers 
about which workers should be classified as exempt.
    Finally, we reviewed the Wage and Hour Division's annual 
process for determining how to target its enforcement and 
compliance assistance resources. Using its recent enforcement 
data, the agency targets industries for enforcement that have a 
higher likelihood of FLSA violations. However, in developing 
its guidance on the FLSA, Wage and Hour Division does not use a 
systematic approach that includes identifying data on the 
subjects or the number of requests for assistance it receives 
from employers and workers.
    In addition, Wage and Hour Division does not have a routine 
database process for assessing the adequacy of its guidance. 
Because of these issues, we recommended that Wage and Hour 
Division develop a systematic approach for identifying areas of 
confusion about the requirements that contribute to possible 
violations, and improving the guidance it provides to employers 
and workers. Wage and Hour Division agreed with our 
recommendation, and stated that it is in the process of 
developing systems to further analyze trends in communications 
received from stakeholders, such as workers and employers.
    That concludes my statement. I would be happy to answer any 
questions you may have.
    [The statement of Dr. Sherrill follows:]
   
   
   
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    Chairman Walberg. Thank you.
    I recognize Ms. McKeague now for your five minutes.

   STATEMENT OF MS. NANCY MCKEAGUE, SENIOR VICE PRESIDENT OF 
 EMPLOYER AND COMMUNITY STRATEGIES, AND CHIEF HUMAN RESOURCES 
    OFFICER, MICHIGAN HEALTH AND HOSPITAL ASSOCIATION, EAST 
  LANSING, MICHIGAN, TESTIFYING ON BEHALF OF THE SOCIETY FOR 
                   HUMAN RESOURCE MANAGEMENT

    Ms. McKeague. Thank you, Chairman Walberg, Ranking Member 
Courtney and distinguished members of the Subcommittee. My name 
is Nancy McKeague, and I am the senior vice president of 
employer and community strategies and the chief human resources 
officer for the Michigan Health and Hospital Association, also 
known as the MHA. And I am appearing before you today on behalf 
of the Society for Human Resource Management.
    Thank you for the opportunity to testify today on how to 
improve the federal wage and hour regulatory structure. Mr. 
Chairman, as you stated, employers of all sizes diligently work 
to classify employees correctly and remain in compliance with 
the Fair Labor Standards Act. However, classification decisions 
for positions are particularly challenging, as they are based 
on both objective and subjective criteria. Therefore, on 
occasion an employer acting in good faith could mistakenly 
classify employees as exempt who, in reality, should be non-
exempt or vice versa.
    Allow me to tell you a little bit about the MHA. We are a 
non-profit association advocating for hospitals and the 
patients they serve. We are an employer of choice, having 
received several workplace awards, referenced in my written 
statement. Yet even some of the best employers face practical 
challenges with the FLSA.
    First, let me suggest that additional guidance will 
certainly be helpful for H.R. professionals, given the 
practical challenges most employers face with FLSA compliance.
    Complying with the statute can create high legal costs for 
employers, which is particularly difficult for an organization 
like the MHA on a tight budget. Unfortunately, increased 
litigation related to alleged FLSA violations leads to less 
funding for a non-profit's core mission; whether that is 
providing patient treatment, caring for children, or conducting 
research. Non-profits like MHA must make challenging employee 
classification determinations because employees are often 
performing a mix of duties which includes both exempt and non-
exempt functions.
    For example, we sometimes find one of our employees will 
fit all of the executive employee exemptions under the FLSA, 
with the exception of supervising two or more employees. Take 
the instance of the MHA Foundation. Our executive director 
there supervises only one employee, but she otherwise fits all 
of the tests. So determining her classification was 
challenging. In the end, we determined that she should be 
classified as exempt because of her autonomy, her experience, 
and our confidence in her personal judgment.
    Given this ambiguity, the stakes in improperly classifying 
employees are high. Planning for an increase in litigation can 
be particularly difficult for the non-profit sector and small 
employers. When the 2004 changes to the FLSA overtime 
regulations were enacted, the MHA had to allocate additional 
funding to retain counsel in order to assure our practices were 
compliant. In the end, a non-profit hospital's decision to 
direct limited funds to defending against lawsuits means less 
money for patient care and treatment. As an employer in the 
health care sector, our member hospitals are working 24 hours a 
day, seven days a week providing critical treatment and care to 
patients.
    Because of the nature of our work, we must have the ability 
to respond as quickly as possible and utilize flexible hours, 
especially for our clinicians. The FLSA makes this difficult 
for certain employees. While non-exempt employees can receive 
time and a half pay, they cannot be afforded the same workplace 
flexibility benefits as an exempt employee.
    The FLSA further impedes workplace flexibility by 
prohibiting private sector employers from offering non-exempt 
employees the option of paid time off rather than overtime pay 
for hours worked over 40 hours per week, even though all public 
sector employees are offered this type of flexibility, commonly 
referred to as ``comp time.''
    Mr. Chairman, today's examination of the FLSA is 
particularly timely, given President Obama's recent directive 
to modernize the overtime regulations. While SHRM appreciates 
the President's interest in clarifying the regulations--and, 
parenthetically, we have been pleased by Secretary Perez's 
responsiveness--we remain concerned that revisions could 
significantly impact employers and employees. Employers and 
employees are just now finally understanding the full impact of 
the 2004 overtime changes, so any changes to the regulations 
should be carefully constructed to prevent a new wave of 
litigation and additional confusion. The current regulations 
may not be perfect, but they are the regulations we are 
accustomed to as a profession.
    In closing, SHRM and its members are committed to working 
with this Subcommittee and other members of Congress to address 
the FLSA in a manner that balances the needs of both employees 
and employers, and does not produce requirements that could 
limit workplace flexibility.
    Mr. Chairman, thank you again for allowing me to share 
SHRM's views on the FLSA, and I welcome your questions.
    [The statement of Ms. McKeague follows:]
   
   
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    Chairman Walberg. Thank you.
    I now recognize Ms. Conti for your five minutes of 
testimony.

 STATEMENT OF MS. JUDITH CONTI, FEDERAL ADVOCACY COORDINATOR, 
  NATIONAL EMPLOYMENT LAW PROJECT, WASHINGTON, D.C., MINORITY 
                            WITNESS.

    Ms. Conti. Thank you, sir. And thanks to you and the 
committee for inviting the National Employment Law Project to 
share this testimony today.
    NELP is a non-profit organization that advocates for low-
wage and unemployed workers, and few things matter to us as 
much as the FLSA's promise of a fair day's wage for a full 
day's work. My written testimony goes into extensive detail 
about the nature and extent of wage theft in this country, 
especially as it applies to low-wage workers. Without a strong 
Wage and Hour Division as the most prominent opponent of wage 
theft, it does, and will, run rampant in certain industries. 
Not only to the detriment of workers, but to the detriment of 
many good and honest businesses that don't cut corners and 
don't cheat their workers.
    Of course, there are principal differences in opinion as 
how to best run and staff the Wage and Hour Division. As was 
its prerogative, the Bush administration placed heavy emphasis 
on compliance assistance. That is, giving employers the tools 
they need to follow the mandates of the FLSA. Indeed, this has 
always been a central component of the Wage and Hour Division's 
work, and must always remain so. But in 2008 and 2009, the GAO 
issued a series of three reports that were extremely critical 
of the Wage and Hour Division's investigative and enforcement 
functions.
    They detailed systemic problems of calls that were never 
returned, cases that were never investigated, and the workers 
who lost their opportunities to even pursue their claims in 
court because the investigations took so long that the statute 
of limitations had run. Clearly, the balance had shifted too 
far in one direction.
    As of May of this year, for the first time in a decade, we 
have a confirmed administrator of the Wage and Hour Division. 
And in Dr. David Weil, we have the rare occasion of someone who 
has spent the majority of his career thinking about and working 
on this very topic of the hearing today; how to best use the 
limited resources of the Wage and Hour Division to enforce the 
FLSA to the maximum extent possible.
    You can accurately say about Dr. David Weil that he has 
literally written the book. His recently published book, the 
Fissured Workplace, and his 2010 report to the Department of 
Labor on how it can better conduct strategic enforcement of the 
FLSA, is mandatory reading in my field, certainly, and for 
anyone interested in wanting to know how to best operate the 
Wage and Hour Division. The recommendations in his report and 
book are too numerous to cite but, in short, he is someone who 
appreciates the role of data and analysis in driving an 
effective enforcement strategy.
    At NELP, we are quite certain he will lead the Wage and 
Hour Division in a rigorous examination of all the relevant 
data to figure out how to best prioritize and balance all of 
its work whether it be investigation, enforcement, education 
for workers or compliance assistance for employers.
    And just briefly, I would like to address the compliance 
assistance that the Wage and Hour Division does provide. It is 
true it stopped the practice of issuing opinion letters, which 
often turned on a very narrow specific set of facts relevant to 
one employer only.
    But one only needs to look at the Wage and Hour Division's 
Web site to see the extensive amount of compliance assistance 
it produces, including numerous fact sheets that are in English 
and nine other languages; regular conference calls with 
stakeholders about compliance with numerous laws and 
regulations; webinars on new and current rules and regulations; 
interactive e-tools that help employers calculate what wages 
they owe workers; field bulletins; administrative 
interpretations; and PowerPoint presentations in eight 
different languages that the department produces to ensure that 
employers have extensive resources to comply with the FLSA.
    In addition, the Wage and Hour Division employees routinely 
take phone calls from employers and/or their attorneys, and 
provide individualized guidance over the phone, as well. 
Looking ahead, NELP anticipates a strong Wage and Hour 
Division, which will soon be enforcing the President's 
executive order that all federal contract workers begin 
receiving a minimum wage of $10.10 with all new contracts 
starting on or after January 1, 2015; a department that will be 
updating and further classifying the rules surrounding the 
payment of overtime; and most of all, we hope that they will be 
soon be overseeing implementation of a nationwide minimum wage 
increase.
    Thank you again for the opportunity to testify at today's 
hearing, and I am happy to answer any questions about my 
written or oral testimony. Thank you.
    [The statement of Ms. Conti follows:]
   
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    Chairman Walberg. Thank you.
    And now we turn to Paul DeCamp for your five minutes.

STATEMENT OF HON. PAUL DECAMP, SHAREHOLDER, JACKSON LEWIS P.C., 
                        WASHINGTON, D.C.

    Mr. DeCamp. Good morning, Chairman Walberg, Ranking Member 
Courtney and distinguished members of the Subcommittee.
    The Fair Labor Standards Act seems straightforward. Just 
pay workers at least $7.25 an hour plus time-and-a-half for 
hours beyond 40 in a work week, unless an exemption applies 
that would change or eliminate one or both of those 
requirements. But the devil is in the details, as set forth at 
some length in my written testimony, which I ask to be made a 
part of the hearing record. There is a reason why violation 
rates under the FLSA are so high, with Wage and Hour 
consistently reporting violations by 70 percent or more of the 
employers it contacts. The statute itself does not provide 
useful definitions of such key terms as ``employee'' or 
``work.''
    And the agency's regulations attempting to shed light on 
these issues and many more take up roughly 1,000 pages in the 
Code of Federal Regulations. In my time at Wage and Hour, as 
well as in my experience in private law practice, I have seen 
employers repeatedly struggle with identifying which workers 
are their employees under the law; which activities constitute 
compensible work; what types of compensation factor into the 
regular rate for purposes of calculating overtime; and which 
employees are exempt from the law's overtime requirements. 
There are certainly many instances where the answers to these 
types of questions are straightforward. And it is reasonable to 
expect employers to understand and to follow those clear legal 
standards.
    But in the surprisingly broad array of circumstances, the 
legal requirements are vague and confusing. These are serious, 
real-world problems for employers dealing with tight operating 
margins, especially in today's economy. These companies are 
often competing with businesses that take more aggressive 
positions on these same issues, such that simply defaulting to 
the most conservative approach where there is ambiguity can 
have crippling consequences by virtue of imposing a competitive 
disadvantage. A rule of ``when in doubt just pay the workers 
more,'' is not a recipe for remaining in business. So employers 
must make choices about how to manage the gray zone between 
clear compliance and clear noncompliance while, at the same 
time, often facing strong economic pressures weighing in favor 
of a more aggressive approach.
    By and large, over the past five and a half years, Wage and 
Hour has been all but completely uninterested in providing 
employers with guidance to assist them in complying with the 
FLSA. The agency has closed its doors to employers, abandoning 
the process it followed for more than half a century of issuing 
opinion letters in response to requests from the public for 
guidance regarding specific questions under the law. Instead, 
the agency has turned to highly punitive enforcement, focusing 
on civil money penalties, liquidated damages, litigation, and 
publicly shaming employers in lieu of helping employers comply 
with the law and thereby avoid violations in the first place.
    As things now stand, many employers have nowhere to turn 
for guidance regarding FLSA compliance. Wage and Hour is 
providing little, if any, information. So the main alternative 
is to hire lawyers. Large companies can usually afford to pay 
at least some amount of money on attorneys. But many smaller 
and medium-size businesses simply do not have either the 
resources to expend on compliance or even the awareness that 
serious liabilities lurk beneath the surface of a seemingly 
simple and innocuous statute. Wage and Hour can do better.
    There will always be employers who want to comply with 
their legal obligations, just as there will always be willful 
violators who intentionally skirt the law. The manner in which 
Wage and Hour carries out its charge to secure compliance with 
the FLSA depends largely on how the agency and, more 
specifically, its leadership and the leadership in the 
department more generally views the relative proportions of 
these two types of employers in the economy. If one believes 
that the vast majority of employers act in good faith and try 
to comply with the law--though perhaps through no evil intent 
they do not always get it right--then one must think that there 
is real value in providing clarity via education and 
interpretive guidance to give employers a fighting chance to 
pay their workers correctly.
    If, instead, one believes that most employers are out to 
cheat their workers and to violate the FLSA if they think that 
they can do so without getting caught, then one will see such 
guidance as having little value; with heavy-handed enforcement 
appearing to be the most effective way to obtain compliance. 
What does the current leadership in Wage and Hour believe? The 
agency should return to its historical practice of treating 
employers as stakeholders and partners in compliance, rather 
than as lawbreakers. This starts with recognizing the need to 
issue many more guidance documents than the agency now 
produces.
    Moreover, Wage and Hour has the ability to gather and to 
examine information regarding the types of issues that give 
rise to frequent violations, as well as questions that 
employers commonly ask when seeing informal guidance. The 
agency should use that information to drive its choices in 
topics for guidance. If Wage and Hour pursues this path the 
result will be more compliance, more workers receiving proper 
pay under the law, and fewer violations. All of the relevant 
stakeholders win.
    Mr. Chairman, this concludes my prepared remarks. I will be 
happy to answer any questions you or the members of the 
Subcommittee may have.
    [The statement of Mr. DeCamp follows:]
   
   
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    Chairman Walberg. Well, thank you. I thank each of the 
panel members for your efficiency in keeping within the time 
limits and giving us information we need. And I would call 
attention to myself and my colleagues on that example, as well.
    Having said that, let me recognize Representative Rokita, 
my good friend from Indiana, for your five minutes of 
questioning.
    Mr. Rokita. Thank you, Chair. I appreciate that, appreciate 
you holding this hearing, and I thank the witnesses for their 
testimony this morning. I am going to concentrate, at least 
initially, on Mr. DeCamp. I thank you for your service to this 
country, by the way. Your written testimony, if I understand it 
right, highlights an issue that employers face when determining 
an employee's regular rate for the purposes of calculating 
overtime pay. And having been an employee in some of these 
places, and then knowing other employers, I know that a lot of 
employers try to do the right thing by, you know, offering 
their workers--allowing them to share in the success of a 
company through a bonus structure or some kind of equity or 
non-equity provision, mostly non-equity.
    Yet even this well-intentioned action can result in an 
employer running afoul of the FLSA, or it can be a deterrent to 
employers who want to provide bonuses. Can you elaborate for 
about 30 seconds to a minute on that?
    Mr. DeCamp. Well, sure. What we are talking about, really, 
is one of the regular rate exclusions under the statute. And 
under the FLSA, a discretionary bonus does not have to go into 
the regular rate. So the employer does not have to pay overtime 
on top of that bonus. A non-discretionary bonus however does go 
into the regular rate. If an employer guesses wrong as to 
whether a bonus is discretionary or non-discretionary it can 
find itself after the fact, after it has paid bonuses, subject 
to an enforcement action. There is a great example of that. 
There is an oil and gas company in the Southwest that awarded 
bonuses that it regarded as discretionary under the standards 
and the regulations to about 5,000 of its non-exempt employees.
    The Department of Labor came in afterwards and said no, we 
think that was a non-discretionary bonus and, in fact, you have 
to pay overtime on that. This resulted in the Department of 
Labor filing a lawsuit in federal court accusing the company of 
violating the law with respect to over 5,000 workers.
    Mr. Rokita. Yet these people got bonuses.
    Mr. DeCamp. They got bonuses. This is sort of the no good 
deed goes unpunished theory of employment.
    Mr. Rokita. Right.
    Mr. DeCamp. And this led to litigation and, ultimately, a 
large award.
    Mr. Rokita. Well, surely the company explained and showed 
that, you know, consideration was given. And I don't know if it 
was less or more, but assume it was about the same. Or you tell 
me if it is different. And what was the department's response? 
A lawsuit? And then what was their legal argument? Strict 
noncompliance?
    Mr. DeCamp. The Department's argument was, well, look, you 
gave this benefit to just about all of your people, you have 
given this bonus before. Therefore, even though you retained, 
under the terms of the bonus plan, the discretion not to award 
a bonus we are gonna treat it as non-discretionary. We are 
gonna say that you really were promising to give this money, 
even though you said you didn't have to give it. And so the 
department said it goes into the regular rate, and they sued.
    Mr. Rokita. What adjective would you use for something like 
this, an action like this?
    Mr. DeCamp. I am sorry. Say again?
    Mr. Rokita. What adjective would you use for an action like 
that?
    Mr. DeCamp. I can't say it in this room.
    [Laughter.]
    Mr. Rokita. Well, church it up. Go ahead.
    Mr. DeCamp. Well, it is heavy-handed and punitive. And--
    Mr. Rokita. I was going to say punitive. Absurd might be 
another one. Going on with something else, I assume you might 
be aware of an amendment that was recently filed here in the 
House of Representatives during a floor debate on several 
appropriations measures. I was surprised by it, actually. But 
the amendment would prevent contractors found to have violated 
the FLSA from continuing to receive federal contracts. So can 
your explain how this amendment could impact companies that you 
have experience with where, through no, you know, intentional 
action they would, again, punitively be prohibited from getting 
employed by the federal government.
    Mr. DeCamp. Well, the great example is that same oil and 
gas company I was talking about. They happen to be a federal 
contractor. So under the standards of the amendment, that 
company would arguably be barred from federal contracting. It 
would be blacklisted under the Appropriations amendment. 
Because there was an award that was in excess of--whether it is 
$5,000 or $100,000, depending on which provision of the statute 
we are talking about--it was a six-figure award ultimately. 
That company that their only violation was paying their non-
exempt employees too much, giving them bonuses could result in 
them being kicked out of the federal contracting program.
    Mr. Rokita. Okay. Is it also true, in your experience both 
as a practitioner now, but in your public experience, that 
union contracts are tied to minimum wage rates?
    Mr. DeCamp. They can be. They are not always it depends on 
the contract.
    Mr. Rokita. Do you have a one out of 10 how many it would 
be. Can you--any kind of--
    Mr. DeCamp. I wouldn't be able to estimate, frankly. Most 
union jobs that I have seen are well above minimum wage, and so 
tend not to--
    Mr. Rokita. Anywhere, right?
    Mr. DeCamp. Right.
    Mr. Rokita. All right, fair enough.
    Mr. Chairman, thanks for the time again. I yield back.
    Chairman Walberg. I thank the gentleman.
    Now I recognize the ranking member, Mr. Courtney, for your 
five minutes.
    Mr. Courtney. Thank you, Mr. Chairman. Again, as was stated 
in the opening remarks and also in Dr. Sherrill's testimony, 
the department's reaction or response to the GAO study was that 
they agreed with its findings and pledged to, again, come up 
with an action plan to follow up in terms of changes to comply 
with the recommendations that GAO found.
    I would also ask, Mr. Chairman, we received a letter last 
night from Dr. Weil, that Ms. Conti referred to, that again was 
a follow up, again, to the initial reaction that was included 
in the report. I would ask that this letter be added to the 
record.
    And it clearly states that contrary to, you know, comments 
here about closing its doors to the employer community that the 
Wage and Hours Division is currently engaged in a national 
outreach effort to provide guidance, information and training 
prior to the new home care regulations.
    In addition, in the area of agriculture they are, again, 
issuing compliance information and even pocket cards for people 
in terms of giving them handy ways to, again, respond to some 
of the issues that people deal with every single day in the 
workplace.
    So, again, as Ms. Conti's testimony indicates, and I think, 
you know, under the new leadership of Secretary Perez we have a 
department that is actively following up with employers to try 
and give them the help that they need. So again, I would ask 
that this be made part of the record.
    [The information follows:]
    
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    Chairman Walberg. Without objection, and hearing none, it 
will be added.
    Mr. Courtney. And, Ms. Conti, I thank you for bringing up 
the 2008-2009 GAO report. I guess I have been around here long 
enough that I remember that hearing. And again, the report, 
frankly, was not, in my opinion a, you know, great report card 
for the Wage and Hour Division as it was presently operating 
right then. I mean, again, just looking at it and refreshing my 
recollection, some of the headings: undercover tests reveal 
inadequate investigations and poor complaint intake process; 
case studies show that Wage and Hours Division inadequately 
investigated complaints; Wage and Hours Division complaint 
intake process, conciliations and other investigative tools do 
not provide assurance of a timely and thorough response to wage 
theft complaints.
    So clearly we were not living in wage and hour paradise 
prior to the new leadership that is at the department right 
now. Frankly, that is not trying to take a cheap shot at people 
that--our predecessors. I mean, frankly, you know, that is 
the--we are all human beings and we all have to deal with 
challenges.
    But the fact of the matter is, the notion that--you know, 
that there was some bright line that took place on January of 
2009 in terms of the way the Department of Labor treats this 
critical area for low-income Americans has sort of cast us into 
this dark period. I mean, the fact is the report goes back 10 
years that we have here today, and frankly doesn't identify any 
sort of change of--sea change that has occurred with the 
department in terms of explaining the spike and the number of 
lawsuits.
    In fact, I mean, that report back in 2008-2009 showed a lot 
of workers were forced almost to go to private remedies because 
of the fact that the department was not picking up the ball. 
And that is a part of the record. I mean, that is not a 
partisan talking point.
    You deal with low-income workers in that population day in 
and day out. It has been 2007--the last time Congress passed a 
minimum wage increase. Can you talk about what is happening to 
the people that you see, that your agency represents?
    Ms. Conti. Absolutely. Tomorrow will actually mark the 
fifth anniversary of the last time the minimum wage has 
increased. During that period, we of course have gone through a 
recession and a recovery, which is not as robust as anybody 
would like. But the fact of the matter is, the price of housing 
has increased over the past 5 years. The price of our utility 
bills has increased. The price of food, clothing, consumer 
goods, gasoline has all increased over the last 5 years. Yet 
the lowest-wage workers in this country have not received a 
raise in 5 years. And when we look at the rates of wage growth, 
while it is certainly true that the federal government only 
mandates the floor, doesn't apply a ceiling, there is 
absolutely stagnant wage growth among the lowest-wage workers 
in this country.
    Quite frankly, among many middle class workers, as well, 
but particularly among the low-wage force. Because there is no 
upward pressure being put on wages from Congress, among other 
things. So those folks have not only stood still, but while the 
cost of living has gotten greater and their wages have stayed 
relatively the same, or, to the extent they have gone up, they 
certainly haven't gone up anything commensurate with the cost 
of living, they are falling further and further behind. And as 
you noted, that only increases their reliance on public 
benefits programs like SNAP as just one example.
    So it has been very dark times for them. And as they have 
seen companies recover, as they have seen shareholders recover, 
as they have seen the stock market boom and executive 
compensation boom and they have stayed the same, it has been 
very hard times for workers.
    Mr. Courtney. Thank you.
    Yield back.
    Chairman Walberg. I thank the gentleman.
    Now I have the pleasure of--I guess we go to--from a 
beautiful part of Wisconsin, my colleague, Mr. Pocan.
    Mr. Pocan. Thank you, Mr. Chairman. I appreciate it.
    Let me just offer a little, I guess, perspective as I look 
at this. I am a new member of Congress, but I have been a small 
business owner for over half my life. I opened a small business 
when I had hair 27 years ago, just to give you a little idea. 
And when I look at, you know, my expenses as a business, 
outside of my cost of sale of goods the single largest expense 
I have is--my operating cost--is labor cost. So what that means 
is, I am gonna try to follow the law really well because I 
don't want to spend a lot of money having other problems. So I 
would look at my insurance bill, I would look at my legal costs 
with the same thing--how do I find cost savings, make sure I am 
doing it efficiently.
    But when it comes to labor law, you know, it is pretty 
straightforward. And if I am going in an area where it is not 
straightforward--for example, one of the things I considered 
was should I hire an independent contractor to go out and do 
some sales on the outside. Then I have to make sure I am doing 
the right definition of independent contractor. I will take the 
time to look into it. So I think somewhat--this isn't in the 
category of rocket science, it is in the category of what is 
best for my business, for my pocketbook and complying with the 
law. And I also have a firm that does my payroll that also 
keeps me in contact.
    I am a small employer, five employees. So it is something 
that I think that some of the complaints maybe should fall in a 
different realm of maybe some compliments to the agency right 
now on what is getting done. I look at the scale of the agency: 
1,100 employees, and in 2012 it is estimated there is $280 
million in wage theft. If you look at robberies for the same 
year, it is estimated that is around $139 million. Yet we have 
about 780,000 law enforcement offices in this country. I am not 
saying it is the only thing they do, but when you have 700 
times the people for compliance for half the money maybe we are 
getting a pretty good result for the dollars that we put into 
this area.
    And I think when I look at the GAO study, you had one 
recommendation, if I am correct, Dr. Sherrill. And it is being 
complied with and followed. It seems to be that we are in a 
pretty good place here. And when you look at some of the past 
problems agencies had to where it is at today perhaps the 
question--if I could, I guess Dr. Sherrill just to really 
clarify this a little more--while there is a significant 
increase in these lawsuits the reason for the increase is 
difficult to determine was, I think the words that you used in 
the report. Is that correct?
    Mr. Sherrill. That is correct.
    Mr. Pocan. So it is not that the agency necessarily is 
doing something different. And as far as you know, not having 
the opinion letters, when I look at the vast number of other 
resources I can go to get the information about what the law 
is, including calling directly--I think there are still 26 
people in the compliance division that I can reach out to ask 
these questions--I still have plenty of resources to be able to 
do that.
    So I guess, Mr. Chairman, as much as I appreciate, you 
know, the conversation we are having today, I wish the 
conversation probably were around things like raising the 
minimum wage. Because the vast majority of low--low-income 
workers, who many of these people are affected not getting 
overtime, not getting their minimum wage, which is where these 
lawsuits come, could really benefit from a wage increase.
    But at least the department right now is helping them get 
some of their resources. And I know Mr. Rokita brought up the 
example of the oil company with the bonuses, and there is 
confusion around that. I mean, if I am an oil company, I am 
gonna give out bonuses that is gonna put me in a different part 
of the law I am gonna probably make sure I am in the correct 
part of the law. Because let's face it, Wal-Mart and McDonald's 
aren't offering bonuses to workers.
    We got issues around overtime and minimum wage whether or 
not they are getting that. So, Mr. DeCamp, if I can just ask 
you a quick question. I know you were in the department. But 
specifically, I mean, I am an employer. I know the vast 
majority of employers are following the law. But don't we need 
something in place for those who aren't, especially when it 
is--you know, we are talking $280 million just in the year 
2012.
    Mr. DeCamp. Well, sure. Absolutely. I mean, there has to be 
enforcement. There will be some employers out there, a 
relatively small proportion of employers, who no matter what 
guidance you provide are going to, on purpose, cheat their 
workers. That is going to happen. We need enforcement to deal 
with that. The challenge that has raised is, right now what we 
have seen of the department over the last five and a half years 
is the same enforcement approach taken to those employers, the 
willful bad actors, and to the non-willful employers, the vast 
majority of employers who are good employers. To every--
    Mr. Pocan. Now, you are referring specific to these 
letters, policy letters?
    Mr. DeCamp. Well, I am talking about we need vigorous 
enforcement, but we need calibrated enforcement. I mean, to a 
hammer everything looks like a nail. And that's--
    Mr. Pocan. Sure, but I think there is--you will agree there 
are certain industries and certain areas--three states where we 
saw most of these--that seem to have more problems. And I want 
the department to be doing what they are doing. And they are 
not bringing up most of the lawsuits. These are coming from 
individuals, correct?
    Mr. DeCamp. Well, from individuals and class actions. That 
is where most of the litigation is coming from. There is a 
great value in more guidance documents. We--it doesn't who up 
in terms of--it is very difficult to prove that a violation was 
prevented because the department issued an opinion letter.
    Mr. Pocan. Just because I see the yellow light, let me just 
ask this. As an employer, though, isn't it my job--the law, I 
think, is fairly straightforward unless you deviate into some 
interesting areas of how you pay your employee. If I am gonna 
go into one of those areas, shouldn't I do my due diligence 
before I put my toe into that water?
    Mr. DeCamp. With all due respect, your assumption is 
incorrect. The law is not that straightforward. There are lots 
and lots of gray areas. There are clear areas, too, for sure. 
But there is a very broad array of issues that are gray like 
these bonus issues, like who is an employee, like what counts 
as work. We have a case going to the Supreme Court right now on 
that. Really basic issues that employers are continuing to 
struggle with. Employers that are doing their best to comply 
with the law. I am not just talking about willful violators or 
employers that don't think about the law. I am talking about 
employers that are trying. Even they find it difficult to get 
it right.
    Mr. Pocan. Thank you, Mr. Chairman.
    Chairman Walberg. I thank the gentleman.
    And I recognize the gentleman from California, Mr. Takano.
    Mr. Takano. Thank you, Mr. Chairman. And thank you to our 
witnesses for their time today. You know, the Wage and Hour 
Division is the Department of Labor's most important tool to 
ensure that workers are receiving the pay and protections they 
are entitled to under the Fair Labor Standards Act.
    Since 2008, the Wage and Hour Division has helped recover 
$1 billion in wages for more than 1.2 million workers. That is 
$1 billion these workers can use to pay for necessities such as 
food, housing, health care and transportation; $1 billion that 
workers can put back into their local communities.
    Now, people who are head of corporations, with their vast 
network of relationships and interlocking boards, have no 
problem in getting their salaries incremented, even if there is 
questionable results that they do for their shareholders. I 
think it is common sense that Americans believe in a vigorous 
enforcement, especially of our low-wage workers. And that is 
why even with the Republican majority controlling the House of 
Representatives, we have passed four appropriations bills in 
the House with amendments that call for preventing the 
contracting with businesses that have a history of wage theft.
    And I don't think the Congress intended for those 
amendments to go to these gray areas that were mentioned by Mr. 
DeCamp, but by people who do cheat our low-wage workers. I 
mean, I think that is the relationship. Let's not kind of 
confuse this issue about what these amendments were about.
    Ms. Conti, could you comment on just what it means to have 
a fully confirmed director? We haven't had a fully confirmed 
director for eight years and how that might bring balance to 
this department.
    Ms. Conti. You know, it is something we are really excited 
about. And this is with no disrespect to Mr. DeCamp and the 
many other learned people who have filled the job in the 
interim between confirmed administrators. But they were often 
holding a seat for somebody else who was officially nominated 
for that job. You know, it stands to reason when you are an 
acting administrator it is not that time stands still, it is 
not that you don't look to continue to do better work, whatever 
your philosophy of enforcement and managing the division is.
    But the fact of the matter is that someone with Senate 
confirmation and the full reins of power over the Wage and Hour 
Division has authority vested in him or her to really move the 
agenda forward. And as I stated in my testimony, you know, Dr. 
Weil has spent his entire career thinking about these very 
issues; data-driven enforcement compliance, and what to do to 
get the best bang for the buck.
    As Mr. DeCamp could tell you better than I ever could, 
under the best of circumstances the Wage and Hour Division will 
always have limited resources, it will always have to do way 
too much with way too little because that is just the nature of 
the beast.
    So we need to look for the ways to get the biggest bang for 
the buck. To use enforcement not just to remedy abuses, but to 
create the greatest deterrent effect. And to structure 
compliance assistance and education for workers in ways that 
will reach the greatest number of people. And a fully-confirmed 
administrator will have the full authority to really go about 
that very aggressively. So we are looking forward to seeing 
what the next few years are going to look like for the Wage and 
Hour department.
    Mr. Takano. Thank you. Dr. Sherrill, the GAO recommended 
that the department be more strategic in its use of resources. 
And specifically the department is trying to comply by offering 
more general advice. And can you comment more about that?
    Dr. Sherrill. Yes. Our recommendation saw the need for 
improvements in the Wage and Hour Division's provision of 
compliance assistance in two key areas. One, first, they didn't 
have a sufficiently routine and systematic approach to getting 
information on where are the areas in which employers and 
others are requesting more guidance. So they need to--so our 
thought was, they need better information and a more systematic 
way to analyze where the inquiries for more clarification of 
the guidance is one aspect of that.
    And second, the Wage and Hour Division doesn't really have 
a data-driven approach to determining how adequate is the 
guidance that it actually issues. For example, it doesn't look 
at trends over time. Is it getting after an issues guidance, is 
it getting less requests for assistance in certain areas? So it 
agreed with both of those recommendations that we think are two 
key areas that could help it really better target the 
interpretive guidance that it provides.
    Mr. Takano. Yes. So devoting all of its resources into 
these very specific compliance--narrow, these narrow opinions--
is not necessarily the best use of their time.
    Dr. Sherrill. Well, the interpretive guidance is a key part 
of their compliance assistance. So it is not like we are 
necessarily arguing that they need to do more or less or 
different types. But our argument is basically you need to have 
a more systematic approach for how they do their interpretive 
guidance based on what information. So that helps target it, 
and to have information to assess what effect is it having.
    Mr. Takano. Okay, thank you.
    My time is up, thank you.
    Chairman Walberg. I thank the gentleman. I recognize myself 
for my five minutes of questioning. Ms. McKeague, would you 
like to comment further on DOL's decision to forego providing 
opinion letters containing fact-specific guidance to employees 
and its impact?
    Ms. McKeague. Yes, Mr. Chairman. The opinion letters are 
very helpful to those of us who are doing what Mr. Pocan just 
discussed, trying to work our way through the issues and make 
sure we do the right thing. And the use of examples, specific 
examples that a lot of us see in the workplace, helps us 
facilitate that process. For instance, calculating travel time 
and what payment we make for travel time is not easy, even if 
you do the work all the time like most of us do. And so the use 
of examples in those letters is very helpful.
    So I would welcome any sort of guidance we got in that 
manner.
    Chairman Walberg. The fact sheets aren't adequate for that?
    Ms. McKeague. The fact sheets help also, but sometimes an 
opinion letter gets attention from higher up in the department 
and pays more attention to current issues which may be 
problematic.
    Chairman Walberg. You mentioned in your testimony employee 
morale, workplace flexibility and several other things relative 
to your concerns about the employees that you are attempting to 
service well, as well as use well in their areas. Why do many 
employees prefer to be exempt?
    Ms. McKeague. You have hit on the key point and, for me, 
the biggest concern. They prefer to be exempt because they have 
more control over their work schedule. And it makes it easy for 
them to fulfill both their work and family obligations without 
feeling that they are letting either down. And as a non-profit 
or a small business, usually your org chart is pretty flat. And 
so people have widespread responsibilities. It is not uncommon 
to have only one person hold a specific job. So it is not like 
an administrative assistant, where you might have eight of 
them.
    But I might have, you know, a clinical specialist who is 
the only one. That is one of the things that makes MHA the good 
place to work that it is, the ability that we give our 
employees to determine how to do the work, when to do the work. 
And in our case, since we are servicing hospitals and across 
time zones, it makes sense to let people make those decisions.
    Chairman Walberg. Does it supply any prestige to employees 
to be in that particular classification?
    Ms. McKeague. Absolutely. You know, one of the things is..
    Chairman Walberg. And that is important to them beyond 
remuneration or it is just another component?
    Ms. McKeague. If a person is already fairly compensated, I 
would say it is important to them beyond remuneration. One of 
the toughest discussions I have with an employee is going back 
to review their job description and how they spent their usual 
day at work to determine whether they still met the test to be 
either exempt or non-exempt. And if I have to tell an employee 
who has been exempt that we are moving them to non-exempt 
status, they still hear the old language.
    Chairman Walberg. It is a step backwards.
    Ms. McKeague. From professional to non-professional staff, 
that is how they view it.
    Chairman Walberg. Dr. Sherrill, could you elaborate--
relatively briefly, but could you elaborate on the information 
GAO reviewed in order to draw conclusions about the reasons for 
increased FLSA litigation?
    Dr. Sherrill. Yes. We basically relied on obtaining 
perspectives from experts in the area; judges, plaintiffs and 
employers' attorneys who defend these kinds of Fair Labor 
Standards Act lawsuits, academics, et cetera. And we basically 
asked these stakeholders who are very familiar with the area, 
in their view what are the key factors that have contributed to 
this substantial rise in lawsuits over the years, especially in 
the last decade. So we weren't able to definitively quantify or 
sort of make an exact determination here. But what we found is 
that the most frequently cited factor was increased awareness 
of these lawsuits. And increased, attorneys' increased 
willingness to take on these lawsuits, over time, was the most 
frequently cited factor across the stakeholders we talked to.
    In addition, we found a range of other factors that I 
mentioned; evolving case law, recent economic conditions, state 
wage and hour laws, and ambiguity in applying some of the laws 
and regulations, especially with the white collar exemptions. 
So it was a range of factors that people cited.
    Chairman Walberg. Okay. Quickly, Mr. DeCamp, could you just 
point out a few activities used more frequently by this 
administration and its impact upon the stakeholders?
    Mr. DeCamp. Well, sure. They have been very aggressive with 
using civil money penalties for what they regard as repeated 
violations. In other words, an employer could have a small 
violation three, 5 years ago affecting a handful of employees 
or even one employee. And then in the current year, they have a 
totally different type of violation, but also under Fair Labor 
Standards Act. It could be at a different facility, a different 
state. The employer now will face civil money penalties as a 
repeat violator of up to $1,100 per affected employee now. And 
that can be hundreds of thousands of dollars or more of 
penalties for a non-willful violation.
    Chairman Walberg. Confused and uncertain and stepped over 
the line.
    Mr. DeCamp. Yes. And you can also see a very aggressive use 
of liquidated damages, which is double the back pay. The 
department has been increasingly insisting on liquidated 
damages as a condition of settling a case administratively, 
even when there is no willful misconduct. It has made it very 
challenging for employers to settle cases.
    They have also been very aggressive with bringing 
litigation and with public press releases to shame employers 
that the department feels violated the FLSA. It is a very 
adversarial relationship that is not calibrating between 
drawing the distinction between willful bad actors and 
employers who made a good faith mistake.
    Chairman Walberg. Hammer and nail.
    Mr. DeCamp. Yes.
    Chairman Walberg. Well, thank you. My time has expired. And 
I certainly appreciate the testimony given, as well as the 
answers and the questions from the committee. So now let me 
recognize the ranking member for any closing comments that you 
might have.
    Mr. Courtney. Thank you, Mr. Chairman. I want to thank all 
the witnesses for your testimony today, and particularly Dr. 
Sherrill who, again, GAO is no stranger to this part of the law 
or department. Again, you have looked at Wage and Hour over the 
years. Again, the last time this committee did it, in 2008 and 
2009, I would characterize the GAO report as stinging in terms 
of its conclusions and its recommendations.
    And again, just to read a very short portion of, again, the 
GAO report back in 2009, this is what it said: ``This 
investigation clearly shows that the Department of Labor has 
left thousands of actual victims of wage theft who sought 
federal government assistance with nowhere to turn. Our work 
has shown that when Wage and Hours Division adequately 
investigates and follows through on cases they are often 
successful. However, far too often many of America's most 
vulnerable workers find themselves dealing with an agency 
concerned about resource limitations with ineffective processes 
and without certain tools necessary to perform timely and 
effective investigations of wage theft complaints. 
Unfortunately, far too often the result is unscrupulous 
employers taking advantage of our country's low-wage workers.''
    Again, that was in 2009. We had a change of administration. 
Secretary Solis did beef up the department, brought on more 
staff. Because that was, frankly, the department's sort of 
response back in--when GAO did the last report. And they did 
beef up protections for workers, which GAO was telling Congress 
in pretty strong language was leaving some of the most 
vulnerable workers in America's economy basically without any 
remedy to deal with what was clearly violations.
    Again, move, fast-forwarding to today's GAO report, you 
know, there is no question there probably needs to be some 
rebalancing here in terms of giving employer guidance. But the 
good news is, the department is not contesting that. Again, 
they are not here to speak for themselves. You know, I frankly 
don't understand that myself personally. But nonetheless, the 
record is clear. They agreed with the findings, they are moving 
forward in terms of trying to respond to those findings. We 
even had an updated report here this morning that is entered to 
the record that confirms that fact.
    But again, in the meantime we are dealing at a time in 
America's economy where income disparity is growing, where the 
cost of living for people who are out there every day, 
particularly single parents with kids are struggling to keep up 
with putting food on the table. Where public budgets are being, 
I think, unnecessarily expended because of trying to make up 
for the gap in that.
    And this Congress needs to move on H.R. 1010. Yesterday, we 
had a wonderful bill signing at the White House that had almost 
no press coverage. The Workforce Investment Act. But it was a 
beautiful sight to see a bipartisan array of legislators who 
sometimes debate very passionately, behind the President 
signing an update to The Workforce Investment Act.
    Hadn't happened since 1998. So the fact is, it is--
    Chairman Walberg. Not noteworthy, not noteworthy. 
Bipartisan.
    Mr. Courtney. And it is possible, you know, for people to 
come together. And as these numbers show over here, I mean, the 
fact is, is that there are thousands of Americans that frankly 
need help. And that they are begging this Congress to move 
forward on. So again, the good news is today I think we 
actually have positive movement, based on what GAO came forward 
with. Let's build on that. Let's pass H.R. 1010.
    And with that, I yield back the balance of my time.
    Chairman Walberg. I thank the gentleman.
    And it is challenging to come up with a understanding of 
why something as bipartisan as that yesterday with the 
President, joining with members of both parties, both houses, 
working together to do something of significance that pushes 
forward the opportunity for job growth, for the growth of, as 
we said in the Declaration of Independence, ``the pursuit of 
happiness'' in this country, of individuals having that 
training and opportunity--that that isn't noteworthy. But there 
are questions in my life I will never have answered, and that 
will just be one of them maybe.
    I would also echo some of the statements that my Democrat 
colleagues have about Secretary Perez and his openness to take 
our phone calls, to respond to some of our concerns. Not 
sometimes as completely as we would like, but nonetheless there 
is response. And I certainly want to add my kudos to his 
efforts.
    And yet, we want to continue pushing forward. And this 
hearing today is for that purpose; to add our support, our 
encouragement to continue working in an area that is causing 
challenges. And, in some ways I will remember the use of--to a 
hammer, everything is seen as a nail--and probably use that 
more.
    Because that is an approach that is of a concern in an 
economy that I don't think we can say has turned around. That 
continues to struggle, that the economic indicators that we saw 
as recently as last week that are building again, if they 
continue as history says they will continue is indicating we 
are going into another recession. We are not coming out of this 
appropriately. And so to not be careful how we deal with both 
the employee and the employer, you know, I appreciate the chart 
that has been put up here. But that chart doesn't talk about 
what CBO, what GAO I believe as well in the report said that to 
increase it to this level will cost 500,000 jobs.
    I am concerned about that in my district. When I see the 
numbers here, I also don't see the numbers of jobs that will be 
lost as a result of doing this. Do we want people to expand in 
their income capabilities? Absolutely yes. We want living 
income that goes on. And so I am concerned about my middle 
class, as well. People that are in these type of jobs, exempt 
and non-exempt, having the opportunity, an employer base that 
generally, across the board, is attempting to work together. 
Not violate the system, not be punitive to individuals, not 
hold people back. But to expand. That we make sure that we do 
not have the adversarial relationship, based upon a law that is 
outdated, outmoded, doesn't identify with the present situation 
that we have in place.
    We want to grow the middle class, we want to grow the 
economy, we want to give opportunity for flexibility in the 
workplace, we want to give opportunity for advancement as well. 
And that comes with identifying issues as partners in the 
process, and not adversarial relationship of regulation by 
shaming. So we will keep working on this. I think it is an 
important question. There are plenty of other questions we can 
deal with, but this is one we want to deal with today.
    And I want to say to our panel I appreciate all of you 
sharing your point of view, your background, your experience 
with us today. It will be important data put into our record, 
giving us direction on where we go from here. Having said that, 
with no further action coming before this Subcommittee, we will 
call it adjourned.
    [Whereupon, at 11:17 a.m., the Subcommittee was adjourned.]

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