[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
REVIEWING THE RULES AND
REGULATIONS IMPLEMENTING
FEDERAL WAGE AND HOUR STANDARDS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. House of Representatives
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JUNE 10, 2015
__________
Serial No. 114-18
__________
Printed for the use of the Committee on Education and the Workforce
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: www.gpo.gov/fdsys/browse/
committee.action?chamber=house&committee=education
or
Committee address: http://edworkforce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
94-823 WASHINGTON : 2016
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN KLINE, Minnesota, Chairman
Joe Wilson, South Carolina Robert C. ``Bobby'' Scott,
Virginia Foxx, North Carolina Virginia
Duncan Hunter, California Ranking Member
David P. Roe, Tennessee Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania Susan A. Davis, California
Tim Walberg, Michigan Raul M. Grijalva, Arizona
Matt Salmon, Arizona Joe Courtney, Connecticut
Brett Guthrie, Kentucky Marcia L. Fudge, Ohio
Todd Rokita, Indiana Jared Polis, Colorado
Lou Barletta, Pennsylvania Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada Northern Mariana Islands
Luke Messer, Indiana Frederica S. Wilson, Florida
Bradley Byrne, Alabama Suzanne Bonamici, Oregon
David Brat, Virginia Mark Pocan, Wisconsin
Buddy Carter, Georgia Mark Takano, California
Michael D. Bishop, Michigan Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma Alma S. Adams, North Carolina
Carlos Curbelo, Florida Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia
Juliane Sullivan, Staff Director
Denise Forte, Minority Staff Director
------
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
TIM WALBERG, Michigan, Chairman
Duncan Hunter, California Frederica S. Wilson, Florida,
Glenn Thompson, Pennsylvania Ranking Member
Todd Rokita, Indiana Mark Pocan, Wisconsin
Dave Brat, Virginia Katherine M. Clark, Massachusetts
Michael D. Bishop, Michigan Alma S. Adams, North Carolina
Steve Russell, Oklahoma Mark DeSaulnier, California
Elise Stefanik, New York Marcia L. Fudge, Ohio
C O N T E N T S
----------
Page
Hearing held on June 10, 2015.................................... 1
Statement of Members:
Walberg, Hon. Tim, Chairman, Subcommittee on Workforce
Protections................................................ 1
Prepared statement of.................................... 4
Wilson, Hon. Frederica S., Ranking Member, Subcommittee on
Workforce Protections...................................... 6
Prepared statement of.................................... 8
Statement of Witnesses:
Berberich, Ms. Nicole, Human Resources Director, Cincinnati
Animal Referral and Emergency Center (CARE), Cincinnati, OH 12
Prepared statement of.................................... 14
Court, Mr. Leonard, Senior Partner, Crowe and Dunlevy,
Oklahoma City, OK.......................................... 22
Prepared statement of.................................... 24
Harris, Hon. Seth D., Former Acting U.S. Secretary of Labor
and Deputy U.S. Secretary of Labor, Distinguished Scholar,
Cornell University School of Industrial and Labor
Relations, Ithaca, NY...................................... 34
Prepared statement of.................................... 36
Richardson, Mr. Jamie, Vice President of Government and
Shareholder Relations, White Castle System, Inc., Columbus,
OH......................................................... 50
Prepared statement of.................................... 53
Additional Submissions:
Takano, Hon. Mark, a Representative in Congress from the
State of California:
Report from the National Employment Law Project.......... 73
Walberg, Hon. Tim, Chairman, Subcommittee on Workforce
Protections:
Statement submitted on behalf of the National Restaurant
Association............................................ 85
Letter dated June 9, 2015, from the National Association
of Home Builders....................................... 93
Report from the U.S. Government Accountability Office
dated December 2013, Fair Labor Standards Act, The
Department of Labor should Adopt a More Systematic
Approach to Developing Its Guidance.................... 95
Ms. Wilson:
Letter dated April 9, 2015, from National Women's Law
Center................................................. 132
REVIEWING THE RULES AND REGULATIONS
IMPLEMENTING FEDERAL WAGE AND HOUR
STANDARDS
----------
Wednesday, June 10, 2015
U.S. House of Representatives
Subcommittee on Workforce Protections
Committee on Education and the Workforce
Washington, D.C.
----------
The subcommittee met, pursuant to call, at 10:02 a.m., in
Room 2175, Rayburn House Office Building, Hon. Tim Walberg
[Chairman of the subcommittee] presiding.
Present: Representatives Walberg, Thompson, Rokita, Brat,
Stefanik, Wilson, Clark, DeSaulnier, and Fudge.
Also present: Representatives Kline, Scott, and Takano.
Staff present: Janelle Belland, Coalitions and Members
Services Coordinator; Ed Gilroy, Director of Workforce Policy;
Callie Harman, Staff Assistant; Tyler Hernandez, Press
Secretary; Nancy Locke, Chief Clerk; John Martin, Professional
Staff Member; Brian Newell, Communications Director; Krisann
Pearce, General Counsel; Molly McLaughlin Salmi, Deputy
Director of Workforce Policy; Alissa Strawcutter, Deputy Clerk;
Alexa Turner, Legislative Assistant; Tylease Alli, Minority
Clerk/Intern and Fellow Coordinator; Austin Barbera, Minority
Staff Assistant; Denise Forte, Minority Staff Director;
Christine Godinez, Minority Staff Assistant; Carolyn Hughes,
Minority Senior Labor Policy Advisor; Eunice Ikene, Minority
Labor Policy Associate; Brian Kennedy, Minority General
Counsel; Kevin McDermott, Minority Senior Labor Policy Advisor;
Amy Peake, Minority Labor Policy Advisor; Kiara Pesante,
Minority Communications Director; Dillon Taylor, Minority Labor
Policy Fellow.
Chairman Walberg. A quorum being present, the subcommittee
will come to order.
Good morning, and welcome, to all of our guests.
I would like to thank our witnesses for joining us today to
examine the rules and regulations guiding implementation of
federal wage and hour standards.
For more than 75 years--that is older than the Chairman, I
am happy to say, and the Chairman of the full Committee, too--
--
Mr. Kline. I am happy, too.
[Laughter.]
Chairman Walberg [continuing]. I think all of us here at
the table.
The Fair Labor Standards Act has been the foundation of our
nation's wage and hour protections. It establishes important
rights for American workers and continues to guide employers in
protecting those rights.
However, the workplace looks very different today than it
did in 1938 when the law was enacted, and the rules and
regulations defining the law are failing to meet the needs of a
twenty-first century workplace. Regulations that made sense
long before the advent of smartphones and telecommuting simply
don't work in the modern economy.
Failing to keep up with the changing workplace, the law's
regulatory structure has become more complex and burdensome.
Both employees and employers have difficulty understanding
their rights and their responsibilities and must constantly
contend with conflicting legal interpretations of the law.
Despite sincere efforts to act in the best interest of
workers, many well-intentioned employers face costly legal
battles because of a flawed regulatory structure, and we have
evidence to back that up.
A report from the nonpartisan Government Accountability
Office revealed a surge in FLSA lawsuits during the past 20
years, with the number of lawsuits increasing by 514 percent
since 1991. Let me repeat that. There has been a 514 percent
increase in FLSA-related litigation over the last 25 years.
That is a troubling increase and strong indication that
something isn't working.
To help address this significant problem, GAO urged the
Department of Labor to--and I quote--``develop a systematic
approach for identifying areas of confusion about the FLSA that
contribute to possible violations and improving the guidance it
provides to employers and workers in those areas.''
Simply stated, we need a system that holds bad actors
accountable when they break the law, but that also helps law-
abiding employers uphold their obligations. I hope some of our
witnesses will shed light on whether the department is
implementing GAO's recommendation and what impact it may be
having on our nation's workplaces.
However, even the best administrative guidance cannot make
up for other shortcomings that exist and are harming those
working hardest to jump-start the economy. This isn't the first
time these concerns have been raised. In fact, this
subcommittee has held a number of hearings in recent years
looking at the very same issue.
It has been a focus of our continued oversight for a simple
reason: we want to ensure that regulations that underpin the
Fair Labor Standards Act serve the best interests of both
American workers and employers.
As Chairman Kline and I noted a year ago, we are ready and
willing to be a partner in a responsible effort to modernize
current regulations, but I would stress that it must be a
responsible effort. The American people deserve a system that
is simple, clear, and can meet the demands of the modern
workforce. The last thing policymakers should do, including
those in the administration, is to make a bad regulatory system
worse.
In the coming days the department is expected to release a
proposal intended to update federal wage and hour regulations.
Rumors are running rampant, and we know concerns are being
raised about what the proposal may entail.
Thanks to an administration notorious for overreaching and
governing through executive fiat, I share many of those same
concerns. I expect we will continue to hear about the
consequences for workers and job creators if the administration
goes too far in the regulatory proposal it is expected to
release.
However, hope springs eternal, and it is my hope the
department will heed these concerns and ultimately put forward
a proposal that encourages rather than stifles productivity,
personal opportunity, and economic growth. Any proposal that
would inflict harm on the nation's workplaces and move the
country in the wrong direction will be opposed by this
Committee and, no doubt, the American people.
With that, I now recognize the senior Democratic member of
the subcommittee and Ranking Member, Representative Frederica
Wilson, for her opening remarks.
[The statement of Chairman Walberg follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Wilson. Thank you, Chairman Walberg, and thank you for
holding this hearing today and giving us an opportunity to talk
about the Fair Labor Standards Act.
And thank you to our panelists for attending.
And thank you to the audience for having a keen interest in
this issue.
Later this month marks 77 years, as it was stated, since
this landmark law was passed. The Fair Labor Standards Act was
passed in a time when workers simply were not valued. Women,
children, immigrants, people of color all were exploited and
made to work unreasonably long hours for starvation wages.
Since its passage, the FLSA has been a powerful tool in
helping workers assert their rights to fair wages and
reasonable hours. Since the FLSA was passed, Congress has made
the necessary updates to ensure that the law continues to
protect workers. Congress must continue with this legacy and
update the FLSA to reflect current economic and employment
realities.
The reality is that this country is facing a dire income
inequality problem. In the last 40 years hourly pay for the
average worker has increased 9 percent while worker
productivity has increased almost 75 percent. At the same time,
top earners have seen astronomical increases in pay.
The looming problem of income inequality threatens to gut
our middle class, create a permanent under class, and dismantle
the American dream of building economic wealth and financial
stability.
This problem not only hurts the individual, but the
American economy as a whole. When less and less money goes to
low-and middle-income workers, less and less money is spent in
our consumer-based economy. Less money spent on goods and
services means fewer jobs. Fewer jobs mean fewer Americans
working and contributing to our tax base.
It is a vicious cycle that ends in economic turmoil and
despair for millions of Americans. We must address the issue of
income inequality, and we must do it now.
We do that by strengthening the FLSA with much-needed
updates. We must update the FLSA by passing the Paycheck
Fairness Act to strengthen equal pay protections. We can no
longer devalue the contributions our daughters, sisters, and
wives make to our economy.
We must update the FLSA by passing the Raise the Wage Act,
to raise the minimum wage. We can no longer insist that people
pull themselves up by their bootstraps when they make the
poverty wages that ensure they will never be able to stay
afloat, let alone get ahead. How do you pull yourself up by the
bootstraps when you have no boots?
We must update the FLSA by modernizing the salary
thresholds for overtime workers. We can no longer pretend that
workers who toil 60 or more hours a week and take home $23,660
a year are paid fair wages.
We must update the FLSA by expanding overtime and minimum
wage protections to home health care workers. We can no longer
justify depriving these workers of these basic protections
while entrusting them to care for our aging parents and
disabled family members. We are almost there ourselves.
Just as we must update the FLSA, we must, for the sake of
income inequality, be wary of rolling back its protections. We
cannot support efforts to strip workers of their overtime no
matter what form it takes, no matter how good the intentions.
Eroding workers' rights to overtime pay will put us back to
the days where the economically vulnerable workers faced the
illusionary choice between working for far less than they are
worth or not working at all.
Labor laws like the FLSA were passed for a reason. That
reason was to protect workers. And we are the Workforce
Protections Subcommittee.
I look forward to hearing from the witnesses and what we
can do to strengthen the FLSA and to continue to protect
workers.
Thank you, Mr. Chair.
[The statement of Ms. Wilson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. I thank the gentlelady.
Pursuant to Committee rule 7(c), all subcommittee 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
statements, questions for the record, and other extraneous
material referenced during the hearing to be submitted in the
official hearing record.
It is now my pleasure to introduce today's witnesses.
First is Ms. Nicole Berberich, who is the human resources
director for the Cincinnati Animal Referral and Emergency
Center, CARE, in Cincinnati, Ohio. Ms. Berberich's specialties
include HR policies and procedures, training and employee
development, employee and labor relations, benefits
administration, and workers' compensation.
Welcome.
Mr. Leonard Court is a senior partner with Crowe and
Dunlevy of Oklahoma City, Oklahoma. Since 1997, Mr. Court has
served as a member of the U.S. Chamber of Commerce Labor
Relations Committee. In 1999, he was appointed chairman of the
Wage, Hour, and Leave Subcommittee.
Welcome.
Mr. Seth Harris is a distinguished scholar with Cornell
University School of Industrial and Labor Relations in Ithaca,
New York. From May 2009 until January 2014, Mr. Harris served
as Deputy Secretary of Labor at DOL, overseeing functions
ranging from strategic planning and performance management to
legislation and policy development and implementation. He
briefly served as Acting Secretary of Labor following the
resignation of Hilda Solis in January of 2013 until Secretary
Perez's confirmation in July of 2013.
Welcome back.
Mr. Jamie Richardson is vice president of government and
shareholder relations with White Castle System, Incorporated,
of Columbus, Ohio. His primary responsibilities include
government affairs, shareholder relations, public relations,
and corporate philanthropy. He joined White Castle in 1998 and
has previously served as director of marketing for the company.
Welcome, and crave on.
I will ask now the witnesses to stand and raise your right
hand. We have the normal process of swearing in at this point.
[Witnesses sworn.]
Let the record reflect the witnesses answered in the
affirmative.
And you may take your seats.
Before I recognize you to provide your testimony, let me
briefly explain our lighting system. A number of you have gone
through this multiple times, but just to remind, you have five
minutes for your testimony. We expect that you will keep fairly
close to that.
When the yellow light goes on it means one minute
remaining. Wrap up your statements as close to the ending time
when the red light goes on as is possible.
And as the Chairman of the full Committee has established,
I will, as well, expect that our Committee members will keep to
the five-minute time for questioning.
Having said that, I now recognize Ms. Berberich for your
five minutes of testimony.
STATEMENT OF MS. NICOLE BERBERICH, HUMAN RESOURCES DIRECTOR,
CINCINNATI ANIMAL REFERRAL AND EMERGENCY CENTER (CARE),
CINCINNATI, OHIO, TESTIFYING ON BEHALF OF THE SOCIETY FOR HUMAN
RESOURCE MANAGEMENT
Ms. Berberich. Chairman Walberg, Ranking Member Wilson, and
distinguished members of the subcommittee, my name is Nicole
Berberich, and I am the human resources director at the
Cincinnati Animal Referral and Emergency Center, or CARE
Center, in Ohio. In my role I oversee all HR policies and
procedures, including employee classifications under the Fair
Labor Standards Act, the FLSA.
I appear before you today on behalf of the Society for
Human Resource Management, or SHRM. Thank you for the
opportunity to testify today on my experience with the FLSA and
implementing regulations.
Mr. Chairman, the FLSA may have been appropriate in the
1930s, but it is out of step with our modern, technology-based
economy, creating unnecessary regulatory burdens for our
employers and hindering the ability of employers to be flexible
and address contemporary employee needs. Furthermore, as the
millennial generation becomes the majority of employees in the
American workforce, the demand for greater use of technology
and flexibility will only continue to grow.
Allow me to tell you a little about my organization. CARE
Center is an emergency and multi-specialty veterinary practice
located in Cincinnati and Dayton, Ohio. Our team of skilled
emergency and specialty staff provide 24-hour care seven days a
week to the patients and clients we serve.
Small businesses with a one-person HR department, like CARE
Center, are likely to experience these regulatory burdens
disproportionately, which will likely grow in complication with
expected changes to FLSA overtime regulations later this month.
I would now like to highlight challenges my organization
faces when it comes to implementing flexible arrangements under
the FLSA. Most notably, the law prohibits private sector
employers from offering nonexempt employees paid time off or
comp time instead of overtime compensation, even though public
sector employees have access to this type of flexibility.
At CARE Center, many hourly employees prefer the option of
comp time, to have more time off to spend with their families,
instead of overtime pay. The veterinary sciences sector
attracts a workforce dedicated to animal health. Our employees
aren't there for the money.
We have to monitor our labor expenses closely and try to
identify other ways to attract and retain our workforce through
competitive employee benefits. Allowing for comp time would
provide my organization with an additional workplace
flexibility option to attract top talent.
Another opportunity to provide flexibility to our workforce
is through biweekly work weeks. Under the FLSA, employers are
permitted to allow a nonexempt employee to work four 10-hour
days Monday through Thursday for a total of 40 hours in a week
and take every Friday off without the employer incurring any
overtime obligations. But if our organization wanted greater
flexibility, we run into challenges.
For example, some of our veterinarians developed a schedule
to meet the emergency care needs of our clients by working 50
hours in one week and 30 hours in the next. The CARE Center
wants to structure the workplace so that our doctors work with
the same technicians and assistants on cases. Working as a
dedicated team builds rapport between the doctors and technical
staff and cultivates a positive work environment that maximizes
patient care.
In the end, I was unable to allow the hourly technicians
and assistants to work alongside those same veterinarians under
their proposed schedule because of the overtime payments that
would be incurred.
Mr. Chairman, today's hearing is timely, given the fact
that DOL is proposing changes to overtime regulations soon. I
fully anticipate our practice will be impacted by these
changes.
We have internal medicine and surgery supervisors who I
recently reclassified as exempt employees due to their
managerial and professional responsibilities within our
organization. If the salary threshold is doubled, those
employees would lose their exempt status and will return to
hourly, nonexempt status, which they will view as a demotion.
Also, as a 24/7 organization, further changes to the
primary duties test requiring additional tracking of exempt
time or the elimination of the ability for managers to do both
exempt and nonexempt work concurrently would greatly impact our
workforce. As a small business, managers may pitch in to work
at the front desk, answer phone calls, and care for patients.
Our emergency surgery and internal medicine technical
supervisors work on the floor as well as manage their
departments. Removing the ability to perform these concurrent
activities would eliminate many opportunities to homegrow our
technicians that have ambitions to become supervisors.
In closing, SHRM is concerned that upcoming changes to the
FLSA overtime regulations will further exacerbate an already
complicated set of regulations for employers and would have the
unintended consequence of limiting workplace flexibility for
employers and employees.
Mr. Chairman, thank you again for allowing me to share my
experiences and SHRM's view on the rules and regulations
governing the FLSA. I welcome your questions.
[The statement of Ms. Berberich follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. I thank you.
Mr. Court, we recognize you for your five minutes of
testimony.
STATEMENT OF MR. LEONARD COURT, SENIOR PARTNER, CROWE &
DUNLEVY, OKLAHOMA CITY, OKLAHOMA, TESTIFYING ON BEHALF OF THE
U.S. CHAMBER OF COMMERCE
Mr. Court. Thank you, Mr. Chairman, Ranking Member, and
members of the Committee.
On behalf of the U.S. Chamber of Commerce, I submitted a
written presentation that covers two separate topics. The first
is changes that are necessary to bring a statute passed in 1938
into the twenty-first century. In it are suggestions
concerning, for instance, the updating of the computer expert
exemption, the addition of an inside sales exemption.
And I will leave my written comments and the comments of my
fellow panelists to cover those, because what I want to focus
on is the second part.
What we are talking about today is, in part, the
regulations as they will be in the paper or will be in the
publications. What I want to talk to you about is how they are
being enforced in the field, because we have great concern at
the Chamber over the enforcement procedures that we are
beginning to see over the last five to six years that we think
are beyond the pale and in many respects simply abusive.
In that regard, I want to focus on three topics.
First, a deliberate pattern of now encouraging employers
not to use legal counsel as part of an investigation. I have
given you examples in my written paper, but the most recent one
was too recent to even make it. This week one of my colleagues
had a wage and hour investigator meet with her. The second
question out of that investigator's mouth was, ``What is the
employer trying to hide since they have hired an attorney?''
When my colleague indicated that the employer was going to
exercise their right to have the attorney sit in for interviews
with management personnel, as they often do, again, as part of
the enforcement policy of the current administration, the
investigator said to her, ``This investigation will be quicker,
it will be easier if you do not participate.'' There seems to
be a fear among wage and hour investigators of having
experienced attorneys sitting in on the investigative process.
The second problem deals with what I would call compelled
settlements with no time to consider them. I have given you
three examples in my written presentation of situations where,
after taking months for an investigation, the investigator
comes to the closing conference, presents the settlement, and
demands an immediate signature without any time for
consideration, whether that be from the individual who is
involved seeking legal counsel or, as in one of the examples, a
multistate corporation where the human resources director
needed to run the settlement by his boss and up the chain of
command. But the threat was, ``If you do not sign it today we
will immediately refer it to litigation.''
The third area is the dramatic increase in the use of civil
money penalties and liquidated damages. As you know, liquidated
damages are essentially double damages that are meant for
willful violations. The statute specifically empowers the
court, not the Department of Labor, to impose those damages.
But as part of the new settlement process of this
administration, we are finding more and more that a demand is
being made not just to give back pay, but to pay double damages
and civil money penalties.
Two of the examples in my paper, if you were talking about
a retail establishment or a used car salesman, would be called
bait and switch. Indications both from attorneys in Washington,
D.C., and attorneys in Mississippi--all over the United
States--where the investigators are coming in, settling claims,
saying, ``You don't have to worry about liquidated damages,''
and then after the amount of settlement has been agreed to by
the employer, then coming in with a second person now demanding
that liquidated damages be paid or that adverse publicity would
occur in the newspaper.
In addition to these three areas of enforcement that I say
are questionable at best, we have also seen a dramatic decrease
in the amount of employer assistance in trying to comply with
the wage and hour regulations. You will hear today and have
heard before the fact that small employers in particular need
assistance in understanding what these regulations mean.
And yet, this administration has announced and deliberately
discontinued the practice of issuing opinion letters where I,
as an employer, can give a specific factual situation to the
Department of Labor and ask how this situation should be
handled and how the law would be applied. The opinion letter
gave the employer a safe harbor so that when it got direction
from the Department of Labor it could rely upon that in going
forward with its interpretation of the law.
This administration has discontinued the use of those
opinion letters and in its place now has indicated that what
they want to do is issue administrative interpretations. But
there are two problems. First, we are getting virtually none
being issued. Second, they do not appear to have that safe
harbor protection for the employer so that relying upon them
will give a defense.
So in closing, I would simply urge you to take a look not
only at what the regulations say, but the tactics that are
being used by the current administration in forwarding their
investigations. We at the Chamber believe that is a significant
problem.
[The statement of Mr. Court follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Thank you, Mr. Court.
Now I recognize Mr. Harris for your testimony.
STATEMENT OF HON. SETH D. HARRIS, FORMER ACTING U.S. SECRETARY
OF LABOR AND DEPUTY U.S. SECRETARY OF LABOR, DISTINGUISHED
SCHOLAR, CORNELL UNIVERSITY SCHOOL OF INDUSTRIAL AND LABOR
RELATIONS, ITHACA, NEW YORK
Mr. Harris. Thank you very much, Mr. Chairman.
Mr. Chairman, Ranking Member Wilson, Chairman Kline,
Ranking Member Scott, it is good to be with both of you again,
and thank you for the opportunity to testify today. Let me note
that I am speaking only for myself, not the various
organizations with which I am affiliated or in the past have
been affiliated.
America's working families are suffering through a decades-
long wages crisis, but neither stagnant wages nor growing
income inequality is a foregone conclusion. Public policy
matters. Congress and the Obama administration must do more.
Most American workers have struggled with stagnant real
wages for decades. While there are several alternative measures
of wages and earnings, they all tell essentially the same
story. The average American worker has not received a
meaningful raise since before Ronald Reagan was elected
president.
Real wages have begun to rise again under President Obama,
yet the pace of wage growth is slow and the amount is too small
to help American families recover from the decline in household
incomes caused by the Great Recession. Real median household
incomes in the United States remain well below their pre-
recession levels.
The story is different for the wealthiest Americans. Their
incomes and wages have continued to grow substantially faster
and more than those of the average family.
Since 1979, productivity has almost doubled. Our economy
has more than doubled in size. But working families are not
receiving their fair share of this growth.
Households in the top 10 percent of incomes used to take in
one-third of our national income. Now they take in half. The
ratio of the average top 1 percent household's wealth to the
median American family's wealth in 2015 is more than twice the
ratio in 1983.
The rich are getting richer, and the richest of the rich
are doing best of all.
The wages crisis has hurt working families and our economy.
Seventy percent of the U.S. economy is consumption--that is
working-class and middle-class families, among others, buying
goods and services.
If working families' wages, incomes, and wealth do not
rise, then the American economy will remain locked in a cycle
of slow growth. We are pressing the accelerator, but we also
have our foot on the brake.
A few policy proposals within this subcommittee's
jurisdiction would help ameliorate the wages crisis and
contribute to narrowing income inequality.
First, Congress must raise the minimum wage, including for
tipped employees. The Raise the Wage Act would increase the
federal minimum wage to $12 per hour by 2020. An increase in
the minimum wage also would be extended to so-called tipped
employees whose federal minimum wage rate has been stuck at
$2.13 for 20 years. This Committee should approve the Raise the
Wage Act immediately.
Second, we must expand minimum wage and overtime coverage
to low-wage workers, like home health aides. In 1975, the Labor
Department effectively excluded home health aides and other
similar workers from minimum wage and overtime protections. The
home health care industry has changed dramatically, and the
regulations must change along with it.
The Labor Department's new regulations were blocked by a
poorly reasoned district court decision I expect will be
reversed by the U.S. Court of Appeals, and rightly so. When it
is, the Labor Department should immediately implement the new
regulations while ensuring that higher wages for home health
aides do not result in reduced assistance to those they serve.
Third, the Labor Department should expand eligibility for
overtime, and Congress should not narrow eligibility. OMB is
reviewing draft-proposed regulations that would update the
rules defining the exemption of executive, administrative, and
professional employees from FLSA coverage. I hope the Labor
Department will update the salary threshold which must be
reached before a worker is exempt.
Also, to address employer frustration with ambiguity in the
existing rules, the proposed regulation should clarify the
meaning of the primary duty test by establishing a bright
line--perhaps a preponderance standard.
Congress must not narrow overtime eligibility. Various
legislative proposals would allow employers to substitute cash
overtime for comp time. While superficially appealing, these
proposals are deeply flawed for several reasons that I detail
in my written testimony, and the Committee should reject those
proposals.
Fourth, Congress should ensure all workers have access to
paid leave for family and medical purposes.
And finally, Congress should provide the Labor Department's
Wage and Hour Division with the enforcement resources it needs
to ensure fair competition among employers and protect workers
from wage theft.
Thank you again, Mr. Chairman, and I look forward to the
subcommittee's questions. I appreciate the opportunity to be
with you today.
[The statement of Mr. Harris follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Thank you, Mr. Harris, and thank you for
your timeliness. You have done this before.
Now I recognize Mr. Richardson for your five minutes of
testimony.
STATEMENT OF MR. JAMIE RICHARDSON, VICE PRESIDENT, WHITE CASTLE
SYSTEMS, INC., COLUMBUS, OHIO, TESTIFYING ON BEHALF OF THE
NATIONAL COUNCIL OF CHAIN RESTAURANTS
Mr. Richardson. Chairman Walberg, Ranking Member Wilson,
Chairman Kline, and Ranking Member Scott, and members of the
subcommittee, thanks for the chance to be with you today to
discuss the Fair Labor Standards Act.
I am Jamie Richardson, and I serve as vice president at
White Castle. I am pleased to be testifying on behalf of the
National Council of Chain Restaurants, NCCR, and NCCR members
around the country, including the country's most respected
restaurants, representing millions of hardworking Americans
dedicated to good business and great taste. NCCR is a division
of the National Retail Federation, the world's largest retail
trade group.
White Castle is a family-owned business, and we were
founded in 1921. From humble beginnings, we have had the
opportunity to grow thoughtfully over the past 94 years, and
today we have 390 restaurants in 12 states with 10,000 team
members who are dedicated to feeding the souls of craver
generations everywhere and making memorable moments every day.
Our founder, Billy Ingram, had two key governing principles
in growing the business: number one, happy employees make happy
customers; and number two, we have no right to expect loyalty
except from those to whom we are loyal.
More than one in four of our 10,000 team members have been
with White Castle 10 years or more. The average time one of our
general managers has been at White Castle is 21 years, and
turnover for this key group last year was less than 6 percent.
We are recognized as an industry leader for our commitment to
diversity, with 33 percent of our restaurant general managers
who are African-American and 77 percent of our restaurant
general managers who are female.
Today, we are here to share thoughts on wage and hour
protections and the Fair Labor Standards Act. White Castle was
17 years old when FLSA was enacted in 1938, and even then White
Castle was pioneering a notion of enlightened management before
it was popular.
For example, we began offering a health insurance benefit
in 1924. Our profit sharing and retirement benefits were
pioneered in the late 1920s, as well as a holiday bonus
initiated for all team members to make us an acknowledged
employer of choice in the 1930s. And those are programs that
still continue to this day.
Our nation's economy and the labor force have changed
significantly since the 1930s, so it comes as no surprise that
a statute from 1938 and its accompanying regulations do not
effectively mirror the needs of today's business and workforce.
There has been a major shift in the industries that drive
employment opportunities. Technology has transformed the
workplace and job duties, and employees increasingly place a
premium on workplace flexibility and work-life balance.
In fact, nearly 80 percent of our White Castle general
managers tell us the number one reason they love the Castle is
the flexibility they enjoy.
The FLSA's current statutory and regulatory structure is
ill-equipped to cope with these realities. The result is an
outdated and complex framework in which employers and employees
must operate, and the need to modernize a 1930s, Depression-era
law for the twenty-first century economy has never been more
important.
One specific example about the relevancy of today's FLSA is
especially concerning to restaurants and retailers. The
administration is soon expected to propose major changes to the
FLSA overtime regulations, which were last updated in 2004.
Rather than providing more opportunities for individuals to
earn overtime pay, it appears the new regulations will only
result in a more complicated law requiring outside legal advice
for small businesses and more litigation.
In anticipation of these regulatory changes, NCCR's parent
organization, the National Retail Federation, commissioned an
Oxford Economics study to analyze the impacts of an increase in
the salary threshold on the retail and restaurant industries.
The report demonstrates just how disruptive significant
increases in the salary threshold would be on an American
business model that creates jobs in every community across the
country.
Looking at the report's mid-range option found an increase
in the overtime salary threshold to $808 per week, or $42,016
per year, would affect 1.7 million retail and restaurant
workers and would cost business owners $5.2 billion per year,
assuming employers do not make changes to offset the increased
costs. At White Castle the estimated added cost with no changes
in our business model would be $8 million to $12 million a
year.
In addition to the expected increase of the salary
threshold, we also anticipate the U.S. Labor Department
regulations will make unnecessary modifications to the duties
test for restaurant managers, which would impose immense costs
on chain restaurants and would stifle opportunities for career
advancement for hourly associates who wish to manage our
restaurants.
In reality, restaurant managers' days are spent performing
management tasks, and they also multitask, stepping in to help
serve diners during busy times, leading and training team
members by working side by side with them, motivating and
teaching as they go. Enacting a duties test would curb a
manager's critical ability to multitask and lead in a busy
restaurant setting, undermine customer service, limit training
opportunities for team members, diminish morale, and force
complicated assessments of time spent managing in a restaurant
setting.
Mr. Chairman, the FLSA of the twenty-first century should
be consistent with the purpose and values from the time in
which it was enacted almost 80 years ago, but the law should be
modernized to reflect the twenty-first century demographics of
our workforce and the unlimited opportunities provided by our
modern and dynamic economy.
On behalf of White Castle and the National Council of Chain
Restaurants, thanks again for the opportunity to share our
views, and we would be happy to answer any questions.
[The statement of Mr. Richardson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Thank you, Mr. Richardson.
Appreciate your time, and all of the testimonies that were
given and the timeliness that you did them in.
I now recognize for the first five minutes of questioning
the Chairman of the full Committee, Mr. Kline.
Mr. Kline. Thank you, Mr. Chairman, for the courtesy.
Thanks for the hearing.
Thanks, to the witnesses, for your testimony. And I will
just add to Chairman Walberg's comments that almost everybody
stayed pretty doggone close to five minutes.
So well done, Mr. Chairman. You must have really gotten
after them.
It is good to see you again, Secretary Harris, and all the
witnesses. It was interesting sitting here listening to
Secretary Harris' testimony, and I was thinking that once
again, you know, I--that is very fine testimony and I disagree
with almost everything you said. So some things don't change.
I do agree that after some six years the incredibly anemic
economy for the last six years or so has worked out fairly well
for the very, very wealthy, but for the rest of America, not so
well.
Mr. Court, I was interested to hear your focus on
implementation procedures and tactics that you were talking
about under the administration. One of the things that you
talked about was this immediate settlement without
consultation.
I want to give you some more time here to elaborate on
that, how that works, and what is the problem that results----
Mr. Court. Thank----
Mr. Kline [continuing]. Because of that action?
Mr. Court. Certainly. If you are unfamiliar with the
process, essentially, after the investigation is concluded the
wage and hour investigator will then come in with his or her
findings. The bottom-line figure is what we are talking about.
They may say you owe $30,000 or $130,000, whatever that figure
is.
What is occurring is that the wage and hour investigator is
making the individual who is sitting in the closing conference
make an immediate decision--we will or we will not accept this
proposal--otherwise the threat is it will go to immediate
litigation on behalf----
Mr. Kline. If I may, who is in the room when this happens?
Mr. Court. More often than not it is a human resources
director of the local facility. For instance, one of the
examples that is in my paper is a multistate employer with a
facility that was in Lawton, Oklahoma. They were not
represented by counsel up through the closing conference. This
tactic occurred.
They happened to pick up the cell phone and call me. I
indicated to the investigator, no, they are entitled to have
time so that their legal counsel can look at it and, as
importantly, so that their home office in Phoenix, Arizona can
see if the analysis is proper or something that they want to
contest.
And it appears what the Department of Labor is attempting
to do is cut out the ability of the employer to either respond
or analyze the job that has been done by the local
investigator. If the investigators were always right that
wouldn't be a problem, but they aren't. I have had numerous
occasions where the initial figure would be a six-figure
settlement requirement, and after analysis and discussion the
figure may drop as low as $10,000.
So it is cutting out the analytical ability of the company
and cutting out the ability to deal with higher-ups in the
company, in terms of this immediate settlement approach that
now seems to be----
Mr. Kline. But in this immediate settlement approach, if
further analysis shows that it should have been, to--$35,000
instead of $100,000, it is too bad. You are still stuck with
$100,000--
Mr. Court. That is correct. By then you have signed the
settlement.
Mr. Kline. Yes. Thank you.
Mr. Richardson, it is nice to see you again. Glad that you
are here.
I am interested in--because we have had conversations--in
fact, you and I have had conversations, and conversations with
how your manager, your store manager, your restaurant manager
who is sort of the captain of the ship--he has got his crew
there and he is trying to move through and he is stepping up
to--or she is stepping up to serve customers during peak times,
doing training, leading lower-level employees, and doing those
things that were in your testimony. If this narrow
interpretation of the overtime revisions were to hit, you said
this is going to have a bad impact.
So one of the things that I have always been interested in
is the sort of upward mobility here through the stores. And if
this were to hit, can you talk about what that would do to
the--not just to the customers and to the function of the
store, but what that does to the individual?
Mr. Richardson. Thank you, Mr. Chairman.
For our team at White Castle we are proud to say that of
our 450 top restaurant operations team members--the general
managers, the district supervisors, and the regional
directors--445 of those individuals started behind the counter
at an hourly rate. So our promote-from-within culture is
critical to that.
Those general managers are the captains of the ship, as you
indicate. Their hope is to be able to become a multi-unit
manager, and their effort and their energy is so
entrepreneurial about coaching, guiding, being involved in
community. Oftentimes they want to go to the Boys and Girls
Club and be part of that. They are the face of White Castle and
ambassadors of good will, and they take great pride in the fact
that they have achieved this status as a salaried team member
and helping lead the charge for that restaurant.
Mr. Kline. Thank you.
I see my time is expired, Mr. Chairman.
Chairman Walberg. I thank the gentleman.
And now I recognize the Ranking Member, gentlelady from
Florida, Ms. Wilson.
Ms. Wilson. Thank you, Mr. Chair.
My question is for Mr. Harris. Please tell me and tell this
body why the Fair Labor Standards Act is so important to
millions of American workers, what has been its role in the
past, and what it will mean for workers going forward. Can you
speak to its role in income inequality?
And while you are doing that, in your written testimony you
spoke of a woman from Florida and how she struggled to make
ends meet on low wages. Tell us about her and other instances
you might have to make this real, so we will know we are
talking about real people.
Thank you.
Mr. Harris. Well, let me start with that story. Thank you
very much for the question.
While I was Acting Secretary I had the privilege of
traveling around the country and meeting with small groups of
minimum-wage and low-wage workers to give them an opportunity
to tell me about their experience of living at $7.25, $8 an
hour in the American economy. And I met this wonderful woman in
central Florida who had a daughter with a disability, and she
had to make the really excruciating choice of giving up hours
worked and wages, which she would never get back, in order to
attend a meeting with school administrators about her
daughter's individual education plan.
So she went to the meeting. She and her daughter were
driving home. Her daughter was hungry, so they stopped for
dinner but she had almost no money. So she bought one
hamburger, one order of French fries, and got two cups of
water. And her daughter ate the meat and the French fries and
the mother ate the hamburger bun and drank the water.
And that was just one of dozens of poignant stories I heard
all around the country, people in low wages making excruciating
choices. Am I going to buy food or am I going to buy clothes
for my kids? Am I going to fix the car or am I going to fix the
heater? Am I going to have to split my prescriptions in half
because I can't afford a refill? I heard dozens and dozens of
these stories.
The Fair Labor Standards Act is supposed to help fix that.
It is supposed to establish a fair floor on wages so that
workers can't be exploited and have their wages driven down if
they don't have the bargaining power to protect themselves in
dealings with employers. It is supposed to avoid exploitative
long hours not by putting a hard ceiling on hours, but by
requiring that employers pay a little bit more. And of course,
it protects against exploitative child labor, very important,
which I don't expect we will be talking about a lot today.
It is critical, how the Fair Labor Standards Act is
structured and how the regulations under it are written, is
critical to the question of wage stagnation and income
inequality. The minimum wage has been stuck for some seven
years now. It is well below its historical value.
Overtime regulations, the current salary threshold that we
are all talking about here for exempt employees is at half of
the average hourly wage for nonproduction employees in the
American economy--half. So I agree with those who say that some
of these regulations are outdated. They should be updated so
that we are pushing wages up, particularly for the lowest
workers in our economy.
Ms. Wilson. In your testimony you outline some of the
reasons why comp time for private employees is problematic. Can
you walk us through an example of how workers might be worse
off if their employers were allowed to offer comp time in lieu
of overtime pay?
Mr. Harris. Certainly. Let me give you the example of an
employee who works overtime in January, February, and March of
a year in order to accumulate enough time so that in August she
will be able to take time off because her grandmother is going
to have some kind of a medical procedure and she wants to be
able to take four weeks off in order to be able to care for her
grandmother during August, okay? Let's say her grandmother is
80 years old, just to pick a date.
Under the comp time proposals that I have read there are
two ways in which the employer controls the comp time, not the
employee. So one possibility is that the employer could say,
``I am going to cash out your comp time.''
Under the Senate bill, the employer can cash out all of the
comp time, meaning give them money, give the employee money in
return for the comp time and the employee no longer has time
off. Under the House bill they can take, in this example, half
of it--two weeks of it--and leave 80 hours.
Also, the employer could say, ``Well, no, I am sorry, you
can't take any time off in August because that will unduly
disrupt my operations.'' And the employer unilaterally decides
that.
So comp time is not like cash wages. If you pay somebody
cash overtime they control how it is spent--the worker controls
how it is spent. But with comp time the employer gets to
decide, in a lot of circumstances, whether or not the employee
gets the time off.
So this tradeoff of cash for time is really an illusion in
an unfortunate number of cases.
Ms. Wilson. Oh, boy.
Chairman Walberg. The gentlelady's time is expired.
Appreciate the exchange there.
I now recognize myself for my five minutes of questioning.
Ms. Berberich, in your testimony you also highlight the
ability of employees to rise through the ranks, like we have
heard in other testimony, in part to their ability to perform
concurrent duties. For example, you note that your emergency
surgery and internal medicine technical supervisors work on the
floor as well as manage their individual departments.
You argue that concurrent duties allow employees to develop
a variety of skill set opportunities for advancement. Can you
talk a little bit more about how important that structure is to
the overall functioning of a business?
Ms. Berberich. Absolutely.
The employees originally go to school for this technical
position, and so they are originally hired to be a registered
veterinary technician. At a point in time in their career they
express an interest in moving into a more supervisory,
managerial role. However, they don't want to let go of those
technical duties, as well.
So we offer that flexibility where you can still keep up
your technical skill set, and yet also get that management
development and that training and be able to have more of a
place in the management meetings and be able to be a part of
the policies and the procedures that go on in the hospital.
We like to offer our employees the flexibility of them
determining the where and the when that they can get their job
done. If they have to be completely on the floor and they don't
have any flexibility outside of the CARE Center then they don't
have that ability to work on performance reviews, phone
interviews, things like that, that further strengthen their
bench strength of workforce on the floor.
Chairman Walberg. And this is their choice? It is all
voluntary?
Ms. Berberich. Yes. This is their choice.
Chairman Walberg. This is what they want to do.
Ms. Berberich. Yes.
Chairman Walberg. For their own personal reasons.
Ms. Berberich. Yes.
Chairman Walberg. Okay.
Mr. Richardson, you mentioned the fact of some statistics
that the tenure of your general managers, I believe you said,
was 21 years on average?
Mr. Richardson. Yes, that is correct.
Chairman Walberg. Talk to us a little bit about what the
potential overtime rules--the changes that would go on there--
talk about what that would do to employees' advancement and job
security.
Mr. Richardson. Thank you, Mr. Chairman.
There are two primary effects. The first that we are
worried about is the salary threshold. The second is the duties
test.
That duties test element is so important because the
general manager--he or she invests their time in helping build
that restaurant, and they are engaged and leading the charge
every day. What we know is without any changes, that would
increase our investment in that area $12 million to $18 million
a year.
That is the same money we are currently using to provide a
great health care benefit. That is the same money we are using
now for our really robust retirement program, and holiday
bonuses, and profit-sharing.
So when we look at it, unfortunately, as a family-owned
business we can't budget like Washington, D.C., does, so we
don't have the same ability----
Chairman Walberg. Don't get personal, please.
[Laughter.]
Mr. Richardson. So we don't have that opportunity to be
able to find those dollars. We are already investing as much as
we can in our people because that is our number one priority.
Food and people are our two biggest investments, and at the
top of the list are our people. So for us, we think that would
limit their ability to continue to grow and take on more
responsibility--
Chairman Walberg. Is an assistant manager position a
significant position?
Mr. Richardson. An assistant manager position is a good
position. That is an hourly position for us, and an opportunity
to learn on the job and grow. And then there is a management
and training program that allows those individuals to grow into
a general manager position.
But you are king or queen of the castle once you become a
general manager----
Chairman Walberg. General manager.
Mr. Richardson [continuing]. It is a fun position.
Chairman Walberg. And committed to it. Okay.
Mr. Court, you discussed in your testimony how wage and
hour investigators discourage use of legal counsel. Why? What
have you determined?
Mr. Court. I am concerned that they want--that the focus
has shifted from doing the investigation right to seeing how
much money they can collect. You all are very used to having
agencies come to you and tell you as part of their search for
appropriations that we have collected X number of dollars for,
in this case, wage and hour violations. And I am concerned that
the emphasis has been placed more, in terms of even their
evaluations, not on whether the investigation is done
correctly, but how much money they can collect.
Chairman Walberg. So this is intimidation for----
Mr. Court. I--it--
Chairman Walberg [continuing]. Fundraising purposes?
Mr. Court. I think that is part of exactly what is going
on. The question I always have is--the question was asked of my
colleague, you know, ``What is the employer afraid of? Why are
they hiring legal counsel?''
And my response is, ``What is the investigator afraid of
when legal counsel is there simply to exercise the rights of
the employer?''
Chairman Walberg. Thank you.
My time is expired.
I now recognize Mr. Scott, Ranking Member of the full
Committee, for his five minutes of questioning.
Mr. Scott. Thank you, Mr. Chairman.
Secretary Harris, you recognize the policy that we have
that 40 hours is the work week and over that you should get
time-and-a-half unless you are exempt. Now, the rulemaking is
going to suggest a higher number than the $23,000. Now, the
exact amount of that will be subject to rulemaking with
interested parties given an opportunity to comment, but if we
just increased for inflation since 1975, the wage threshold, do
you know what it would be today?
Mr. Harris. I do. Currently we have a little bit north of
21 million people who are exempt under the existing threshold,
and raising the threshold to around $51,000, which would be an
inflation adjustment since 1975, would newly cover 6.1 million
workers.
Mr. Scott. But the number would be about $51,000 just with
inflation. And the old rate covered about 65 percent of the
workers as being exempt; now about 11 or 12 percent are
covered.
If we were to cover 90--excuse me--65 percent of the
workers like they were back in 1975, what would that threshold
be?
Mr. Harris. That would cut the number of exempt in half, so
it would newly cover about 10.4 million workers.
Mr. Scott. And how much--where would the threshold be--
dollar amount?
Mr. Harris. To get to that level it would have to be
$69,000--a little north of $69,000 a year.
Mr. Scott. Okay. But we don't know what the number is going
to be, but that gives you an idea of if we just adjusted for
inflation and what the situation was in 1975, kind of what the
numbers might look like.
Now, you mentioned wage inequality. The Chairman mentioned
that the wealthy have been doing well, everybody else not so
hot. What federal policy has contributed to that?
Mr. Harris. There is no federal policy under President
Obama that has contributed to that. I am sorry the Chairman
left because I wanted to have an opportunity to respond.
This is not a phenomenon of the last six years; it is the
phenomenon of the last four decades. We have seen rising wage
inequality and income inequality in the United States really
since the 1970s, and there are a number of factors and federal
policies that contribute to that. Failure to raise the minimum
wage is very important. Failure to raise the overtime threshold
is another part of it. Failure to provide paid leave.
We are one of the--we are one of two countries out of 185
surveyed by the OECD that don't provide paid maternity leave as
a matter of law. We obviously have the Family and Medical Leave
Act, but that is unpaid leave for workers.
Obviously, the declining union density has a very important
effect. Our failure over the last 10 years to invest
sufficiently in creating middle-wage, middle-skill jobs in
infrastructure and other industries. So there are a number of
policies that we can change.
But most important, there are policies within the
jurisdiction of this subcommittee that I think we can act on.
Raising the minimum wage would be the first on my list.
Mr. Scott. Now, what effect would the Paycheck Fairness Act
have on addressing discrimination?
Mr. Harris. Yes. I think the Paycheck Fairness Act would
have to be included on that list because of the terrible wage
gap between the average working woman and the average working
man, yes.
Mr. Scott. And can you say a word about what increasing the
minimum wage--what effect that would have on the economy?
Mr. Harris. I think it would help our economy to grow. As I
said, 70 percent of the American economy is built on
consumption. Working people spend the money that they get, and
they spend it almost right away. So it ricochets throughout the
economy, and so it increases GDP.
You give more money to a billionaire, they put it in
savings. They don't spend it, and so it is less effective at
helping to grow GDP.
So you put more money in the pockets of 30 million, 35
million, 38 million Americans by raising the minimum wage, we
are going to see that ricochet, particularly in the communities
that need that growth the most, the communities that are
suffering the most.
Mr. Scott. Now, one proposal that you have commented on,
the so-called comp time legislation--how much choice does the
employee have in terms of--I mean, does the employer or the
employee--does the employer get to choose whether or not the
employee can get comp time or take overtime?
Mr. Harris. Well, the way the bills are written, the
employee is not supposed to be subjected to coercion or
intimidation in the decision whether or not to use--to select
comp time.
But, you know, we are talking about the Wage and Hour
Division. I know it is appealing to treat it as though it is
this monolithic law enforcement juggernaut.
They have 1,800 employees protecting 135 million workers in
7.3 million workplaces, and these bills would add yet another
responsibility, which is protecting workers from exploitation
with respect to comp time. Where are the extra resources going
to come from to do that? I don't think that Congress is going
to provide them, unfortunately, when they pass this bill. And I
have read the bills. I don't see any authorization for
additional resources in those bills.
Mr. Scott. Thank you, Mr. Chairman.
Chairman Walberg. I thank the gentleman.
Now I recognize the gentleman from Pennsylvania, Mr.
Thompson.
Mr. Thompson. Chairman, thank you so much.
Thank you to the panelists who are here.
My first question actually is for Ms. Berberich. As a
governing body we consistently encourage use of modern
technology in our schools, our research facilities, and
government agencies. It is concerning to hear that by failing
to update the FLSA we are essentially doing the opposite for
businesses in the twenty-first century.
And by the way, I hope your patient, Carmen, is doing
well--the boxer. That is just a great story.
Can you elaborate on how technology is escalating the risk
of FLSA noncompliance and how employers are coping?
Ms. Berberich. Absolutely. And thank you for the question.
Our workforce needs the flexibility to be able to work when
and where they can get the job done. If we have nonexempt
employees that have to have all of their time tracked it
becomes cost-prohibitive to use electronic devices that are not
on the premises to conduct work and to have that time tracked
and then calculated in for payroll purposes.
Mr. Thompson. Very good. Well, as someone who is really--
has championed, and successfully, telemedicine language--and I
know veterinarian services it obviously applies, but, I mean,
we are just--this really poses a real barrier to what is truly
accessible health care if we don't do that.
Mr. Richardson, I really support that, you know, we all
want greater opportunity for everyone. I want greater wages.
I see a different pathway than the former secretary does. I
see that that is achievable through training. I am proud to co-
chair the Career and Technical Education Caucus, very strong
bipartisan caucus here in Congress. I think that we achieve
that through career ladder advancement, specific training,
career and technical education training.
In your testimony you mentioned--and you talked about this
briefly in a different concept or perspective--that
modifications to the duties test would stifle opportunities for
career advancement for hourly associates. Now, I assume that
is, you know, that is really going to prevent them from getting
access to the type of on-the-job training that would set them
up for that advancement. Can you elaborate?
Mr. Richardson. Yes. Thank you, Congressman.
One of the things we encounter is with our team members
they want to grow and they want to learn. They love the
flexibility that is part of the workplace. For our general
managers specifically, we understand that this is, for some of
them, where they want to be for the rest of their career; for
others, they want to advance and take on more.
We have what we call a White Castle University. Good
example. We bring our general managers in from all over the
country. They congregate in Ohio, in Columbus, at our home
office, and they spend time together. For them it is a very
unifying experience. They feel energized.
We have general manager conferences.
Those are the types of things that under a new regulatory
regime we would have to make tough decisions about because we
simply can't print our own Castle dollars and have the dollars
affordable to be able to invest in that.
Mr. Thompson. Very good.
Mr. Court, as--I am also--I serve on the Agriculture
Committee, one of the subcommittee chairs there, so part of
your testimony caught my eye in terms of commodities. During
this recession time we have been blessed that the agriculture
industry has really remained pretty resilient. It has really
saved us--that and our domestic energy production.
But there are some issues related to export, and we have
great opportunities in export. So my question kind of centers
back on part of your testimony and questions about there have
been concerns with the Wage and Hour Division's use of the hot
cargo provisions of FLSA to clear settlements.
As you point out in your testimony, growers shipping
products will--that will quickly spoil have been coerced into
signing a consent judgment to get their products moving even
though the growers strongly disagreed with the division's
allegations. How should the division use the hot cargo
provision, and are there alternatives to stopping shipments of
goods that are perishable?
Mr. Court. First, I would say that the hot cargo provision
should be used sparingly. It is probably better suited for
nonperishable goods--the garment industry, for instance.
The specific case that I reference in my written testimony
was the circumstance in which the threat--not actually threat,
but actual use of the hot cargo provision caused growers in
California to literally lose in excess of $200,000 worth of
product. It forced them to sign a consent decree, which they
did.
Ultimately, they went to court to undo the consent decree
and a federal judge found coercion by the Department of Labor,
which is the very thing that I am complaining about, in terms
of the investigative tactics.
As an alternative--quite frankly, I have not thought
through what an alternative to the use of the hot cargo would
be in the perishable good industry, other than typical
enforcement procedures that are used in every other industry,
which is to do the investigation, do it right, and see if we
can get compliance by way of agreement, and then if not,
through litigation.
Mr. Thompson. Thank you, Mr. Chairman.
Chairman Walberg. I thank the gentleman.
Now I recognize the gentlelady from Ohio, where I enjoyed
my weekend just south of your district very much. And for a
Michigander to say that about Ohio, that is pretty special.
Ms. Fudge. I thank you very much, Mr. Chairman. Come any
time.
Thank you. I thank you all for your testimony today.
Clearly there is one thing we agree on, and that is that
the Fair Labor Standards Act is outdated and is in need of
updating. I also agree that we need to look at what the purpose
of the bill is, and that is to be sure that we don't leave
behind the very people the law was intended to protect, which
are the American worker.
Now, Mr. Court, I just want to be clear on something that
you said. You indicated that oftentimes when the investigation
is completed they come and give you kind of a ``take it or
leave it right now.'' Now, if, in fact, that is the case, I am
with you. I don't agree that that is appropriate.
But I do want to be clear on this: The investigator does
not determine whether an employer has legal counsel or not, do
they?
Mr. Court. The investigator does not determine in the
strictest sense. What they are doing is encouraging--
Ms. Fudge. Well, no, no. That is not my question.
Mr. Court. Okay.
Ms. Fudge. The question is, they don't determine it, the
employer determines whether they have legal counsel or not.
Mr. Court. That is correct. The employer determines whether
they have legal counsel.
Ms. Fudge. Okay. Thank you.
Mr. Richardson, I will have to admit that I have eaten many
too many of those when I was in college at Ohio State--
Mr. Richardson. We appreciate your patronage. Thank you.
Ms. Fudge. I spent a lot of time in Ohio. Let me say that
first.
But let me ask this question: What is the average salary of
your managers and how many hours do they work, on average?
Mr. Richardson. For our general managers they work on
average about 40 hours. We think it is important to have work-
life balance--
Ms. Fudge. Not general manager, the level below that one.
Mr. Richardson. Oh, the level below that?
Ms. Fudge. Yes.
Mr. Richardson. For those team members who have been with
us a bit longer they are working somewhere between 35 and 40
hours, for the most part. We have, with new hires they start
out as part-time, so that is below 30 hours now. And so with
those who are below 30 their hope is to be able to be available
and be able to get the----
Ms. Fudge. What is the salary? My question is, what is the
salary, and on average, how many hours do they work?
Mr. Richardson. Oh, sure. Okay. So you are talking about
not our general managers but our hourly team members?
Ms. Fudge. Correct.
Mr. Richardson. The average hourly team member at White
Castle makes close to $10 per hour.
Ms. Fudge. Is that ``close to'' like $8, or is it----
Mr. Richardson. No, no, no, no; $9.78, somewhere in there.
Ms. Fudge. Okay.
Mr. Richardson. It is about 38 percent ahead of the federal
minimum wage.
Ms. Fudge. Okay. Now, tell me at what level do you not
think it appropriate that they should receive overtime.
Mr. Richardson. When you are talking about the general
managers or----
Ms. Fudge. Anybody. Just pick anybody.
Mr. Richardson. Well, for our team members it is about
work-life balance, so our focus, as a people-focused business
and happy employees making happy customers, is to really meet
them where they are. The biggest----
Ms. Fudge. I am happy too, but I need the answer.
Mr. Richardson. Sure. Let me just share one part that
shapes it, because each person's choices are different and we
offer a lot of flexibility, that can shape that pretty
dramatically.
Ms. Fudge. Thank you so much.
Mr. Harris, let's go back to the comp time proposal. I am a
former mayor so I worked in the public sector. I understand
comp time very, very well.
Please explain again for me why you think it is not
appropriate for the change that the House is talking about to
be in law. Please explain that for me again.
Mr. Harris. I will do it really quickly, because there is a
long discussion, I think. The first is the myth that the FLSA
is perfectly inflexible is just that. It is a myth. There is a
great deal of flexibility.
The difference between the comp time proposals and the FLSA
is that with the flexibility workers get paid less under the
comp time proposals and more under the FLSA. So if you are
concerned about wage stagnation, if you are concerned about
income inequality, the comp time proposals are the wrong way to
go.
The second is workers don't need time or money, they need
time and money. And I think that the premise of the bill that
they should have to buy overtime from--buy time off from their
employers by sacrificing their overtime pay, in addition to
being morally dubious, is really problematic as an economic
matter and as a matter of where we are in our country.
And then finally, I would say I--as I said before in
response to the Ranking Member's question, I don't think the
workers get the deal that they are being promised because
employers still control the comp time in large part.
Ms. Fudge. Thank you very much.
Just let me say lastly, I understand that there are some
issues with the investigation. I am going to look into that to
see what is happening with that. But I do know this one thing:
you wouldn't have an investigation if you didn't break the law.
Thank you very much. I yield back, Mr. Chairman.
Chairman Walberg. I thank the gentlelady, and I do disagree
that you have had too many White Castles. That is impossible,
in my position.
I now recognize the ranking millennial on this Committee,
the gentlelady from New York, Ms. Stefanik.
Ms. Stefanik. Thank you, Mr. Chairman. And that is very
fitting because my question was related to millennials in the
workplace, and my question is for Ms. Berberich.
As a fellow millennial I just wanted to lay down the
context. Last month millennials surpassed Generation Xers as
the largest generation in the U.S. labor force. More than one
in three American workers today are millennials, and by 2020
nearly half of the U.S. workforce will be comprised of
millennials.
So your point about how the FLSA and the fact that it has
not modernized to keep pace with the technologically driven
workplace is very meaningful. It will have significant impacts
on our broader economic growth.
I know that I am an--typical millennial, an avid user of my
smartphone, and I know that my constituents at home expect me
to be in contact at all hours to make sure that I am serving
them. And I believe that in small businesses and in the private
sector it is also important to have that flexibility to promote
greater productivity and to help grow our businesses.
So can you talk about specifically how employers have been
advised to ensure compliance with current rules is stifling
flexibility and productivity, from your experience?
Ms. Berberich. Thank you for your question.
I would say that employers are being stifled in their
flexibility under the current regulations due to not having the
resources for tracking this possible compensable time. In an
organization such as CARE Center I am a one-person HR
department. If we have to have additional tracking outside of
our in-house systems, that would be additional expense, and I
can say that for CARE Center and for many small businesses, we
simply don't have the resources for it.
Ms. Stefanik. And, Mr. Richardson, you spoke a lot about
your company's commitment to flexibility in the workplace. Do
you have any thoughts, as you are seeing millennials join your
business, and do you have any reflections to share?
Mr. Richardson. One of the things that is really
interesting as we attract more millennials is to see that their
priorities are different. And not surprisingly, our general
managers who are 40 and over are a bit more focused on
retirement benefit and what comes next in that degree.
With our younger workers it is absolutely about what can I
learn, and a different notion of how long is a good time to
stay somewhere. So to them it is about learning the skills, the
portability, having that chance to get the first job in a
workplace.
And I will tell you what is really tough, in a lot of our
cities that youth unemployment rate is catastrophically high--
over 50 percent in Chicago; over 38 percent in Detroit; near 27
percent in New York. And that is why we fear if there are other
wage adjustments those are the first folks who don't get that
chance to have that first step on the ladder to progress and
opportunity.
So that is where we have real inequality. It is about
inequality of opportunity that we are seeing in that landscape
where we need to have more jobs.
Ms. Stefanik. Mr. Court, do you have anything to add?
Mr. Court. Let me just respond to the last, I guess,
comment that if you weren't doing something wrong there
wouldn't be an investigation. I couldn't disagree more.
An investigation can be started by a disgruntled employee.
It can be started by a business competitor. The Department of
Labor recognizes those investigations, and I have cited in my
paper at least one example from my neighboring state of
Arkansas of an investigation that went on for months, ran six-
figure legal fees, and ultimately there was a finding that
nothing was wrong.
Ms. Stefanik. Thank you very much.
I think in order to encourage economic growth for
Millennials we ought to be promoting policies that promote
flexibility and productivity.
So thank you very much, and I yield back.
Chairman Walberg. I thank the gentlelady.
And now I recognize the distinguished representative from
California, Mr. DeSaulnier.
Mr. DeSaulnier. Thank you, Mr. Chairman.
Let me first say that as somebody who has owned and managed
restaurants--independent restaurants--very different, Mr.
Richardson, from your product--I feel some sympathy in the last
comment by Mr. Court on regulations that don't seem to really
be efficient, and it might be because of the resources we put
into them, in terms of their stated goals.
Having said that, coming from Northern California, where we
have a very high-cost area but the restaurant business does
very well in spite of--and having managed--and I own
restaurants in San Francisco, where you have got a very high
minimum wage, you don't have a tipped minimum wage. It is sort
of shocking to see that the federal tipped minimum wage is only
$2.13, and my staff made a lot of money in tips.
So all of that said in the context that California
regulations are much more difficult than the federal, which I
look at as sort of a minimum.
When our managers scheduled they had to pay extra for split
shifts. A lot of my employees didn't--they had to commute a
long way. They didn't like doing a split shift. But on the
other hand, I had to pay them time-and-a-half.
So I understand all that, but in the long run, the biggest
problem, to Mr. Harris' comments--and I have--first question is
your example of the steel mill was really wonderful, but in the
service industry you say--the food service industry--trying to
get that kind of technological improvement, particularly in
fine dining, is fairly limited, and you still need a well-
educated workforce.
Do you have any responses to productivity when it comes to
nonmanufacturing fields, and how do we get more productive
employees and still have particularly small businesses thrive?
Now, that was actually Mr. Harris.
Mr. Harris. Oh. Well, thank you very much. That is a very
big question.
So there are industries where technology is not going to be
able to make dramatic change, but you see in restaurants--fast
casual restaurants and other kinds--the use of technology for
ordering, so the order is conveyed directly from the customer
back to the kitchen. The servers are essentially just
delivering the food, they are not taking the orders.
You are able to pay at your table. That is an innovation of
one of the fast casual restaurants.
So that will be an example of--in those small--those
businesses that use those kinds of technologies will see a
decline in the number of employees, but I don't think we will
see the kind of dramatic impact, for example, that we have seen
in manufacturing. The example I gave in my testimony was a 75
percent cut in the number of workers.
Mr. DeSaulnier. The reason I asked, other than the fact I
want to avail myself of your wisdom, is so in those fields in
order to become--get a greater return on investment it seems
like you almost have to get concessions on the wage side and
benefit side. But that is a Henry Ford rule. If I didn't pay my
employees enough to be able to come into my restaurant it
really had a problem to the larger question that you posed
about an economy that is 70 percent driven by consumer
purchases, and that we have this huge disparity in capital and
labor.
So your comment about tightening the labor markets by
creating millions of jobs, particularly in middle-wage, middle-
skill jobs with smart investments in transportation and
communication infrastructure, alternative energy, these are all
things we have done in California and it spurred the economy.
So I wonder if you could comment on that.
I guess what I am getting at, for the individual business
owner they are in a very retail environment. But we have got a
larger, more complex issue that you are very well versed in
that if we could get the wages up it would benefit--obviously
benefit the economy and the small business owner.
Mr. Harris. I think that is precisely right, is that if we
are able to raise wages across the board, particularly for low-
wage and middle-skill workers, we are simply going to have more
people spending more money. Those workers will spend every
dollar that they get, sometimes more than every dollar that
they get, and that spurs economic growth.
It helps White Castle. People are spending more money in
their restaurants. It helps those restaurants you are talking
about in California. People are spending more money there.
It allows them to hire more people. It allows them to
expand. It allows them to open a new restaurant.
As demand goes up, good things happen with respect to
supply and production.
We have a trend in our economy--it is a long-term trend,
really since the 1970s--where technology has replaced workers
in a lot of places. It has also allowed for off-shoring of
jobs. So you have a lot of middle-wage, middle-skill workers
who are dropping into low-wage, low-skill jobs simply because
the middle-wage, middle-skill jobs are gone.
Think of ATMs and bank tellers. Think of robots and
manufacturing jobs. That has put downward pressure on wages
both in the middle-wage, middle-skill market and in the low-
wage, low-skill market.
So we both, and I agree with the comment before. We need to
skill workers up so that they can compete for those high-wage,
high-skill jobs, but that is difficult for a lot of workers.
We also have to raise the bottom as much as we can by
raising the minimum wage, raising overtime standards, making
sure that we are protecting workers through tough enforcement.
Mr. DeSaulnier. And I appreciate that, but it is a leap of
faith for the individual business owner to do that. I have
found in my experience that when you took that leap of faith as
a regional economy it benefited you in the long run.
Thank you, Mr. Chairman.
Chairman Walberg. I thank the gentleman.
Now I continue with the California questioning by
recognizing the gentleman from California, Mr. Takano.
Mr. Takano. Thank you, Mr. Chairman.
I am particularly interested this morning in this morning's
testimony on the forthcoming Department of Labor proposed rule
to update the Fair Labor Standards Act white-collar exemption
for overtime pay.
We have heard from witnesses today that the FLSA is
outdated and hasn't been updated to reflect the modern
workplace. I would argue that is one of the very reasons an
update to the overtime exemption is badly needed.
The intent of the white collar exemption to overtime pay
was to exempt those with sufficient power in the labor market
who are able to advocate for better wages and hours for
themselves. This is clearly not the case anymore.
In 1975, 65 percent of salaried workers were eligible for
overtime pay. Now only 11 percent of workers are eligible.
As we have heard this morning, Americans are working longer
hours and are more productive, yet their wages are largely
flat. Updating the overtime exemption will help millions of
workers make ends meet and give an added boost to our economy.
Well, Mr. Harris, what is your response to those who will
say that this will hurt the workers we want to help? If
employers don't want to pay the extra overtime, won't they
logically increase the hours of those working part-time and
hire more workers?
Mr. Harris. Well, let me just say, if the biggest problem
that workers have is that they will have too much money to
spend, I think that is a problem that we can live with, and
that is what is going to happen, is that workers who are
currently exempted who are earning $27,000, $28,000, $29,000 a
year and are working 50, 60, 70 hours a week, they are going to
see their pay go up. Either because the employer genuinely
believes that they should be exempt--they should have the
status of an exempt employee and they raise their pay in order
to get them over the threshold, or because they are going to
have to be paid hourly and they are going to get more money
because they are working in excess of 40 hours in a week and
they are going to get time-and-a-half. So those workers' wages
are going to go up.
But I think you are right. We are going to see some
substitution where workers who are currently working part time
in fast-food restaurants and other kinds of establishments are
going to see their hours increase, particularly if the Labor
Department focuses on this primary duties test. If we say,
``You know what? You can't work 99 percent of your time doing
nonexempt work and still be an exempt employee,'' and we say
that work has to be done by somebody else, I do expect that we
are going to see more part-time employees getting more hours,
as you predicted.
Mr. Takano. Thank you.
Mr. Harris, in your testimony you briefly talked about the
types of workers who will benefit from raising the income
threshold for overtime pay. Can you tell us more about the
characteristics of these workers?
Mr. Harris. Right. So, as I said earlier in response to
Ranking Member Scott's question, we have about 21 million,
almost 22 million workers who are currently exempt with the
threshold--or can be exempt at the current threshold of $455.
If we raise the threshold, that is largely going to
benefit--not exclusively, but largely going to benefit women
workers, because we have a lot of women in the low-wage ranks,
particularly in industries like retail and fast-food and
others. It will disproportionately benefit workers of color
because, again, they tend to be over-represented in low-wage,
low-skill jobs, unfortunately.
And it is going to help not the youngest workers, because
that is not who are the assistant managers or the general
managers; it is going to help workers who are in their 30s and
40s, not the millennials, who are going to--who are--who have
gotten along in their career and have moved up a little bit in
their career but are still not getting sufficient wages.
So the groups that have been left behind in our economy are
the folks who are going to benefit the most from an increase in
the overtime threshold.
Mr. Takano. Thank you.
And to add to Mr. Harris' remarks, I would like to ask
unanimous consent to insert into the record a report from the
National Employment Law Project. This report has stories of
workers who would benefit.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Walberg. Without objection. Hearing none, it will
be submitted.
Mr. Takano. Some would argue that changes to white collar
exemption will result in more confusion for employees. It would
seem to me that the current duties test is responsible for much
of the confusion regarding exempt versus nonexempt employees.
Won't a clearer definition of executive, administrative, or
professional work help employers properly categorize employees?
And as a follow up, won't raising the income threshold make
more employees eligible and mean employers will be less reliant
on the duties test to determine if a worker is exempt or
nonexempt?
Mr. Harris. With respect to the latter point, absolutely,
yes. You are going to have many--if the threshold goes up,
particularly if it goes up substantially, you will have many
fewer employees to whom you have to apply the duties test
because they will simply be covered by overtime because they
are below the threshold.
With respect to the duties test itself, you know, I think
employers are trying to make a choice now: Do they want the
devil they know or do they want the devil they don't know that
is coming in the regulations?
My view is let's wait and see what the regulations say. We
have talked a lot about the regulations here. None of us know
what are in these proposed regulations except we think that the
salary threshold is going to go up.
Let's see them. Let's see whether or not they simplify the
rules for employers.
One of the things I have said is that if we make a clear,
bright line on the primary duties test to support some of the
things that my colleagues on the panel have said, that will
make it a lot easier for employers. Clear lines are better for
people who are regulated so they can conform their behavior to
the standards.
So I am hoping that they are going to do that in this
regulation, and I expect they will.
Chairman Walberg. Thank the gentleman. Time is expired.
Now I recognize the gentleman from Indiana, a great state
with businesses and challenges, and now competition coming from
the north finally, and look forward to your questioning.
Mr. Rokita. We welcome the competition, and it is a good
thing, Mr. Chairman. This hearing is also a good thing. I
appreciate you holding it.
My apologies for not being able to be here for everyone's
testimony, but we had a late vote series last night, so before
that vote series I was able to look into some of your remarks
and get acquainted with them. When you are trapped in the
office you might as well work, right?
My first question, then, would go to, at this point I
think, Mr. Court. In your testimony you testify to a
substantial increase in FLSA lawsuits. And in fact, the GAO
accounts for a 514 percent increase in lawsuits since 1991.
And Mr. Harris stated in his testimony that--he said the
overwhelming majority--I am paraphrasing here, but correct me
if I am wrong--the overwhelming majority of U.S. companies want
to comply with the law and, in fact, do comply with the law.
That is nice.
But then you also say--you at least admit the existing
rules are too complex.
So, Mr. Court, in your opinion has confusion about FLSA
rules contributed to the increase in FLSA litigation? Is there
a correlation or a causation there?
Mr. Court. I don't believe that the current test of primary
duties is the source of this increase in litigation. Quite
frankly, with all due deference to the congressman from
California, the California bright line test of the 51 percent
is indication of how litigation will occur, because California
leads the country in wage and hour class action lawsuits.
They use a bright line test in California. Who is really
going to get rich off of a bright line test is the attorneys,
because it is simply going to increase the litigation.
Two years ago I spoke to the Oklahoma State Human Resources
Conference, and I asked this very question, sort of the one
that Mr. Harris indicated: Would you prefer a bright line test,
which I think is the myth that is being spread by proponents of
it, or do you prefer the current primary duties test? I asked
for a raise of hands from an audience of over 150, ``How many
of you want a bright line test, a percentage test?'' Not a
single person in the room raised their hands.
Mr. Rokita. This was an audience of who?
Mr. Court. Human resource directors.
And then I was part of a delegation to meet with the
secretary of labor and his staff over the proposed regulations,
as they were doing their meetings with various contingency
groups, and I told this story and a prominent member of that
department said to me, ``Leonard, that is what I am hearing
from human resource directors all across the country.''
Businesses do not want the bright line test, contrary to what--
the propaganda that is being spread.
Mr. Rokita. Thank you for that, Mr. Court. Let me ask you
this: Is it pretty much understood by let's say the folks in
that audience, or even you, that the--there has been a
reduction in the administration's compliance assistance in the
agency, and actually the elimination of the issuance of opinion
letters? Correct, right?
Mr. Court. That is correct.
Mr. Rokita. Right.
Mr. Court. That is one of many.
Mr. Rokita. Can that be attributed to this increase in
lawsuits?
Mr. Court. I think the----
Mr. Rokita. Hold on, Mr. Harris. And let the record reflect
Mr. Harris is nodding his head. But you just said----
Mr. Harris [continuing]. I was shaking my head----
Mr. Rokita [continuing]. Shaking, excuse me, shaking your
head. But you just testified earlier that, you know, apparently
people like detailed, specific rules if they are going to be
regulated. Well, the administration eliminating opinion letters
seems to go against that testimony.
Mr. Court.
Mr. Court. I would agree with that observation.
Another thing the Department of Labor has essentially
ceased doing for literally decades, if I as an employer found
that I had a violation, and I wanted to correct it, I have to
get approval from the Department of Labor to get an effective
release. That is one of the methodologies.
And historically what we would do is go to the Department
of Labor, say, ``All right, we found this problem; we want to
fix it,'' and get their assistance. Today, employers are not
doing that because the Department of Labor has quit helping and
quit giving the assurance that if I voluntarily come forward
that won't result in a massive investigation which now could
result in the liquidated damages and civil money penalties.
Mr. Rokita. Yes. Seems to me this leads to an adversarial
relationship when they could--the agency could just as easily
spend its time and resources to help with compliance.
Mr. Court. It does that, and quite frankly, it seems to me
it is counterproductive to the very goal that we are sort of
all talking about here, which is to quickly get the wages to
the employees, because to the extent it encourages litigation,
that delays the decision-making process.
Mr. Rokita. Thank you, Chairman. I yield back.
I yield.
Chairman Walberg. Let me just ask one question in following
up with your train that was going there.
Ms. Berberich, what does ``human resources'' connote to
you?
Ms. Berberich. I am sorry, can you repeat that question?
Chairman Walberg. What does ``human resources'' connote to
you? What does it mean to you when you hear the term ``human
resources?'' And I am coming from a time when you used to be
called ``personnel department.''
Ms. Berberich. Thank you, Mr. Chairman.
Chairman Walberg. Could you quickly answer that?
Ms. Berberich. Human resources to me is servant leadership.
The idea of human resources is to be there for your employees,
interpret the laws, help management to make the correct
decisions. We want to have those good-faith efforts in properly
interpreting the law and making the decisions that are in the
best interest of both the business and the employees.
Chairman Walberg. Thank you.
I yield back.
The gentleman's time is expired.
I was just caught there as I was listening with that
flashback as Mr. Court was speaking that we are in a different
time--and I think it is a good time--that we are talking not
simply about personnel department, ``personnel'' meaning fairly
sterile--people hired to do a job--to the issue of human
resources, as we look at it, I think, in most general cases,
across the board. We look at it as a cooperative relationship.
Well, I appreciate the testimony today. I appreciate the
answers the witnesses have given from both sides of the ledger
and in between and all around.
And I appreciate the attention that the subcommittee
members have given to this issue.
So now I would ask the Ranking Member for her closing
statement.
Ms. Wilson. Mr. Chairman, I want to thank you again for
holding this hearing and giving us an opportunity to discuss
the Fair Labor Standards Act.
I want to thank all of the witnesses for being here today.
Today we have heard lots of statistics about how many
Americans would benefit from strengthening the FLSA. We have
heard stories about the people who would benefit from much-
needed updates to the law.
But I want to remind my colleagues that these statistics
and stories represent real people. These are our constituents.
These are people who truly know what it means to struggle with
low, stagnant, or unfair wages--millions of Americans who know
what it means to work long hours and never get ahead.
These statistics and stories represent the 130 million
Americans protected by FLSA. Thirty-eight million Americans
would benefit from a raise to the minimum wage. These are the
people who wake up every morning and go to their jobs knowing
that at the end of the day, no matter how hard they have
worked, they will not make enough to make ends meet. They are
why we must pass the Raise the Wage Act.
The statistics and stories represent the millions of women
who would benefit from the strengthening of the equal pay
protection. These are the women, no matter how hard they work,
may be denied the security of equal pay for equal work. It is
unconscionable that women on average make $10,000 less a year
than men. We must pass the Paycheck Fairness Act.
The stories we have heard today represent the millions of
workers who work 60, 70, even 80 hours a week and make less
than $24,000 a year with no additional pay for overtime. It is
absurd that we think that these constituents and this scenario
constitute fair wages. We must support an increased salary
threshold for overtime pay.
All of these necessary updates--raising the minimum wage,
equal pay guarantees, overtime adjustment--reflect the spirit
that was enshrined in the FLSA 77 years ago. Congress came
together to memorialize and venerate the rights we know all
workers are entitled to.
These rights are predicated on a simple yet wholly
undeniable fact: American workers deserve to work with dignity.
Forty years of wage stagnation have chipped away that dignity.
It has forced far too many Americans to work for far less than
what they are worth.
As hard as Americans work to try to make a decent living,
to provide food for their families, to pay their bills, to put
their children through college, we cannot in good conscience
take steps to erode where protections are in place.
I stand with my colleagues on this Committee--I don't care
what side they are on, what party, but if they stand with me on
this committee--who remain dedicated to ensuring we restore and
uphold the dignity of work. I hope that our colleagues who
don't will join us in our endeavor.
I appreciate this opportunity to talk about FLSA, and I
urge this subcommittee to do more.
Hold a hearing on decreasing the gender wage gap. Hold a
hearing on raising the minimum wage. Hold a hearing that
finally puts the rights of American workers first. Hold a
hearing on overtime versus comp time versus compensation.
Hold a hearing and finally agree that this country is
facing a serious income inequality problem. We know this, and
we must respect this, and we must respect the workers.
I yield back the balance of my time.
Chairman Walberg. I thank the gentlelady, and I certainly
would concur with the fact that the FLSA has served its purpose
in many cases over many years in a very positive way.
And the grand old lady or gentleman that we want to call
it, whatever gender we give to that legislation, it does need
some updating. It needs to get into the real world of today.
And yes, I am glad that today we had stories of American
workers told. But I am also glad we had stories of employers--
American employers who provide opportunity for the American
dream. And I think those two stories need to be told, but they
need to coincide together in a way that is a continuity of that
American dream that goes on.
We will have tension. We always will. It is part of
America. That is why we are the greatest country in the world
and have provided the greatest opportunity for all men and
women, all colors, creeds, et cetera, in the world. And we want
that to continue.
But we need to do it in the proper way, and we will have
more hearings. We will look to more issues to, indeed, from my
perspective, get government out of the way as much as possible
to let the genius that is America and its people function.
I would say that we have an agenda, we have priorities, but
I maybe ought to hold back. But I am not; 2009, 2010 was a time
when the majority party of those two years, the 111th Congress,
if these were important issues, as important as they are being
perceived today and spoken of today--minimum wage, income
equality and all the rest, overtime hours--why weren't they
dealt with during that time in Congress, when the minority
party of today controlled both houses and the White House? If
it was that important then, and it is that important now, why
wasn't it taken care of then with proposals?
And yet, we brought about legislation that mandated 30-hour
full time that has caused significant problem to industries
even seated at this table; 50-employee-level mandate for
requirement of health care, which has caused extreme problems
to our small businesses of today and a frustration of our
economy moving forward. We don't want that to continue.
Just two weeks ago I had the privilege, along with the
Chairman and several members of the full Committee, in visiting
Skype in Estonia--Tallinn, Estonia. I realized I was not a
millennial at that time or anything younger than that. But a
creative environment where they had a 24-hour food service--hot
food service there, cafeteria available for their employees;
where they had beanbags, if they wanted to take a nap they
could do that.
They had a sauna. For those of you that aren't
Scandinavian, that is a sauna. They had a playroom. They had
work stations without walls. And I felt very old there.
And yet, Microsoft and Skype are doing creative things
there that allows for flexibility, creativity, authenticity of
the workforce in doing things to move the common agenda forward
for that company--Google and others like that.
But it is not just those companies. It is, as we heard, the
food industry, the health care industry of both humans and
animals, the brick and mortar manufacturing, sales forces, with
the resources we have today that make it possible for you to do
your work away from the workplace and do it well and still meet
needs of the family concerns, of the individual concerns.
And that is something we want to get right when we look at
FLSA, to make sure it is not just good for now but it is good
for a number of--maybe not 75 years, with the rapid increase
that we have. So I think that is, again, why flexibility has to
be there, so we will keep looking at it.
I hope that Department of Labor has been listening today. I
hope that they have heard real-world stories that have gone on.
I hope they understand the creative tension that was even at
the witness table today so that we don't do things that
ultimately frustrate the movement forward not just for this
country but for each individual in this country--the employee
and the employer--so we can remain the standard for the world.
Let me just point out finally in conclusion, a lot of
statements were made about the Working Families Flexibility
Act, H.R. 1406, specifically. Let me make it very clear: The
decision to receive comp time is completely voluntary.
Workers can withdraw from a comp time agreement whenever
they choose. No worker can be intimidated, coerced, or forced
to accept comp time instead of cash wages. All existing
enforcement remedies, including action by the U.S. Department
of Labor, are available to workers. Just make sure the facts of
the legislation are clear.
Having no more issues to come before the Committee at this
time, I declare it adjourned.
[Additional submissions by Chairman Walberg follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[Whereupon, at 12:13 p.m., the subcommittee was adjourned.]
[all]