[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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