    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

                   STANDING UP FOR WORKERS: PREVENTING WAGE
                       THEFT AND RECOVERING STOLEN WAGES

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

                                    HEARING

                                   before the

                                SUBCOMMITTEE ON
                             WORKFORCE PROTECTIONS

                                     of the

                        COMMITTEE ON EDUCATION AND LABOR
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                  HEARING HELD IN WASHINGTON, DC, MAY 11, 2022

                                   __________

                               Serial No. 117-44

                                   __________

          Printed for the use of the Committee on Education and Labor

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Available via: edlabor.house.gov or www.govinfo.gov
                                 _________

                     U.S. GOVERNMENT PUBLISHING OFFICE

    47-708 PDF               WASHINGTON : 2023

                        COMMITTEE ON EDUCATION AND LABOR

                 ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

    RAUL M. GRIJALVA, Arizona            VIRGINIA FOXX, North Carolina,
    JOE COURTNEY, Connecticut              Ranking Member
    GREGORIO KILILI CAMACHO SABLAN,      JOE WILSON, South Carolina
      Northern Mariana Islands           GLENN THOMPSON, Pennsylvania
    FREDERICA S. WILSON, Florida         TIM WALBERG, Michigan
    SUZANNE BONAMICI, Oregon             GLENN GROTHMAN, Wisconsin
    MARK TAKANO, California              ELISE M. STEFANIK, New York
    ALMA S. ADAMS, North Carolina        RICK W. ALLEN, Georgia
    MARK DeSAULNIER, California          JIM BANKS, Indiana
    DONALD NORCROSS, New Jersey          JAMES COMER, Kentucky
    PRAMILA JAYAPAL, Washington          RUSS FULCHER, Idaho
    JOSEPH D. MORELLE, New York          FRED KELLER, Pennsylvania
    SUSAN WILD, Pennsylvania             MARIANNETTE MILLER-MEEKS, Iowa
    LUCY McBATH, Georgia                 BURGESS OWENS, Utah
    JAHANA HAYES, Connecticut            BOB GOOD, Virginia
    ANDY LEVIN, Michigan                 LISA C. McCLAIN, Michigan
    ILHAN OMAR, Minnesota                DIANA HARSHBARGER, Tennessee
    HALEY M. STEVENS, Michigan           MARY E. MILLER, Illinois
    TERESA LEGER FERNANDEZ, New Mexico   VICTORIA SPARTZ, Indiana
    MONDAIRE JONES, New York             SCOTT FITZGERALD, Wisconsin
    KATHY E. MANNING, North Carolina     MADISON CAWTHORN, North Carolina
    FRANK J. MRVAN, Indiana              MICHELLE STEEL, California
    JAMAAL BOWMAN, New York, Vice-Chair  CHRIS JACOBS, New York
    MARK POCAN, Wisconsin                Vacancy
    JOAQUIN CASTRO, Texas                Vacancy
    MIKIE SHERRILL, New Jersey
    ADRIANO ESPAILLAT, New York
    KWEISI MFUME, Maryland
    SHEILA CHERFILUS-McCORMICK, Florida

                       Veronique Pluviose, Staff Director
                      Cyrus Artz, Minority Staff Director
                                     ------

                     SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                   ALMA S. ADAMS, North Carolina, Chairwoman

    MARK TAKANO, California              FRED KELLER, Pennsylvania,
    DONALD NORCROSS,New Jersey             Ranking Member
    PRAMILA JAYAPAL, Washington          ELISE M. STEFANIK, New York
    ILHAN OMAR, Minnesota                MARIANNETTE MILLER-MEEKS, Iowa
    HALEY M. STEVENS, Michigan           BURGESS OWENS, Utah
    MONDAIRE JONES, New York             BOB GOOD, Virginia
    ROBERT C. ``BOBBY'' SCOTT, Virginia  MADISON CAWTHORN, North Carolina
    Vacancy                              MICHELLE STEEL, California
                                         VIRGINIA FOXX, North Carolina (ex
                                             officio)

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing held on May 11, 2022.....................................     1

    Statement of Members:
        Adams, Hon. Alma S., Chairwoman, Subcommittee on Workforce
          Protections................................................     1
            Prepared statement of....................................     4
        Keller, Hon. Fred, Ranking Member, Subcommittee on Workforce
          Protections................................................     5
            Prepared statement of....................................     6

    Statement of Witnesses:
        Cacace, Karen, Labor Bureau Chief, The New York State Office
          of the Attorney General....................................     8
            Prepared statement of....................................    11
        Esparza, Francisco, Representative, United Brotherhood of
          Carpenters.................................................    14
            Prepared statement of....................................    17
        McCutchen, Tammy, Senior Affiliate, Resolution Economics.....    21
            Prepared statement of....................................    24
        Swenson-Klatt, Daniel, Owner & Operator, Butter Bakery Cafe..    34
            Prepared statement of....................................    37

    Additional Submissions:
        Ranking Member Keller:
            Letter dated May 17, 2022 from the NFIB..................    60
            Letter dated May 18, 2022 from the US Chamber of Commerce    62
            Letter dated May 18, 2022 from the ABC...................    64
            Report dated December 2021, ``The Great Realization'',
              from MBO Partners......................................    65
            Letter dated May 16, 2022 from the NRF...................    88
            Letter dated May 24, 2022 from the RILF..................    90
            Letter dated May 17, 2022 from the IAW...................    93

                      STANDING UP FOR WORKERS: PREVENTING
                     WAGE THEFT AND RECOVERING STOLEN WAGES

                                  ----------

                            Wednesday, May 11, 2022

                      House of Representatives,
                 Subcommittee on Workforce Protections,
                              Committee on Education and Labor,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10:15 a.m.,
    2176 Rayburn House Office Building, Washington, DC, Hon. Alma
    Adams (Chairwoman of the Subcommittee) presiding.
        Present: Representatives Adams, Takano, Norcross, Jayapal,
    Omar, Stevens, Scott, Keller, Stefanik, Miller-Meeks, Good,
    Steel, and Foxx (ex officio).
        Staff present: Brittany Alston, Staff Assistant; Nekea
    Brown, Director of Operations; Ilana Brunner, General Counsel;
    Kyle deCant, Labor Policy Counsel; Scott Estrada, Professional
    Staff; Daniel Foster, Health and Labor Counsel; Rasheedah
    Hasan, Chief Clerk; Sheila Havenner, Director of Information
    Technology; Eli Hovland, Policy Associate; Stephanie Lalle,
    Communications Director; Andre Lindsay, Policy Associate; Kevin
    McDermott, Director of Labor Policy; Kota Mizutani, Deputy
    Communication Director; Max Moore, Staff Assistant; Lorin
    Obler, GAO Detailee; Kayla Pennebecker, Staff Assistant; Mason
    Pesek, Labor Policy Counsel; Veronique Pluviose, Staff
    Director; Robert Shull, Labor Policy Staff; Banyon Vassar,
    Deputy Director of Information Technology; Sam Varie, Press
    Secretary; ArRone Washington, Clerk/Special Assistant to the
    Staff Director; Cyrus Artz, Minority Staff Director; Gabriel
    Bisson, Minority Staff Assistant; Mini Ganesh, Minority Staff
    Assistant; John Martin, Minority, Minority Workplace Policy
    Counsel; Hannah Matesic, Minority Director of Operations; Audra
    McGeorge, Minority Communications Director; and Ethan Pann,
    Minority Press Assistant.
        Chairwoman Adams. Good morning. The Subcommittee on
    Workforce Protections will come to order. Welcome everyone. I
    note that a quorum is present. The Subcommittee is meeting
    today to hear testimony on Standing Up for Workers: Preventing
    Wage Theft and Recovering Stolen Wages.
        This is a hybrid hearing pursuant to House Resolution 8 and
    the regulations thereto. All microphones, both in the room and
    on the platform will be kept muted, as a general rule, to avoid
    unnecessary background noise. Members and witnesses will be
    responsible for unmuting themselves when they're recognized to
    speak or when they wish to seek recognition.
        When Members wish to speak or seek recognition, they should
    unmute themselves and all a pause of 2 seconds to ensure the
    microphone picks up their speech. I would also ask that Members
    please identify themselves before they speak.
        Members who are participating in person should not be
    logged onto the remote platform in order to avoid feedback,
    echoes, and distortion. Members participating remotely shall be
    considered present in the proceeding when they are visible on
    camera, and they shall be considered not present when they are
    not visible on camera.
        The only exception to this is if they're experiencing
    technical difficulty and inform Committee staff of such
    difficulty. If any Member experiences difficulty during the
    hearing, you should stay connected on the platform, make sure
    you're muted, and then use your phone to immediately call the
    Committee's IT director, whose number was provided in advance.
        Should the Chair need to step away for any reason, another
    majority Member is hereby authorized to assume the gavel in the
    Chair's absence. In order to ensure that the Committee's five-
    minute rule is adhered to, staff will be keeping track of time
    using the Committee's digital timer on the remote platform.
        For Members participating in person, the timer will be
    broadcast in the Committee Room on the television monitor as
    part of the platform gallery view and visible in its own
    thumbnail window. The Committee Room timer will not be in use.
    For Members participating remotely, this will be visible in
    gallery view in its own thumbnail window on the remote
    platform. Members are asked to wrap up promptly when their time
    has expired.
        And finally, while the recent guidance from the Office of
    the Attending Physician has made mask wearing optional at this
    time, please know that we have in our midst, at both the Member
    and staff levels, individuals who are immune compromised or who
    may have immediate family members who are immune compromised,
    as well as those who might not be vaccinated, either due to
    medical reasons or because the vaccine is not yet available to
    children under the age of five.
        Therefore, the Committee strongly recommends that masks
    continue to be worn out of concern for the safety of
    unvaccinated and immune compromised Committee Members and staff
    and their families.
        So, pursuant to Committee Rule 8(c), opening statements are
    limited to the Chair and the Ranking Members. This allows us to
    hear from our witnesses sooner and it provides all Members with
    adequate time to ask questions. I now recognize myself for the
    purpose of making an opening statement.
        Today we're meeting to discuss the pervasive and serious
    consequences of wage theft and examine a legislative solution
    to protect workers' wages and hold unscrupulous employers
    accountable. Too often, dishonest employers cheat their
    employees out of wages that they are legally entitled to
    receive.
        This can take many forms, whether by paying workers less
    than the minimum wage, withholding overtime pay, or forcing
    them to work off the clock. Regardless of the form, it allows
    those employers, who skirt the law, to get richer and pushes
    the most vulnerable workers deeper into poverty.
        This is a multi-billion-dollar problem. Each year dishonest
    employers steal at least $15 billion from workers' paycheck in
    minimum wage violations alone with all forms of wage theft
    possibly exceeding $50 billion annually in stolen compensation.
    This has serious consequences for workers across the Nation and
    disproportionally hurts women and people of color who are more
    likely to work low-wage jobs.
        According to a 2016 study conducted by the Economic Policy
    Institute, hourly workers cost 25 percent of their annual
    hearings. Now, that's more than $3,000 in stolen wages that
    could not be used for essential expenses like rent, groceries,
    or childcare. Ultimately, wage theft prevents workers from
    taking meaningful steps to enter the middle class.
        In fact, workers who suffer a minimum wage violation are
    more than three times as likely to be in poverty. Moreover,
    about one in three workers who are victims of a wage theft
    violation receive some form of Public Assistance.
        Although wage theft practices are already illegal under the
    Fair Labor Standards Act of 1938 or FLSA, the law's trivial
    penalties and damages provisions have not prevented wage theft.
    Furthermore, employers use a variety of legal loopholes to
    evade accountability.
        So, today FLSA civil monetary penalties are just $1,100 for
    wage and hour violations and the Department of Labor's maximum
    penalty for repeated or willful violators is $2,203. So, let me
    repeat that. An average hourly worker lost more than $3,000 per
    year in stolen earnings. Therefore, it certainly looks like it
    is cheaper to willingly violate the FLSA than it is to pay
    employees what they are entitled to receive.
        Now, this is not only bad for workers, but it put honest
    businesses that abide by the law at a competitive disadvantage.
    The FLSA also does not require detailed paystubs or
    recordkeeping, which are critical for workers to confirm pay
    accuracy and, if necessary, establish a legal claim for stolen
    wages.
        So, when workers do have the evidence to mount a case,
    their claims are often stymied by employer-imposed class action
    waivers and arbitration clauses. Simply put, current law favors
    dishonest employers over hard-working Americans. So, if we want
    to raise people out of poverty, if we want to ensure Americans
    can enter the middle class, and if we believe that workers
    deserve a decent wage for an honest day's work, then we must
    enact a meaningful deterrent to wage theft and help workers
    seek justice.
        The Wage Theft Protection and Wage Recovery Act, which I'm
    proud to co-sponsor, is a responsible solution to deliver on
    that goal. The legislation increases civil monetary penalties
    and liquidated damages to meaningfully deter any business
    considering stealing their workers' wages. It also will help
    level the playing field for those businesses already playing by
    the rules.
        Further, the bill requires detailed paystubs be delivered
    to employees regularly and adequate recordkeeping to provide
    employees information necessary to hold employers accountable
    in court for violating the law.
        And finally, it prevents employers from exploiting
    mandatory arbitration and collective action waivers and it
    protects an employee's ability to pursue remedies for stolen
    wages under the law.
        I'm also pleased that President Biden's Fiscal Year 2023
    budget proposes the necessary resources to help restore the
    Department of Labor's ability to enforce the FLSA after 4 years
    of staff cuts made under the Trump administration. However,
    more money cannot fix the deficiencies in the FLSA. If we, as
    Congress, know better, we should do better. Therefore, I'm
    committed to working with my colleagues to pass the Wage Theft
    Prevention and Wage Recovery Act of 2022 to ensure workers
    receive the wages that they earn.
        [The statement of Chairwoman Adams follows:]

         Statement of Hon. Alma S. Adams, Chairwoman, Subcommittee on
                             Workforce Protections

        Today, we are meeting to discuss the pervasive and serious
    consequences of wage theft and examine a legislative solution to
    protect workers' wages and hold unscrupulous employers accountable.
        Too often, dishonest employers cheat their employees out of the
    wages that they are legally entitled to receive.
        This can take many forms-whether by paying workers less than the
    minimum wage, withholding overtime pay, or forcing them to work off-
    the-clock.
        Regardless of the form, it allows those employers who skirt the law
    to get richer and pushes the most vulnerable workers deeper into
    poverty.
        This is a multi-billion-dollar problem. Each year, dishonest
    employers steal at least $15 billion from workers' paychecks in minimum
    wage violations alone, with all forms of wage theft possibly exceeding
    $50 billion annually in stolen compensation.
        This has serious consequences for workers across the Nation and
    disproportionately hurts women and people of color-who are more likely
    to work low-wage jobs.
        According to a 2017 study conducted by the Economic Policy
    Institute, hourly workers lost 25 percent of their annual earnings,
    that's more than $3,000 in stolen wages-money that could not be used
    for essential expenses like rent, groceries, or child care.
        Ultimately, wage theft prevents workers from taking meaningful
    steps to enter the middle class.
        In fact, workers who suffer a minimum wage violation are more than
    three times as likely to be in poverty. Moreover, about 1-in-3 workers
    who are victims of a wage theft violation receive some form of public
    assistance.
        Although wage theft practices are already illegal under the Fair
    Labor Standards Act of 1938, or the F-L-S-A, the law's trivial
    penalties and damages provisions have not prevented wage theft.
    Furthermore, employers use a variety of legal loopholes to evade
    accountability.
        Today, F-L-S-A civil monetary penalties are just $1,100 for wage
    and hour violations, and the Department of Labor's maximum penalty for
    repeated or willful violators is $2,203.
        So, let me repeat that-on average, workers who were victims of wage
    theft lost more than $3,000 per year in stolen earnings.
        Therefore, it certainly looks like it is cheaper to willingly
    violate the F-L-S-A than it is to pay employees what they are entitled
    to receive. This is not only bad for workers, but it puts honest
    businesses that abide by the law at a competitive disadvantage.
        The F-L-S-A also does not require detailed pay stubs or
    recordkeeping, which are critical for workers to confirm pay accuracy
    and, if necessary, establish a legal claim for stolen wages.
        When workers do have the evidence to mount a case, their claims are
    often stymied by employer-imposed class action waivers and arbitration
    clauses.
        Simply put, current law favors dishonest employers over hard-
    working Americans.
        So, if we want to raise people out of poverty; if we want to ensure
    Americans can enter the middle class; and, if we believe that workers
    deserve a decent wage for an honest day's work, then we must enact a
    meaningful deterrent to wage theft and help workers seek justice.
        The Wage Theft Prevention and Wage Recovery Act-which I am proud to
    cosponsor-is a responsible solution to deliver on that goal.
        This legislation increases civil monetary penalties and liquidated
    damages to meaningfully deter any business considering stealing their
    workers' wages. This also will help level the playing field for those
    businesses already playing by the rules.
        Further, the bill requires detailed pay stubs be delivered to
    employees regularly and adequate recordkeeping to provide employees
    information necessary to hold employers accountable in court for
    violating the law.
        Finally, it prevents employers from exploiting mandatory
    arbitration and collective action waivers and protects an employee's
    ability to pursue remedies for stolen wages under the law.
        I am also pleased that President Biden's Fiscal Year 2023 budget
    proposes the necessary resources to help restore the Department of
    Labor's ability to enforce the F-L-S-A after 4 years of staff cuts made
    under the Trump administration.
        However, more money cannot fix the deficiencies in the F-L-S-A. If
    we as a Congress know better, we should do better!
        Therefore, I am committed to working with my colleagues to pass the
    Wage Theft Prevention and Wage Recovery Act of 2022 to ensure workers
    receive the wages that they earn.
                                     ______

        I now recognize the distinguished Ranking Member for the
    purpose of making an opening statement.
        Mr. Keller. Thank you. All workers must be paid in full for
    their work. That is not in question or open for debate.
    Republicans fully support the enforcement of the Fair Labor
    Standards Act, FLSA.
        What we do not support is weaponizing this Act or any
    Federal legislation to be used against our country's job
    creators. Unfortunately, that is exactly what H.R. 7701,
    Congresswoman's DeLauro's bill, is attempting to accomplish.
        First of all, Democrats' approach to employers is wrong.
    Referring to unintentional technical errors in payroll as wage
    theft demonstrates Democrats' hostility toward America's job
    creators. Employers want to do the right thing by their
    employees and pay them what is owed. People work hard and get
    the job done every day. I see that across central and
    northeastern Pennsylvania. Calling our country's job creators
    thieves is beyond outrageous and should have no place in our
    policymaker's discourse.
        It would be far more productive for the Department of Labor
    to provide compliance assistance to employers instead of
    assuming all employers are bad actors, which my Republican
    colleagues and I know is not the case. Both workers and job
    creators benefit from clear and concise compliance procedures,
    but Democrats' proposed changes to the FLSA would make
    employment and wage regulations even more convoluted.
        This legislation would then impose crushing penalties on
    employers for not being able to effectively navigate the maze
    of red tape it intends to create. This is nothing short of
    entrapment. We should be supporting easy to understand wage and
    hour rules, not impossible compliance burdens. The enforcement
    penalties are extremely punitive and could severely hinder
    employers, especially, small businesses. This is not the way to
    treat those keeping our country's economy running. In fact, it
    is counterproductive.
        Further, the onerous mandates and disproportionate
    penalties in this bill will have a chilling effect on the
    ability of employers to offer additional benefits to workers,
    including greater compensation or flexibility. Employers want
    to do what is best for their employees, but the Federal
    Government is threatening to stand in their way.
        Democrats are completely ignoring the adverse consequences
    that will come from their meddling. In truth, this legislation
    is a massive power grab meant to substantially increase the
    Federal Government's control over the workforce. H.R. 7701
    would fundamentally alter the FLSA by expanding its
    jurisdiction to all employer/employee contracts, including
    collective bargaining agreements.
        This legislation will harm America's job creators and
    workers. Whenever Democrats and Washington bureaucrats expand
    Federal control over private businesses, it reduces innovation
    and the ability of businesses to respond to changing economic
    circumstances. This is not the way our country will recover
    from the pandemic, the worker shortage, or record-high
    inflation. This legislation is short-sighted and destructive.
        In the case of bad actors, the FLSA already has strong
    remedies in place for employers who do not comply with the law.
    Instead of adding burdensome reporting requirements and
    increasing penalties, the Department of Labor should simply use
    existing law. Democrats continue to fail to recognize the
    importance of independent contractors in today's evolving
    economy and this legislation would have a negative effect on
    their opportunities.
        If Democrats had their way, independent contracting would
    come to an end; yet independent contractors are serving a vital
    purpose in many industries and workers seek out the benefits
    and flexibility these arrangements provide. If Democrats truly
    care about our people, they will start looking to bolster job
    creators instead of tearing them down.
        The truth is we need more freedom in the marketplace, not
    less. Thank you and I yield back.
        [The statement of Ranking Member Keller follows:]

        Statement of Hon. Fred Keller, Ranking Member, Subcommittee on
                             Workforce Protections

        All workers must be paid in full for their work-that is not in
    question or open for debate. Republicans fully support the enforcement
    of the Fair Labor Standards Act (FLSA).
        What we do not support is weaponizing this Act, or any Federal
    legislation, to be used against our country's job creators.
    Unfortunately, that is exactly what H.R. 7701, Congresswoman
        DeLauro's bill is attempting to accomplish.
        First of all, Democrats' approach to employers is wrong. Referring
    to unintentional technical errors in payroll as `wage theft'
    demonstrates Democrats' hostility toward America's job creators.
    Employers want to do right by their employees and pay them what is
    owed. People work hard and get the job done every day-I see that across
    Central and Northeast Pennsylvania. Calling our country's job creators
    `thieves' is beyond outrageous and should have no place in our
    policymakers' discourse.
        It would be far more productive for the Department of Labor to
    provide compliance assistance to employers instead of assuming all
    employers are bad actors-which my Republican colleagues and I know is
    not the case.
        Both workers and job creators benefit from clear and concise
    compliance procedures, but
        Democrats' proposed changes to the FLSA would make employment and
    wage regulations even more convoluted. This legislation would then
    impose crushing penalties on employers for not being able to
    effectively navigate the maze of red tape it intends to create. This is
    nothing short of entrapment.
        We should be supporting easy-to-understand wage and hour rules-not
    impossible compliance burdens. The enforcement penalties are extremely
    punitive and could severely hinder employers, especially small
    businesses. This is not the way to treat those keeping our country's
    economy running. In fact, it is counterproductive.
        Further, the onerous mandates and disproportionate penalties in
    this bill will have a chilling effect on the ability of employers to
    offer additional benefits to workers, including greater compensation or
    flexibility. Employers want to do what is best for their employees, but
    the Federal Government is threatening to stand in their way. Democrats
    are completely ignoring the adverse consequences that will come from
    their meddling.
        In truth, this legislation is a massive power grab meant to
    substantially increase the Federal
        government's control over the workforce. H.R. 7701 would
    fundamentally alter the FLSA by expanding its jurisdiction to all
    employer-employee contracts, including collective bargaining
    agreements.
        This legislation will harm America's job creators and workers.
    Whenever Democrats and Washington bureaucrats expand Federal control
    over private businesses, it reduces innovation
        and the ability of businesses to respond to changing economic
    circumstances. This is not the way our country will recover from the
    pandemic, the worker shortage, or record high inflation. This
    legislation is short-sighted and destructive.
        In the case of bad actors, the FLSA already has strong remedies in
    place for employers who do not comply with the law. Instead of adding
    burdensome reporting requirements and increasing penalties, the DOL
    should simply use existing law.
        Democrats continue to fail to recognize the importance of
    independent contractors in today's evolving economy, and this
    legislation would have a negative effect on their opportunities. If
    Democrats had their way, independent contracting would come to an end.
    Yet, independent contractors are serving a vital purpose in many
    industries-and workers seek out the benefits and flexibility these
    arrangements provide.
        If Democrats truly care about our people, they will start looking
    to bolster job creators instead of tearing them down. The truth is, we
    need more freedom in the marketplace, not less.
                                     ______

        Chairwoman Adams. Thank you very much. Without objection,
    all of the Members who wish to insert written statements into
    the record may do so by submitting to the Committee Clerk,
    either, electronically, in Microsoft Word format by 5 p.m. on
    May 25th.
        I would now like to introduce our witnesses. Ms. Karen--is
    that Cacace?
        Ms. Cacace. It's Cacace.
        Chairwoman Adams. Cacace. Excuse me. OK, Ms. Cacace is the
    Labor Bureau Chief of the New York State Office of the Attorney
    General. As Labor Bureau Chief, Ms. Cacace has extensive
    knowledge of Federal and New York wage and hour laws and the
    current realities of wage theft enforcement.
        Mr. Francisco Esparza is the representative for the United
    Brotherhood of Carpenters. Mr. Esparza has been a victim of
    wage theft himself and he now draws on that experience to
    educate other workers about their workplace rights with the
    carpenters.
        Ms. Tammy McCutchen is a Senior Affiliate at Resolution
    Economics. Ms. McCutchen provides expert services to employers
    on employment law, compliance issues, and previously served as
    Administrator of the Wage and Hour Division at the U.S.
    Department of Labor under President George W. Bush.
        I'd now like to turn to Representative Omar to introduce
    the final witnesses. Representative Omar will provide a brief
    introduction for Daniel Swenson-Klatt. If Representative Omar
    is--
        Ms. Omar. Yes, thank you, Chairwoman.
        Chairwoman Adams. You're here. Great. Thank you.
        Ms. Omar. Thank you, Chairwoman. I am honored to introduce
    Daniel Swenson-Klatt, a small business owner from my district
    who has been advocating for workers' rights in our community
    and other communities across the country.
        Mr. Swenson-Klatt is former middle school educator turned
    to small businessperson and has owned and operated the Butter
    Bakery Cafe in Minneapolis since 2006. Daniel served as
    Minneapolis's Workforce Advisory Committee and help launch its
    small business team and currently serves as the representative
    of Kingfield Neighborhood for Local Development Projects.
        He's a board member of Main Street Alliances Minnesota
    Chapter and serves on the Steering Committee of Rise, a High
    Restaurant Employer Association. Daniel's currently assisting
    the Bloomington City Council to prepare an Earn, Sick, and Safe
    Time ordinance for their city.
        Daniel, thank you for making Minnesota proud through your
    leadership and tireless advocacy on behalf of working families.
    I yield back, Chairwoman.
        Chairwoman Adams. Thank you. Thank you, Representative
    Omar. So, these are the instructions for the witnesses. We do
    appreciate you for participating today. We look forward to your
    testimony but let me remind the witnesses that we've read your
    written statements. They will appear in full in the hearing
    record.
        Pursuant to Committee Rule 8(d) and the Committee practice,
    each of you is asked to limit your oral presentation to five-
    minute summary of your written statement. So, before you begin
    your testimony, please reMember to unmute your microphone.
    During your testimony, staff will be keeping track of time and
    the timer is visible to you at the witness table. Please be
    attentive to the time, wrap up when your time is over, and re-
    mute your microphone.
        We'll let all of the witnesses make their presentations
    before we move to Member questions. When answering a question,
    please remember to unmute your microphone. The witnesses are
    aware of their responsibility to provide accurate information
    to the Subcommittee and therefore will proceed with their
    testimony.
        I'd like to first recognize Karen Cacace and Ms. Cacace,
    you are now ready to give your testimony.

      STATEMENT OF KAREN CACACE, LABOR BUREAU CHIEF, THE NEW YORK
                  STATE OFFICE OF THE ATTORNEY GENERAL

        Ms. Cacace. Good morning, Chair Adams, Ranking Member
    Keller, and distinguished Members of the Subcommittee. My name
    is Karen Cacace and I'm the Bureau Chief of the Labor Bureau at
    the Office of the New York State Attorney General. Prior to
    joining the Office of the Attorney General, I was the Director
    of the Employment Law Unit at the Legal Aid Society in New York
    City.
        I want to thank you for convening this important hearing at
    such a vital time for workers and for giving our office an
    opportunity to share our experiences and insight. The Labor
    Bureau of the Office of the New York State Office of the
    Attorney General enforces Federal, State, and local laws
    affecting workers in New York State.
        Our office prioritizes enforcement of wage theft against
    low-wage workers. Our office recently resolved several wage
    theft investigations, including investigations involving home
    health aides, restaurant workers, and residential building
    staff. While I was at the Legal Aid Society, the Employment Law
    Unit litigated many cases of wage theft in different
    industries, including for restaurant workers, domestic workers,
    and residential building services employees.
        Wage theft continues to be a devastating issue for low-wage
    workers across industries. It is an area that requires
    legislation to increase protections, deter violations, and
    encourage greater enforcement. There are several potential
    amendments to the Fair Labor Standards Act that would
    significantly improve the law.
        The Fair Labor Standards Act has not increased the minimum
    wage since 2009 and it provides that workers who are required
    to be paid the minimum wage be paid only $7.25 an hour. In
    contrast, the New York Labor Law provides that within New York
    City, Long Island, and Westchester the minimum wage is $15 per
    hour and throughout the rest of New York State the minimum wage
    is 13.20 per hour.
        In addition to minimum wage increases, there are other
    important protections that can be added to the Fair Labor
    Standards Act. For instance, as part of New York's Wage Theft
    Prevention Act, which went into effect in 2011, New York
    requires that employers provide employees a hiring notice that
    explains whether they are covered by the minimum wage laws and,
    if they are, what their hourly wage and overtime rate will be.
    This notice must be provided in English and the employee's
    primary language. Without this protection, workers may not know
    that there are any wage laws that apply to them or that they
    are entitled to a specific hourly rate.
        Another important provision of New York's Wage Theft
    Prevention Act is that employers are required to provide
    employees with paystubs which detail how many hours they worked
    each week and the amount that they are being paid per hour.
    This allows workers to review the number of hours they are
    being paid and to address any issues immediately and seek legal
    assistance.
        If hiring notice and paystub requirements are enacted, it
    will be easier for workers to prove wage theft claims.
    Sometimes employers report on paystubs that they are paying
    workers less than the minimum wage and thereby hand the workers
    strong evidence of the violation. If employers fail to provide
    the paystubs, employees may prove their claims through their
    own credible testimoneys. Penalties for failing to comply with
    hiring notice and paystub requirements are also important.
        In addition, the New York Labor Law provides that workers
    must be paid their promised wage. And if an employer promises
    to pay an employee a rate above the minimum, it's a violation
    of the New York Labor Law. This is important because the New
    York Labor Law violation allows attorney's fees and it allows
    liquidated damages, something that a regular breach of contract
    claim does not allow.
        Another issue that is prevalent is for employers to fail to
    pay employees their last paycheck and so additional penalties
    for that violation are significant because they will encourage
    lawyers to take on those cases which can be for a small amount
    of wages but are still significant to the workers.
        Increasing penalties, overall, may be the most effective
    method of deterring employers from violating the substantive
    provisions of the Fair Labor Standards Act. For many employers,
    the cost of having to pay their employees once a wage theft
    claim is filed, is not significant enough to deter them from
    violating the law.
        It is also essential that workers be allowed to pursue wage
    theft claims jointly or in groups by bring a class or
    collective action. The time and cost of a wage theft litigation
    is difficult for an individual worker to bear alone.
        Finally, lengthening the statute of limitations is also
    important. Low-wage workers are often unaware of their rights,
    and it may take them time to recognize that there have been
    violations and to find legal representation. In New York, the
    statute of limitations is 6 years.
        We very much appreciate the opportunity to share our input
    with you here today and welcome the chance to continue this
    conversation. Thank you.
        [The Statement of Ms. Cacace follows:]

                       Prepared Statement of Karen Cacace

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Adams. And thank you very much. We'll now hear
    from Francisco Esparza. You're recognized for your testimony.

      STATEMENT OF MR. FRANCISCO ESPARZA, REPRESENTATIVE, UNITED
                       BROTHERHOOD OF CARPENTERS

        Mr. Esparza. Well, good morning, Chair Scott, Ranking
    Member Fox, and Members of the Education and Labor Committee. I
    appreciate the opportunity to testify today on my experience
    and expertise on the issues of workers' rights, wage theft, and
    the uneven process of wage recovery for victims of wage theft.
        I am Francisco Esparza and I am a council representative
    for the Eastern Atlantic States Regional Council of Carpenters,
    a union carpenter, and a former victim of wage theft in the
    construction industry's underground economy.
        I came to the United States 18 years ago when I was 11
    years old. I am a Dreamer. As a DACA recipient, I understand
    that I am fortunate to be able to have a career in this country
    and the ability to work for all that I earn. To be honest, that
    realization is not one that comes easily to many people like
    me.
        Countless construction workers, especially, in the District
    of Columbia, see themselves as voiceless and invisible. In the
    underground economy of the construction industry, you are told
    you are lucky to have a job, in general, and will be
    compensated by the means dictated by your employer or your
    labor broker. This is not how things should work in this
    country, but all too often they do.
        It takes education, some courage, and self-respect for many
    to decide that they have been cheated and deserve fair
    compensation. In 2019, myself and 222 others started to speak
    up and take action to receive the $618,000 in stolen wages we
    earned. Our class action lawsuit against Contractor Anning
    Johnson was for unpaid wages, unpaid overtime, and workplace
    fraud under Federal and District of Columbia law.
        This was a major victory for workers who did not think they
    have a voice. It was historic because it is so rare. Without
    the laws put into place in the District of Columbia, we would
    not have had the ability to take this step. The District of
    Columbia has stronger than average laws in place to help
    workers fight back against wage theft.
        The District's Minimum Wage Payment and Collection Law and
    Workplace Fraud Act provide more opportunity for----
        Chairwoman Adams. Excuse me. Mr. Esparza, can you turn your
    volume up please, sir. We're having difficulty, some of the
    Members hearing you. Turn your volume up just a little bit
    more.
        Mr. Esparza. How do I do that?
        Chairwoman Adams. Let's see. It should be at the bottom of
    your computer, if you move your--can someone give him some
    instructions about that. Maybe if you could speak up a little
    bit, maybe that'll help.
        Mr. Vassar. Mr. Esparza, if you could, sir, in the bottom
    left-hand corner of your screen should be your microphone mute
    button. In the corner of that microphone button is a little
    arrow. If you can click on that little arrow and go to audio
    settings, sir, you should see a separation for mike and
    speakers and you should see test microphone with a little bar
    that you can drag to the right. If you can drag the bar to the
    right to increase your microphone pickup, sir. Thank you.
        Mr. Esparza. Better?
        Chairwoman Adams. Yes, that is. That is. Thank you, sir.
        Mr. Esparza. I apologize.
        Chairwoman Adams. We stopped the clock, so you're not going
    to lose any time. OK. Proceed.
        Mr. Esparza. OK. The actions workers have taken have now
    deterred unscrupulous contractors and labor brokers from
    stealing wages from the most vulnerable workers so that they
    can profit more. These profits are not only on the backs of
    workers they victimize, but the honest U.S. taxpayers like me.
        Worker's Compensation, funding for American infrastructure,
    our schools, veterans' programs, and more are not paid into
    because of these actions. Recent studies and research show the
    issues are still prevalent and more enforcement and changes to
    our laws are necessary.
        In a national study by researchers and economist from
    Harvard University, Michigan State University, and Allegany
    College, it was estimated that we have lost on $8.4 billion in
    State and Federal tax revenue. Additionally, the study found
    that possibly 2.60 million construction workers are
    misclassified or off the books. There's a $1.7 billion
    shortfall on Worker's Compensation, $725.1 million in
    unemployment insurance, and $811.1 million in overtime not
    paid.
        The District of Columbia has taken steps to improve our
    workers ability to fight back against these firms, but studies
    have found that workers are still victimized in D.C. all the
    time. A 2021 survey of workers found that nearly 50 percent of
    those surveyed are part of the underground economy. These
    workers reported that instead of receiving a paycheck with a
    paystub and with taxes deducted, they were being paid with a
    personal or a business check without any payroll deductions or
    they simply being paid in cash.
        After I was educated by the Carpenters Union on my rights,
    I joined the class action lawsuit against Anning Johnson, I
    became a union carpenter. I did this to protect myself and earn
    the fair wages I deserve with the backing of a union that will
    fight for me. I later was fortunate to become a council
    representative. I take the responsibility very seriously. I was
    once a voiceless worker. Now, I am the voice for not only the
    union carpenters I represent in the District of Columbia, but
    also the non-union workers looking for help.
        I hope my testimony and experience was helpful to you.
    Congress must act so that the Wage Theft Prevention and Wage
    Recovery Act is made law. Your actions toward strengthening
    penalties on violators, improving workers' ability to pursue
    wage theft claims, expand outreach to workers and businesses on
    the issues and facilitate the collection of evidence to assist
    in enforcement can help a worker gain the wage they deserve and
    hopefully help deter these crimes in the future. Workers
    deserve better in this country and with your help we will see
    less victims in the underground economy. Thank you again for
    your time.
        [The Statement of Mr. Esparza follows:]

                    Prepared Statement of Francisco Esparza

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Adams. And thank you very much. Thank you for
    your testimony. I want to recognize Tammy McCutchen. Ms.
    McCutchen, we're ready for your testimony. You have five
    minutes.

      STATEMENT OF TAMMY McCUTCHEN, SENIOR AFFILIATE, RESOLUTION
                               ECONOMICS

        Ms. McCutchen. Thank you. Chairwoman Adams, Ranking Member
    Keller, and Members of the Subcommittee, thank you for the
    opportunity to speak with you today.
        Protecting vulnerable, low-wage workers has been the focus
    of my entire Wage and Hour career. First, by expanding
    strategic enforcement in low-wage industries while serving as
    Wage-an-Hour Administrator and then by conducting audits of
    employer pay practices as defined and correct as FLSA
    violations. I believe we all have a common goal. Do what we can
    to ensure that workers are paid in compliance with the FLSA and
    receive that pay when they perform the work, not months or
    years later.
        Justice delayed is justice denied. There is nowhere truer
    than when low-wage workers must wait months or years to be
    paid. This workforce is often transient and the longer it takes
    to recover wages the harder it is to find the workers to give
    them their hard-earned money.
        The debate is how best to accomplish our common goal. I
    bring a unique perspective to the problem. During my career, I
    have seen the worst of employers and the best of employers. I
    have seen horrible practices. I have seen fabulous practices. I
    have seen bad people do bad things. I have seen amazing people
    do fabulous things, but still miss the compliance mark.
        I've thought about this problem for 20 years and these are
    the conclusions I have reached. We need clear and simple rules.
    We need swift and certain enforcement. We need to punish the
    bad, while rewarding the good. Achievement of these goals will
    require meaningful reform, but I'm afraid that the current bill
    will not improve protections for low-wage workers.
        Let me tell you why. The provisions on disclosures paystubs
    final pay and the right to full compensation are covered under
    State law. Adding Federal requirements would add complexity and
    confusion without actually improving the worker protections. We
    need to simplify the FLSA, not make it more complex. Making
    compliance more difficult will decrease compliance and thus
    harm workers.
        State contract laws, union CBAs, and arbitration procedures
    already ensure workers receive their full compensation. Also,
    Wage an Hour investigators have no training or experience in
    enforcing private contracts or CBAs. The heart of the bill
    focuses on enforcement. New and increased back wages,
    liquidated damages, civil and criminal penalties. These
    increases proposed are extreme and I fear will be
    counterproductive of the goals of this bill.
        Increasing the financial consequences for violations makes
    a great headline, but I urge you to think about the actual
    impact on low-wage workers. Employers faced with such massive
    damages and penalties will have only one way to react to
    violation allegations. Litigate, litigate, and litigate some
    more. Payment of back wages would be delayed by years. The
    plaintiff's bar will collect more fees, but low-wage workers, I
    am afraid, will see nothing at all.
        The proposed increases also are inflexible, with no room
    for discretion based on the size of business or the type of
    violation. In the increases should be lower for small
    businesses which have fewer resources to ensure compliance and
    should be limited to repeat, willful, and retaliation
    violations.
        I don't understand at all why a bill focused on protecting
    low-wage workers would include provisions on litigation. There
    are no limits to the ability of employees to unit and pursue
    lawsuits against employers. The Department of Labor litigates
    on behalf of all employees. Plaintiffs' attorneys file
    thousands of Wage and Hour class actions and collective actions
    every year.
        Removing the FLSA opt-in litigation procedures, especially,
    without any replacement will generate confusion and more
    litigation, which benefits only lawyers. Arbitration is cost
    effective, it's quicker with significant protections for
    workers. Swift resolution of wage claims is essential to
    protecting low-wage workers and arbitration can do that.
    Litigation cannot.
        Tolling the statute of limitations during agency
    investigations also would delay payment of back wages. DOL does
    take too long to resolve complaints. Tolling would remove any
    incentives of the Wage and Hour Division to move more quickly.
    A better approach is to set metrics and create incentives in
    the agency for quick resolution and reduce time for
    investigations.
        I've only time to discuss one of my concerns with the grant
    program. Deputizing advocates to help conduct investigations
    would eradicate the long tradition of employers voluntarily
    cooperating with agency investigations, producing documents,
    welcoming investigators into their worksite. But if DOL brings
    along unions and advocates, employers will stop cooperating and
    insist on search warrants and document subpoenas. After all,
    the 4th Amendment does apply.
        More complexity, longer investigations, more litigation
    will harm low-wage workers by delaying payment of wages. We
    need to find a better path. Thank you.
        [The Statement of Ms. McCutchen follows:]

                     Prepared Statement of Tammy McCutchen

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Adams. Thank you very much. We'll now from
    Daniel Swenson-Klatt. You are recognized for five minutes.

      STATEMENT OF DANIEL SWENSON-KLATT, OWNER & OPERATOR, BUTTER
                         BAKERY CAFE

        Mr. Swenson-Klatt. Thank you, Representative Omar, for your
    kind introduction and your strong support of small businesses
    like mine in Minnesota's Fifth congressional District. We
    certainly appreciate you taking the time to meet with small
    business owners from Main Street Alliance last week during our
    May Small Business Month of Action.
        Chairwoman Adams, Ranking Member Keller, and Members of the
    Subcommittee thank you for the opportunity to address you
    today.
        My name is Daniel Swenson-Klatt. I've owned and operated
    Butter Bakery Cafe for the past 16 years in Minneapolis,
    Minnesota. I'm also here on behalf of Main Street Alliance, a
    national network of small businesses working to build people-
    centered, community-focused local economies.
        In my ideal world, fair wage laws wouldn't be necessary.
    What if instead we valued everyone fairly for their labor,
    providing each person with what they need in order to help them
    thrive. Sadly, that is not the history of our country and those
    unfair labor practices don't actually ring true to the ideals
    of our country.
        As a result, there's been a long and continual process of
    undoing those harms and righting the wrongs. The Fair Labor
    laws developed over many years are one way of moving closer to
    those goals. This philosophy has been at the core of my
    business. I learned about Fair Wage laws by doing. My first job
    out of college was as the sole employee of a small, nonprofit
    community center in Baltimore.
        And while I had held jobs before as an employee, I quickly
    needed to understand what it also meant to be an employer. I
    learned about payroll recording and taxes and how to decipher
    IRS letters through a great mentor who walked me through it and
    taught me the basics of accounting. Those lessons stayed with
    me over the years as I worked in public and charter schools, in
    nonprofits, in self-employment, and finally, now as a for-
    profit business owner.
        Technology available to me now that didn't exist in the
    mid-eighties makes preparing payroll on your own accessible,
    even if you don't use a payroll service. I recognize that the
    complexity of payroll can at times be baffling and frustrating.
    I still make mistakes. I am still learning, but the process of
    hiring staff, setting up payroll, and retaining staff through
    fair labor practice is fundamental for business owners.
        The benefits of providing clear rules and policies far out
    way the effort to create them. The technical assistance
    available in many forms and with willing mentors it's a
    business owner's choice to not play fair. As someone who
    chooses to play by the rules, I lose out business owners who
    bend those rules and use their power and privilege to avoid
    paying a fair wage.
        When I price my products fairly to represent a true cost of
    labor, I get questioned by lower prices elsewhere. Because I
    have worked in the restaurant industry and knew its issues with
    wage theft, I was willing to work with my staff to deal with a
    systemic inequities, create a fair wage model, and treat all my
    staff as professionals. My staff appreciate the ability to know
    what they'll make when they come to work.
        When our city added an Earn Sick and Safe Time Ordnance for
    staff in 2016, we were at the lead teaching other businesses
    how to adopt it and build it into their payroll recording.
        During 2018 and 1919, I had the opportunity of serving on
    Minneapolis' Workforce Advisory Committee which worked to craft
    a Wage Theft Ordinance. A key component was an employee notice
    which would spell out the terms and conditions of employment
    for every staff member. We modified a State template for our
    city and it's an easy form. I complete it each time I go
    through the hiring process.
        During our research on wage theft, one of the stories that
    bothered me the most was that large, national chains that were
    willing to encourage wage theft practices knowing that in
    nearly all states restitution was limited to Federal minimum
    wage and that wage was lower in many states and so they would
    come out ahead, even if they were caught and lost.
        My staff gain a sense of agency in their role as an
    employee with a clear employee notice. My workers appreciate
    the openness and transparency, they appreciate a clearly
    spelled out policy for wages and payroll reporting. The tasks
    of hiring and setting up payroll should include this
    information. Your efforts to define what that notice include
    are helpful, not harmful. I can meet those compliance
    requirements.
        Thank you for continuing the effort to undo fair labor
    practices of the past and work with small businesses to build a
    sustainable economy, vibrate neighborhoods and strong
    communities across this country. I am happy to answer any
    questions you may have.
        [The Statement of Mr. Swenson-Klatt follows:]

                   Prepared Statement of Daniel Swenson-Klatt

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairwoman Adams. Thank you very much. Under Committee Rule
    9(a), we'll now question witnesses under the five-minute rule.
    I'll be recognizing Subcommittee Members in seniority order.
    Again, to ensure that Members' five-minute rule is adhered to,
    staff will be keeping track of time. Please be attentive to the
    time, wrap up when your time is over, and re-mute your
    microphone.
        As Chair, I'll now recognize myself for five minutes. Ms.
    Cacace, under current law the FLSA provides that workers who
    are victims of wage theft can only be compensated for unpaid
    hours of work at the Federal minimum wage rate of $7.25 an
    hour. That would mean that a worker earning $10 per hour who
    was a victim of wage theft would only receive back wages at the
    rate of $7.25 per hour. So, how does this current limitation on
    damages under the FLSA harm low-wage workers?
        Ms. Cacace. Thank you, Chair Adams. Your question points
    out a significant problem. If you have an agreement with your
    employer to get paid above the Federal minimum wage, which is
    only 7.25 an hour, even if they don't pay you the $10 an hour,
    they said they would, if you are suing under the Fair Labor
    Standards Act, you cannot currently sue for that $10 an hour.
    You are only able to sue for the 7.25 an hour, there's no way
    for them under the Fair Labor Standards Act to obtain the money
    that the employer agreed to pay them and that they earned. And
    this significantly diminished their damages.
        If you work at $7.25 an hour for 40 hours a week for 50
    hours a year, it comes out to only $14,500 per year. So, you
    have somebody who's full time working making just $14,500 and
    only able to collect that much money, even if they were
    promised a wage of $10 an hour.
        Chairwoman Adams. OK. Thank you for that. Raising the
    Federal minimum wage is an issue of great importance to me and
    many of the Members of this Subcommittee. I appreciate your
    testifying and speaking to the importance of the issue, but Ms.
    Cacace, as you know, wage theft disproportionately impacts
    workers of color, including Black women.
        In your experience as a Labor Bureau Chief and as a Legal
    Aid attorney, can you share some of the ways in which wage
    theft impacts our most vulnerable communities?
        Ms. Cacace. Yes, of course. The low-wage workers work
    paycheck to paycheck, so they do not have savings in the bank
    if their employer does not pay them the wages they're owed for
    the last week. So, what happens is, as you mentioned in your
    opening statement, they're unable to pay their rent. They're
    unable to buy groceries, to pay their utility bills.
        And when I was at Legal Aid, we would screen every worker
    that came in for an employment law issue for any other issues
    and often they would already be in eviction proceedings. There
    would already be a scarcity of food in the house. There were so
    many fundamental issues that developed from not getting paid
    your minimum wages every single week and the stress that that
    puts on a person is enormous and people are really suffering.
    And so, any amendments to the Fair Labor Standards Act that
    will increase the ability to enforce the law will be an
    enormous benefit to these workers.
        Chairwoman Adams. Thank you very much. I've got a few
    minutes left. Mr. Swenson-Klatt, as a small business owner,
    what would you say in response to the argument that providing
    paystubs and pay records to employees is too burdensome?
        Mr. Swenson-Klatt. I am currently providing paystubs and
    all of the information required. I don't feel like it's a
    burden at all to me. It's a one-step click of a box and in this
    case I'm not afraid of it.
        Chairwoman Adams. OK. So, it doesn't appear to be a burden
    to you?
        Mr. Swenson-Klatt. Not at all.
        Chairwoman Adams. You've been doing it for how long?
        Mr. Swenson-Klatt. For 16 years.
        Chairwoman Adams. OK. Alright, well, you know it sounds
    like you have the model. Thank you very much. I have a little
    time left. I'm going to yield my time back, but I also want to
    now recognize Ranking Member for the purposes of questioning
    the witnesses. Rank Member Keller, you're recognized, sir.
        Mr. Keller. Thank you. Ms. McCutchen, thank you for being
    here today. Democrats have long been hostile to the independent
    contractor model, which has offered flexibility and well-paying
    opportunities to millions of Americans. Are you concerned that
    the burdensome requirements and excess penalties in
    Congresswoman DeLauro's bill would have a chilling effect on
    the ability of independent contractors to find work?
        Ms. McCutchen. Oh, absolutely, Representative Keller and
    thank you for asking. Now, you know there are over 10 million
    open jobs right now in this country and at the same time in
    2021 over 12 million workers joined the independent workforce.
    That's according to a study by NBO Partners. By the way 55
    percent of those are women and 67 percent are Gen Z and
    Millennials. The vast majority are choosing to do that
    voluntarily and are happier and healthier, according to this
    report.
        Now, employers need to tap into this workforce, 12 million
    versus 10 million open jobs, but uncertainty caused by DOL's
    illegal withdrawal of the Trump administration's IC regulations
    and then coupled with this massive increase in penalties means
    that no rational employer would actually want to engage the
    independent workforce which they really need to be able to do.
        Mr. Keller. Thank you. Also, Ms. McCutchen, the Fair Labor
    Standards Act covers roughly 143 million workers in the diverse
    businesses of all sizes that employ them. Are you concerned
    that the burdensome requirements contained in Congresswoman
    DeLauro's bill would unduly impact small businesses?
        Ms. McCutchen. Yes. You might as well call this bill the
    Bankrupt Small Business Act. Small businesses do not have in
    house attorneys. They can't afford outside employment law
    specialists. They don't have a professional HR. They primarily
    rely on the advice of their accountants, who I'm sorry to say,
    just do not know the FLSA sufficiently.
        Guidance for the small businesses is really hard to find on
    the Wage and Hour Division website. Sometimes I can't find it.
    Many small businesses, even when current law, need a payment
    plan to repay the back wages they owe and let alone the
    excessive penalties proposed here.
        I have seen small businesses bankrupted. There are
    perhaps--I don't know. Perhaps that's the goal. Under current
    leadership at DOL, targeting ICs, franchisees, guess what,
    bankrupt small businesses can't employ any workers at all.
        Mr. Keller. And this might be for, as you mentioned, the
    regulations are not clear and the guidance isn't always there,
    so a small business if they would make a mistake or something
    that would be detrimental to them because is that a lot what we
    find that businesses might have made a mistake, an error in
    trying to sift through the regulation?
        Ms. McCutchen. Yes. And that's the problem with the word
    'wage theft? in talking about this as if they're criminal
    activities. Good employers make mistakes because compliance is
    hard, and this bill does not distinguish between the good faith
    employer who makes an error versus the really bad actors that
    are out there.
        Mr. Keller. And we all want to hold people that are
    intentionally doing things wrong accountable. I think that's
    the minority of people. I mean I noticed in Mr. Swenson-Klatt's
    testimony he recognized that there's a complexity of payroll at
    times and can be baffling and frustrating and he still makes
    mistakes, according to his own testimony and I don't think
    they're going after the right thing.
        Mr. Klatt, I don't think you're doing those things on
    purpose, are you?
        Mr. Swenson-Klatt. Indeed not, and that's----
        Mr. Keller. That just proves the point that this
    legislation is going to be detrimental to people and the vast,
    vast majority of the employers in the United States want to do
    the right thing for their employees because their employees--I
    mentioned in my opening statement how I recognized that going
    across central and northeastern Pennsylvania, but when I was in
    high school, I worked in a restaurant. I worked in a nursing
    home washing pots and pans, and I worked in a factory right out
    of high school. And I tell you what, the people that owned
    those businesses back in the early and mid-eighties, guess
    what, the cared about the people that came to work every day.
    They wanted to do the right thing. So, I just think we, as
    policymakers, need to quit demonizing the people we represent
    that create jobs every day. Thank you and I yield back.
        Chairwoman Adams. Thank you very much, Ranking Member. I'll
    now recognize Mr. Takano. You're recognized for five minutes.
        Mr. Takano. Thank you kindly, Madam Chair. Ms. Cacace, what
    do you have to say about the allegation that this law, this
    proposed bill doesn't make a distinction between mistakes and
    willful wage theft?
        Ms. Cacace. Well, the liquidated damages they are more
    significant if it is somebody who has engaged in willful
    behavior, so it definitely does make a mistake. But I think the
    important thing to recognize is that this bill, the only
    additional substance that it's requiring of employers is to
    give a paystub. A paystub is the most basic thing that an
    employee should receive from their employer. They should know
    exactly how much they are getting paid. They should know for
    exactly how many hours their employer is paying them. That is
    not too much of a burden. It is not too complicated. And under
    the Fair Labor Standards Act, it's necessary because many
    states do not have that requirement, so this is an essential
    protection that is not going to burden anyone. And any small
    business who complies with that will have no--there's no
    penalties. Pay your workers the right amount and nobody is
    bankrupting your business.
        Mr. Takano. Thank you. Ms. McCutchen indicates that both
    Federal and State laws under the paystub disclosure
    requirements would, in her words, 'lead only to more complexity
    and confusion when employers try to figure out which law is
    more effective, but this doesn't make any sense to me. I think
    employers like Mr. Swenson-Klatt are smart enough to figure it
    out. Do you agree with Ms. McCutchen that a Federal paystub
    requirement, such as the one that you described, would lead to
    more complexity and confusion?
        Ms. Cacace. No. As I said, I think the paystub requirement
    is a very basic requirement. It is absolutely the bare minimum
    that you should give your employees. I do not think it will be
    more complicated for businesses and they should be able to
    figure it out.
        Mr. Takano. I'm astounded, quite frankly, Ms. Cacace, that
    there isn't a national requirement for paystub. I receive a
    paystub. I know the Ranking Member and every Member of this
    Committee, Republican or Democrat, receives a paystub. Every
    one of my employees receives a paystub. It's common sense that
    you need a paystub to figure out whether or not we're receiving
    the full amount that's due. We can actually go back and look at
    whether or not we're being paid minimum wage or whether we are
    being paid the overtime that we deserve and we can dispute with
    your supervisor.
        I think all this bill is doing is saying every American
    worker should get a paystub detailing their deductions. I think
    most Americans would say that this is common sense.
        Mr. Swenson-Klatt. Ms. McCutchen says that the Wage Theft
    Act propose increases to the penalties for violators of Fair
    Labor Standard Act are, 'very significant and even ridiculous.?
    I don't believe it's ridiculous to hold businesses accountable
    for stealing workers' wages. What do you think?
        Mr. Swenson-Klatt. I would find it a little more ridiculous
    to not charge someone for stealing. If I were to take my
    employees? wages after they took them out of the bank, I'm sure
    I would be in trouble, but if I do it before they get to put it
    in the bank, I should also be in trouble. So, I don't think
    it's ridiculous at all to take on the bad actors to let them
    know this is not the way to play business.
        Mr. Takano. Mr. Swenson-Klatt, you mentioned or alluded to
    the big national chains and some of their practices. How you
    have to compete against some of their bad acting. Can you tell
    us a little bit more about what you've experienced and what
    you've seen?
        Mr. Swenson-Klatt. Within our own city, it's pretty clear
    that the wage levels here are much higher than across the
    country. And so, when a company can use that difference to get
    the Federal minimum wage as the base, they're cutting wages for
    those staff who work in our city. I have to pay my staff in
    this city the full wage and that's a pretty discrepancy. They
    can certainly out compete me in a lot of ways by not having to
    do that.
        Mr. Takano. Madam Chair, I yield back, but I'm astounded
    that workers cannot recover the minimum wage that is set in
    Minneapolis that's higher than the Federal Government. They can
    only recover what the Federal Government has set at seven
    dollars and change. I find that astounding. I yield back.
        Chairwoman Adams. Thank you, sir. Thank you very much. I
    want to now yield to the gentlelady from North Carolina,
    Ranking Member of the Education Committee, Representative Foxx
    you're recognized.
        Ms. Foxx. Thank you, Madam Chairman. Ms. McCutchen, thank
    you very much for being here and for your very positive opening
    statement. The DeLauro bill creates a new requirement for DOL's
    Wage and Hour Division to enforce all employment contracts and
    collective bargaining agreements.
        Ms. McCutchen, based on your time leading the Division, are
    you concerned about the Division's ability to enforce this
    mandate and what implementation issues would the Division face?
        Ms. McCutchen. Yes, I'm very concerned. That type of
    contract claim is totally outside of the Wage and Hours
    experience and indeed the attorneys and solicitors' office too.
    They do not know contract law and certainly I would suggest
    that unions are the experts at enforcing collective bargaining
    agreements. So, you would have to develop, the agency would,
    new training and train every investigator and it's not an easy,
    new type of law. And all that time training new investigators,
    developing the training, every minute of that would be spent
    away from helping low-wage workers.
        And I'd also like to suggest employees who have contracts
    and union members under collective bargaining agreements are
    not the low-wage workers that we should be focusing on here, so
    it's just a bad idea all around. And believe me, they have
    remedies. It's called State contract laws and enforcing
    collective bargaining agreements.
        Ms. Foxx. Thank you. Ms. McCutchen, the legislation we're
    discussing today would force a business to comply with
    stringent disclosure requirements that would include
    unnecessary paperwork and costly analysis. How would these
    costly requirements subvert the legislation stated goal of
    benefiting workers?
        Ms. McCutchen. Well, first of all, let me correct the
    record. Every employee gets a paystub because every State does
    have a paystub requirement. Some of them require more and some
    less, but paystubs do exist, everybody gets them, but adding
    additional disclosures would mean additional time. It means
    working with our payroll provider to make sure that your
    paystubs actually comply with the law, that's more perspective.
    California versus Federal, for example.
        Under California law, you have to list total hours, not
    just regular and overtime. This law would just do regular and
    overtime, so it is confusing because this would add 51 laws
    that you have to comply with rather than just your local,
    State, or numbers of states. So, I would rather employers spend
    the time instead of trying to comply with unnecessary
    paperwork, which we frankly don't know whether it helps low-
    wage workers, whether they even would read this additional
    paperwork. I'd rather spend the time and money and resources on
    enforcement of the bad actors for low-wage workers.
        Ms. Foxx. Thank you again. Ms. McCutchen, 5 years ago, a
    witness testifying before the Committee representing the
    Society of Human Resource Management discussed the challenges
    of complying with FLSA requirements in the modern workplace and
    how the FLSA has not kept pace with the 21st Century economy.
    Do you agree that employer compliance with the FLSA wage and
    hour requirement has become more complicated in light of
    technological developments? How has the COVID-19 pandemic
    accelerated this trend?
        Ms. McCutchen. Absolutely, I agree. The core requirements
    for FLSA, as you will recall, were enacted in 1938 and the
    workplace today is nothing like the workplace 80 years ago.
    Then we were primarily a blue-collar manufacturing economy and
    now today we are a service economy with more independent
    workers and COVID just accelerated all the changes, where we
    work, how we work, the types of jobs, the types of pay. It's
    more complicated to track hours. It's more complicated to
    calculate overtime. It's more complicated to figure out who is
    exempt from overtime and who is not.
        And yes, we need to help low-wage workers, but we need to
    focus on reforms that will do that, simple, clear rules and
    quick enforcement is what we need.
        Ms. Foxx. Thank you. Madame Chair, I yield back.
        Chairwoman Adams. Alright, thank you to the Ranking Member.
    So, I want to recognize Ms. Jayapal, Representative Jayapal,
    you are recognized.
        Ms. Jayapal. Thank you so much, Madam Chair. Wage theft is
    indefensible, especially, as corporations rake in record
    profits. Funding for the Wage and Hour Division to combat wage
    theft has essentially remained flat for the past decades thanks
    to corporate lobbying. In addition to beefing up Federal
    enforcement, we have to take an 'All of the Above? approach to
    protect workers' paychecks.
        One of the most effective recourses for workers is
    litigation. Between 2017 and 2020, class action lawsuits
    recovered more lost wages than Labor Department action and yet
    many employment contracts contain provisions that waive a
    worker's right to a day in court by subjecting them to
    mandatory arbitration and preventing them from bringing class
    action lawsuits.
        That's why I'm a proud co-sponsor of the Wage Theft
    Prevention and Wage Recovery Act, which bans these coercive
    practices against workers fighting to win their hard-earned
    wages.
        Mr. Esparza, thank you for sharing your story. I think it's
    too often that immigrant workers get overlooked and erased,
    even as they face very unique challenges. If you had been
    required to sign an employment agreement that mandated you to
    bring your wage claim in arbitration as an individual and pay
    out-of-pocket arbitration costs, do you believe that your wage
    claim would've been successful?
        Mr. Esparza. It would not be successful at all because, I
    mean, I don't have the resources to do it by myself. That's why
    the union supported me and thanks to them I was able to do this
    class action lawsuit. Without them, I wouldn't be able to.
        Ms. Jayapal. You wouldn't have been able to do it. It's
    just too expensive and you wouldn't have had the resources. On
    average, a worker experiencing minimum wage violations lose
    about $3,300 in 1 year, more than a month of rent in a city
    like Seattle, but a small sum compared to the cost of
    litigation.
        Ms. Cacace, would an individual, low-wage worker be able to
    easily find legal representation for such a claim?
        Ms. Cacace. No, definitely not. I mean before even being at
    Legal Aid I was in private practice, and it was very difficult
    for us to take claims of low-wage workers because the recover
    most significant to the workers was not great enough to warrant
    the resources put into the litigation and so the ability to
    bring collective and class actions is really essential so
    workers can have their rights vindicated and can receive the
    money that they're owed.
        And going to arbitration is not the answer. Arbitration is
    not as efficient as it is claimed to be. We had a recent case
    here in New York where the arbitration took over 3 years for a
    group of home health aides, so it's important that workers have
    the right to litigate in court as a group. Thank you.
        Ms. Jayapal. Let me followup on that because you were just
    starting to get at my next question, which is why do employers
    prefer settling wage theft disputes in arbitration rather than
    in the courts? Because if you look at the data, more than half
    of private sector non-union employees are subjected to this
    forced arbitration. So, what's in it for the employers?
        Ms. Cacace. So, many arbitration agreements say that a
    worker has to arbitrate individually, so, for instance, there
    is currently a collective and class action against Uber and
    Lyft in New York State brought by the Taxi Workers Alliance and
    that is claimed for thousands of workers.
        The companies have claimed that all of those workers are
    subject to individual arbitration, so thousands of individual
    arbitrations. It would be impossible to find representation to
    do that and would take decades to individually arbitrate each
    one of those claims, so it's more efficient to have class and
    group actions that can go into court.
        Ms. Jayapal. So, in a way, it's an effective way to quash
    many of these complaints from workers to be able to get what's
    fairly owed to them. Let me stick with you and say that the
    Wage Theft Prevention and Wage Recovery Act includes a
    provision that would automatically include qualifying workers
    in a class action lawsuit instead of requiring them to opt in.
    How will that impact the strength of class action cases and the
    Fair Labor Standards Act enforcement?
        Ms. Cacace. I think that makes sense because when workers
    often receive an opt in notice, they're afraid. They would be
    making themselves known. They could be currently still working
    for this employer and it's a difficult decision whether to opt
    in because of the fear of retaliation. So, if they don't have
    to take that affirmative step until after the case is over and
    there is going to be recovery, I think a lot more workers will
    get the compensation that they earned.
        Ms. Jayapal. Thank you so much. And Madam Chair, I'm proud
    that the House has passed the ending of Forced Arbitration of
    Sexual Assault and Sexual Harassment Act, my bill with Cheri
    Bustos, and that the Senate passed it and it got signed into
    law. I hope we can eliminate forced arbitration and provide
    limitations on class action and eliminate the limitations on
    class action with this bill. Thank you very much. I yield back.
        Chairwoman Adams. And thank you. I want to recognize now,
    Mrs. Miller-Meeks of Iowa. You have five minutes, ma'am.
        Mrs. Miller-Meeks. Thank you, Madame Chair and Ranking
    Member Keller and thank you to all of our witnesses for their
    important testimony.
        Ms. McCutchen, you had done an excellent job and thank you
    for appearing here in person, describing the onerous
    implementation and regulations around the FLSA and how
    difficult it is for a business that wants to comply and is
    paying a fair wage to comply with those regulations.
        The FLSA does not define the term 'joint employer.?
    congressional Democrats and the Biden administration support
    creating the broadest definition possible of joint employment
    and do have concerns about how broad joint employment
    definition would work with the DeLauro bill and would it
    significantly increase liability for employers and threaten the
    franchise business model.
        Ms. McCutchen. I think it would kill the franchise business
    model and also ruin many small businesses because they cannot
    afford the tripling and quadrupling of penalties that this bill
    would propose, especially, in a franchisee business. What
    company would have franchisees when they're going to be held
    responsible with these extreme penalties for every minor
    violation by every single franchisee who is a small business?
    Better just to have company stores where you can control the
    pay and the pay practices of the employees in the storefronts
    with our brand on it.
        So, the broader the joint--anti-joint employment is anti-
    franchise and anti-small business.
        Mrs. Miller-Meeks. And I know that our small businesses in
    Iowa who are extremely concerned about this and they're paying,
    in many cases, well over $15 an hour. Your testimony discusses
    the complexity of the Fair Labor Standards Act and the value of
    streamlining requirements. During the Trump administration, DOL
    issued a final rule on workers classification as employees and
    independent contractors under FLSA. This rule emphasized the
    degree of workers control over their work and their great
    entrepreneurial opportunity for profit or loss. Does this rule
    provide greater certainty for workers and businesses?
        Ms. McCutchen. Absolutely. Before that there were no
    regulations. There were no clear standards at all. It was only
    informal guidance, which you had to be an expert to find on the
    Wage and Hour Division website. So, these were regulations.
    They were focusing on who controlled the work, which is the
    commonality in all the--sorry to say this--100 different
    Federal and State regulations and statutes on independent work.
        Now, of course, the Biden administration withdrew that
    rule. A Texas Court said that that was illegal, and it is back
    in force, but here's more confusion. It's not on the Wage and
    Hours Division's website. The Trump regulations that are in
    force today what we see on the website is a notice about the
    law, but not a link to the actual regulations and they have,
    instead, their Factsheet 13, which is a seven-factor test that
    was in place before the regulations. So, to help small
    businesses and franchisees, they need to put the Trump
    regulations back on their website and take off Factsheet 13.
        Mrs. Miller-Meeks. So, it sounds like that clarifying
    language needs to present and we need to stop practices where
    we know it's illegal, but we're going to continue to do it.
        In March of this year, a Federal court held that efforts by
    the Biden Labor Department to withdraw the Trump
    administration's final rule on independent contractors were
    invalid, to your point, and that the Trump rule, which became
    effective in March 2021 remains in effect today and I think you
    alluded to this. Do you know whether the Department is
    following the Trump administration work classification rule,
    and will they put it back on their website or is that an
    indication they're not following it?
        Ms. McCutchen. I don't know. I don't think anybody knows
    whether they're actually following the law, as they're required
    to do under the Texas District Court. I also don't know whether
    they're going to appeal that case, so we're in total disarray
    right now. My advice to employers is the rule is the Trump rule
    and that's the rule that you should insist DOL and in
    litigation be applied.
        Mrs. Miller-Meeks. Thank you so much for your testimony.
    Ms. Chair, I yield back my time.
        Chairwoman Adams. Thank you very much. Representative Omar,
    you are now recognized for five minutes, ma'am.
        Ms. Omar. Thank you, Madame Chairwoman. Thank you, Mr.
    Swenson-Klatt for joining us today. Can you please detail how
    illegal payroll practices from certain companies end up hurting
    businesses like yours and your employees?
        Mr. Swenson-Klatt. Thank you. It's been my experience that
    when I've made a mistake with any of my payroll issues, I get
    opportunity to learn. I've had great experience with the IRS in
    working through any issues. I haven't had any fines that I've
    needed to be afraid of. And when I hear about businesses that
    break rules willingly, make efforts to skirt the law in order
    to gain some competitive advantage, I feel like all the work
    I'm doing is kind of at a loss.
        It also just makes me feel like my consumers, my workers,
    my community feels devalued for their labor when they know
    businesses, on a large scale, can avoid paying a fair wage.
        Ms. Omar. Thank you. Democratic AG offices across the
    Nation have been working hard to protect workers' labor rights
    and make sure the economy is safe and sustainable for
    historically disenfranchised communities. And so, I first want
    to thank Ms. Cacace for fighting for working families in New
    York. You mentioned in your testimony that your office and
    State legislature enacted vital reforms to require universal
    payroll transparency and enforce tougher legal and mandatory
    repercussions for wage violations.
        In 2019, the Minnesota legislature passed similar worker
    protection which also authorized criminal penalties and
    increased civil fines for wage theft. That same year my good
    friend and predecessor, Attorney General Keith Ellison,
    established wage theft unit that is dedicated to advancing and
    protecting the rights of exploited workers.
        Over the past couple of years, our AG's office has won
    hundreds of thousands of dollars in payback unpaid overtime and
    other damages for workers in my District and across the State.
    Unfortunately, some of the most pervasive cases of wage theft
    in my State still occur in construction industries where almost
    one in five construction workers suffer some type of payroll
    fraud and misclassification.
        A very recent example of this happened last week where
    workers claimed wage theft for more than $100,000 by
    subcontractors at the Viking Lakes Development in Egan,
    Minnesota. It is clear that more DOL funding and additional
    Federal reforms are needed to assist our localities in
    protecting the most vulnerable workers. How do you think the
    Wage Theft Act aids in your legal work?
        Ms. Cacace. Thank you for your questions. So, as we're
    talking about the paystub requirements, I think it's important,
    not only so workers know each and every week what they are
    getting paid for and so they can address any discrepancy
    immediately, but if they need to litigate those records are
    really invaluable. So, we have seen cases in our office where,
    even though the minimum wage is $15 an hour, the workers are
    being paid $13 an hour and that's what it says right there on
    the paystub, so that just makes the case easier to litigate.
        And if there were even more penalties, I think rather than
    lead to more litigation, I think that leads that to less
    litigation, right? So, if you know that your paystub shows you
    did not pay correctly, you're going to be subjected to double
    or triple penalties. If you have a good lawyer on the
    employer's side, they're going to tell you to settle that case.
    Let's resolve this, let's start paying correctly, and then we
    won't face this again.
        One of the other things that's in the bill is also to
    codify the standard that if an employer doesn't keep records
    that then the employee's testimony is presumptively true about
    their hours and their wages. And it's really important to get
    that in the statute because I think that then employers will be
    on notice that, oh, it's good for me to give the paystub
    because then I'm doing something right. We deal with things
    immediately, if they happen. And they realize that if they
    don't what my worker comes in and testifies it's going to be
    very difficult for me to rebut that. So, I think a lot of the
    provisions will make it easier for employers to comply with the
    law and will make it more likely that there will be early
    settlements rather than long litigation.
        Chairwoman Adams. The Gentlelady's time has expired.
        Ms. Omar. Thank you.
        Chairwoman Adams. Alright, thank you very much. Mr. Good,
    you are now recognized, sir, five minutes.
        Mr. Good. Thank you, Madame Chairman. Thank you to Ranking
    Member for holding this hearing. I want to thank our witness
    who is here, Ms. McCutchen, for being with us in person. I
    suspect this will be a requirement of this and every other
    committee in a few months and I appreciate your courageous
    example of being here with us in person.
        As you know, though--as we all know, we're experiencing
    record inflation in the country thanks to the reckless and
    relentless spending sprees by this Administration. This is
    further exacerbated by the Democrat COVID lockdowns that have
    decimated small businesses, many of which will never recover.
    In fact, NFIB has reported that 25 percent of small businesses
    in my home State of Virginia have closed permanently, never to
    reopen again as a result of these Democrat lockdowns.
        This is even more tragic when you consider the fact that
    some 90 percent of Americans work for small businesses, so we
    know who ultimately this is impacted by. They're not going to
    make any wage without a job. But we should be working, I know
    you agree, to get the heavy, oppressive hand of government off
    the necks of working families and small businesses.
        As a matter of fact, tomorrow I plan to introduce my bill,
    the Small Business Before Bureaucrats Act, which would update
    the 60-year-old NLRB regulatory standards to reduce the number
    of businesses that are under the oppressive control of the
    NLRB. It would increase by tenfold the standard for when a
    business would have to qualify to be under that control.
        But back to the 40-year high inflation rate which we're all
    suffering under, which I believe is the No. 1 issue for most
    Americans today. In the State of the Union Address, this
    President made it clear that he blames business owners or seems
    to make that clear that he blames them. I don't know if he was
    dishonestly trying to deflect from his terrible record, his
    failed policies, or he simply after 50 years in government does
    not understand what it takes to run a business, to operate at a
    profit, when he said to businesses lower your costs, not
    recognizing that businesses every day try to do two things,
    increase revenue, reduce their costs so they can survive, meet
    their payroll, keep their doors open, and employ their
    employees.
        Congress should be looking, I think you agree, to empower
    job creators to survive this economic crisis. So, I ask you,
    what's the most important action or some of the most important
    actions that you believe that Congress could take to empower
    job creators and hopefully therefore bolster the wages or the
    opportunities for working Americans.
        Ms. McCutchen. Well, I think one of the most urgent things,
    just like your bill is going to be in NLRB, is exclude more
    small businesses from the FLSA coverage. It's 500,000 in annual
    business sales. It's been that way for decades and decades and
    decades. So, taking that out by ten times would be a help to
    get the Federal Government out of small businesses, but this
    bill would do the opposite effect, right?
        I mean, yes, this bill, even minor, unintentional
    violations the penalty is going to be $22,000 per violation per
    employee. Now, think about that. You have five employees, and
    you make a minor mistake on your paystubs. That's $100,000 in
    fines a week. That is going to bankrupt small businesses and it
    just can't happen in this economy.
        I will also say I was at a conference last week where
    hospitality employers the whole discussion was staffing,
    staffing, staffing. We cannot get employees. You've seen the
    'Help Wanted? signs on every store, on every restaurant. We
    need to simplify, simplify, simplify these rules so that
    employers can comply with them easily, pay the employees what
    they are owed now, not after 3 years of litigation.
        Mr. Good. Well said. I tell folks back home in the District
    this Democrat majority looks with contempt and distain at job
    creators, employers, business owners and believe that they seek
    to exploit their employees and they must have done that to
    become successful and to be an employer to begin with and
    continues to layer more and more consequence, punitive damages
    upon employers who are just trying to survive, just trying to
    pay their employees. Could you speak with the limited time that
    we have--you referenced the need for clear and simple Labor
    rules. What should Congress do to more simplify and eliminate
    some of those to help small business owners?
        Ms. McCutchen. Well, my written testimony actually has 10
    ideas for FLSA reform that would help do that. That includes,
    for example, a refocus on low-wage workers, that includes
    excluding high compensated workers from the coverage of the
    FLSA, make them exempt. It includes allowing businesses and
    employees to enter private waivers of claims so they can
    resolve issues quickly and privately without the danger of
    being sued again.
        I could just go on and on, but we just need the regular
    rates. I'm sorry for the time, but today to get staffing
    businesses have to give special benefits and special pay, like
    Dollywood, where I'm from in Eastern Tennessee, is giving full,
    free college educations to every full-time and part-time
    employee from Day One.
        Chairwoman Adams. That's time.
        Ms. McCutchen. Now, before the Trump administration's
    regulations on the regular rate that would've caused overtime
    liability.
        Chairwoman Adams. Ma'am. Ma'am.
        Ms. McCutchen. You can't give that without violating the
    FLSA.
        Chairwoman Adams. Ma'am, excuse me.
        Mr. Good. Thank you very much.
        Chairwoman Adams. We have to move on. You're out of time.
        Mr. Good. Thank you, Madame Chairman. I yield back.
        Chairwoman Adams. Thank you. The gentleman from New Jersey,
    Representative Norcross, you are recognized, sir, for five
    minutes.
        Mr. Norcross. Thank you, Madame Chairwoman, and for holding
    this incredibly important hearing. I know what it's like to be
    cheated out of wages. Unfortunately, when I was young man, I
    was a victim. And there is a difference between somebody making
    a mistake and what we're talking about today. And I will talk
    about this with one our witnesses to get his feedback.
        I have never heard in my entire career of somebody going
    into bankruptcy, being prosecuted criminally because of an
    accidental mistake. The ones that we are talking about today
    are intentional, are large, and hurt real people. I understand
    contractors are the partners of workers. We're in this
    together, but there's a distinction between a good contractor
    who does the right thing and might a mistake and what we're
    going to hear here in a few minutes.
        Mr. Esparza let's talk about the bad actors and in your
    case, the wage thefts. You joined with 200 plus other workers
    in a class action suit for $618,000. That's not an accidental
    mistake. Let's be clear. You were working for the employer.
    Talk to me about what kind of paystubs, earning statements that
    you received. How was it that you were either able to document
    or difficult to document the wage theft?
        Mr. Esparza. Well, the form of payment from this person
    that I was working for, she was just giving me a personal check
    with a certain amount of money for the hours that I worked.
    There was no overtime paid after 40 hours. I used to work from
    Monday to Sunday and still get paid the same amount. And for
    Saturday/Sunday, I mean, I was keeping a record of everything
    that I was doing because, like I said on my testimony, the
    union was educating me, and they told me to start saving those
    as proof.
        Mr. Norcross. So, when you got a personal check, it was
    just made out to you, the amount, and the signature by the
    employer?
        Mr. Esparza. Yes, that was it. There was no paystub or
    anything, so it was just an amount.
        Mr. Norcross. That happened week after week or was that a
    one-time occurrence?
        Mr. Esparza. It was week after week.
        Mr. Norcross. So, this isn't an accident by any stretch of
    the imagination and that's what I'm trying to suggest here to
    my colleagues. There's a huge difference trying to put little
    guys out of business. No, we're not. They're the ones who drive
    our country. The ones we worked with. That's not an accident,
    folks. Oh, gee, I forgot my paystub today. OK, that was once.
    How many weeks did that happen on your job?
        Mr. Esparza. I want to say around probably 10 weeks
    straight.
        Mr. Norcross. Yes, that's a pretty big accident. So, when
    we look at what's going on, if you had a standard, what most
    people around the country have, is how many hours you worked,
    the amount of pay, that would've been very helpful in terms of
    making sure you got the right pay. Now, was it just you on the
    job that got that or were there other workers?
        Mr. Esparza. No, there were multiple workers there.
        Mr. Norcross. Yes. And unfortunately, in the construction
    industry, these are some of the things that I ran into as a
    young apprentice trying to make my way through the industry
    like you, Mr. Francisco. It is tough. And all we're doing is
    checks and balances. Nobody wants to get beat up here. We all
    want to have a shot at life, but we want a fair playing field.
    And the fact of the matter is when they hold the hammer over
    some of the employees' heads like we're hearing here today,
    that's not a fair, that's not a level playing field.
        We all should be focused on getting rid of the bad actors
    and making sure that everybody plays by the same rules.
    Contractors don't go out of business for making a little
    mistake. They do not get criminally charged accidentally. It's
    bad actors. And I want to thank you for sharing your story and
    I yield back the balance of my time.
        Chairwoman Adams. Thank you. Thank you very much, Mr.
    Norcross. I want to recognize Ms. Steel. You're recognized for
    five minutes.
        Ms. Steel. Madame Chairwoman, thank you very much.
    Independent contractors and entrepreneurs and small businesses
    in my home State of California already understand the
    devastating effects California burdensome laws have had on
    their ability to provide for their families. There are more
    than two million independent contractors and entrepreneurs
    working across California. And now, more than ever, we should
    be supporting our workforce and providing clear guidelines to
    give workers more flexibility and independence to find the
    right job for them.
        Those who chose to become an independent contractor want
    and enjoy the independence and flexibility and control that is
    provided to them. Recently, the Court blocked the Biden
    administration's attempt to limit clarity and guidance on the
    classification of contractors under the Fair Labor Standard
    Act.
        Having said that, Ms. McCutchen--if I pronounce it wrong,
    sorry--with your background and knowledge of your Labor
    Department and recent Court rulings, how is current Department
    actually observing the independent contractor worker
    classification rule and do you agree there should be more
    certainty for workers and employers?
        Ms. McCutchen. Thank you for that question. Right now,
    there's actually no published regulations on independent
    contractor status and that's a particularly tough situation
    because under Federal and State law there are actually over 100
    different regulations and statutes which have independent
    contractor standards in them. So, the Trump administration did
    the right thing in establishing a clear, simple rule that
    employers could follow.
        Right now, what we have at DOL is no rules at all, so it's
    litigation. It's setting the standards through litigation
    rather than legislation and that is pretty tough, especially,
    for small businesses to figure out what is the law that they're
    supposed to be complying with.
        Ms. Steel. Thank you for the answer. I'm very supportive of
    local small business models and empowering minority
    entrepreneurs to start their own business. And let me ask you
    one more question. With bad definitions of independent
    contractor classifications and joint employer, would this hurt
    those who want to open their small business under the franchise
    model at this point?
        Ms. McCutchen. Well, it makes it very difficult, right?
    Most businesses, in my experience, want to comply. They want to
    do the right thing, but they're not compliance machines. When
    you're opening a small business, especially, today you have
    enough problems just trying to open a small business, let alone
    having to try to figure out all these laws. And with this bill,
    and the 22,000 per employee per violation for unintentional
    violations that's ruinous for small businesses. And so, I just
    don't know how, even if I was a small business owner, I would
    be scared today in trying to open a new business because I
    don't know how you survive this type of bill.
        Ms. Steel. Especially, in California, it's much worse than
    any other states in the Nation.
        So, thank you very much, Madame Chair, and I yield back.
        Chairwoman Adams. Thank you very much. I want to recognize
    Representative Stevens.
        Ms. Stevens. Yes, great.
        Chairwoman Adams. You've got five minutes, ma'am.
        Ms. Stevens. Yes. Sounds good. I'm ready to rock. I'm
    surprised that all of five minutes of questioning wouldn't be
    used by any Member of Congress the egregious topic at hand
    known as wage theft, preventing wage theft and requiring stolen
    wages, particularly, in a time of rising costs. Particularly,
    in a time of inflation, I think we should be helping the
    American worker achieve and recuperate and gain all of the
    wages that they are owed. I really want to salute Mr. Esparza
    for being here and for your testimony and for your effort.
        Certainly, as a labor-aligned Member of Congress hailing
    from the great State of Michigan. I represent Oakland County in
    the Congress, working alongside many building trade unions. I
    do want to express that we have our own challenge in Michigan
    as it pertains to prevailing wage, right, and making sure that
    prevailing wage continues to be the utilization and the method
    of how contracts go, going forward. And yet, it was rolled back
    in Michigan, and I know our Governor, Governor Whitmer, has
    been working to combat that.
        I know that here in the Congress I am very dedicated to
    this effort and I'm proud to be an original co-sponsor the Wage
    Theft Prevention and Wage Recovery Act, a responsible solution
    to deter wage theft and help workers seek justice. I'm going to
    be clear. If you're not on board with this, you're part of the
    problem. OK, I'm a daughter of small business owners. I've seen
    my dad go through it with his landscape company and he pays his
    workers for good day work. So, Ms. McCutchen says that
    increased penalties for violating the Fair Labor Standards Act
    could harm small businesses. Please remind us how many people
    do you employ?
        Mr. Swenson-Klatt. I employ 20. I have 20 on staff.
        Ms. Stevens. So, you consider yourself a small business?
        Mr. Swenson-Klatt. I am a small business.
        Ms. Stevens. And do you think businesses of any size that
    play by the rules would have anything to worry about with the
    increased penalties in the Wage Theft Act?
        Mr. Swenson-Klatt. I feel that I am in compliance with what
    is here. I am doing my best to match all of the requirements
    and I have no fears of what's going forward.
        Mr. Stevens. Right. And we know as a result of an ongoing
    pandemic, an unbelievable and catastrophic war started by
    Russia in Ukraine prices are rising, people are going to the
    grocery store, they're paying through the roof for the brisket,
    the roast, the this and that. So, could you please highlight,
    Mr. Swenson-Klatt, some of the technical assistance and
    resources available to small businesses that they can use to be
    sure that they're compliant with wage and hour laws?
        Mr. Swenson-Klatt. Now, within Minneapolis, we feel we're
    pretty fortunate. I have business associations. I have the
    city. I have the small business team. We have been able to work
    with our state-support community development corporations. All
    of them provide technical assistance and mentors. I, myself,
    have served as a mentor for new and emerging entrepreneurs in
    my own neighborhood. It's available. We put it to use online
    and in person.
        Ms. Stevens. And it's exciting. That's great. So, Ms.
    Cacace, thank you so much for being here and for your role at
    the New York State Office of the Attorney General.
        Considering that there are no penalties for recordkeeping
    violations and no requirements to provide employees with
    paystubs, employers currently have little legal incentive to
    maintain accurate records. How important are paystubs and
    payroll records for pursuing wage theft cases?
        Ms. Cacace. Thank you for the question. And yes, I think,
    as I said earlier, it's essential, right? It's essential for
    workers to know what they're getting paid to be able to deal
    with it immediately if there is a problem and then it's
    essential for the lawyers if there needs to be a wage theft
    claim. So, if you are litigating a claim, that is your first
    piece of evidence. Is there a paystub, what does it say, and is
    it accurate? And if an employer is correctly paying their
    employees, it is their best defense. So, it essential for
    everyone and will make things much easier.
        Ms. Stevens. Yes. Excellent. Well, with those 10 seconds
    remaining, the near full utilization of my five minutes. Thank
    you, Madame Chair and I yield back.
        Chairwoman Adams. And thank you very much. I want to yield
    now to Representative Stefanik. You are recognized, ma'am, five
    minutes. Is Representative Stefanik on? Is Representative
    Stefanik on? She is not. OK, Representative Scott are you on
    the platform?
        Mr. Scott. I'm not on the platform. I'm in the Hearing
    Room.
        Chairwoman Adams. OK, Representative Scott, you are
    recognized. I want to recognize the gentleman of the Full
    Committee in Labor. You are recognized, sir. You have five
    minutes.
        Mr. Scott. Thank you. Thank you. Thank all the witnesses
    for being with us. And I want to start with Ms. Cacace.
        We've heard a lot about technical errors. How do we know
    that wage theft is actually taking place, not as just technical
    errors, but intentional acts?
        Ms. Cacace. Yes. Thank you for the question. I think it's
    by the volume and I think that somebody recently just asked
    about this. If it is I forgot to give a paystub 1 day, that's
    very different from I didn't pay wages to thousands of
    employees for years on end. So, in the New York State Attorney
    General's Office, we recently had a case that we resolved with
    two large agencies that provide home health aides and there are
    two components to the settlement. One is over $5 million, and
    the other is over $6 million. So, this is for thousands of
    workers who were routinely not paid for all of the hours that
    they worked.
        Mr. Scott. We've heard a lot about errors that are made by
    people who don't understand the rules and that kind of thing.
    How often do you see these errors benefiting the employees?
        Ms. Cacace. I don't think in the 20 years I have been in
    this field have ever seen one of those, but people come to me
    when they have a problem.
        Mr. Scott. Now, you mentioned recovery and mentioned the
    minimum wage under FLSA. If you were promised $20 an hour and
    actually got paid $10 an hour, would you have recovery
    available to you under the FLSA because you've been paid more
    than the Federal minimum wage?
        Ms. Cacace. No, currently, you would not.
        Mr. Scott. You would not have a claim at all under the
    FLSA.
        Ms. Cacace. That's correct.
        Mr. Scott. You would have a claim under contract, I'd
    imagine.
        Ms. Cacace. You could have a breach of contract under State
    law, but as I said earlier, that does not come with attorneys'
    fees and it does not come with any liquidated damages, so it
    may be very difficult for you to find a lawyer to take that
    case.
        Mr. Scott. And if it goes to arbitration, who pays the
    arbitration fees?
        Ms. Cacace. It is usually split between the employee and
    the employer.
        Mr. Scott. So, the employee would have to pay part of the
    arbitration fees.
        Ms. Cacace. Yes.
        Mr. Scott. And if the claim is not a huge claim, you just
    ripped of a couple hundred dollars.
        Ms. Cacace. It's generally not worth it.
        Mr. Scott. It's just not worth it. Now, are you familiar
    with the pending legislation?
        Ms. Cacace. Yes.
        Mr. Scott. We've heard comments that the penalties are 20
    some thousand dollars up and then $100,000. Is that not to
    exceed those numbers?
        Ms. Cacace. Yes, of course. And the Department of Labor
    would have discretion if it was a small mistake not to award
    those high-level penalties.
        Mr. Scott. And could they take into consideration the size
    of the business?
        Ms. Cacace. Yes.
        Mr. Scott. And how egregious the situation was?
        Ms. Cacace. Yes.
        Mr. Scott. Thank you. Ms. McCutchen, you indicated that all
    states have paystub requirements; is that right?
        Ms. McCutchen. (Inaudible.)
        Mr. Scott. Well, we can agree at least most states.
        Ms. McCutchen. Yes.
        Mr. Scott. And if you're operating in a lot of different
    states, you'd have a lot of different compliance. Would it make
    sense to have one Federal law on paystubs to preempt all of
    those different laws?
        Ms. McCutchen. I think there's different viewpoints of
    that. I, myself, have sort of dreamed about writing a uniform
    code of employment law, but I think to do that would take a lot
    of study, right, because you shouldn't automatically adopt what
    California and New York are doing, which are very burdensome
    and haven't had a great affect in those states. So, you would
    want to study every single law and figure out what's the middle
    ground.
        Mr. Scott. Well, you would only have to learn one system.
    You wouldn't have to learn each and every one if you have in a
    number of different states.
        Ms. McCutchen. Right. Correct.
        Mr. Scott. You also talked about tolling the statute of
    limitations during the investigation.
        Ms. McCutchen. Yes.
        Mr. Scott. And you think that the statute of limitations
    should not be tolled.
        Ms. McCutchen. That is because I am afraid that if you toll
    the statute of limitations there would be no incentive for the
    Wage and Hour Division to complete their investigations more
    quickly and it is speed that low-wage workers need. They need
    to get their pay.
        Mr. Scott. Of course, on the other side, the statute of
    limitations may expire while the investigation is going on and
    the person waiting for action just lost his case.
        Ms. McCutchen. Every day, right, is a new back wages, so it
    very rarely happens that you lose all claims. You still will
    have two or 3 years of back wages to collect. And I think this
    Committee, in particular, can conduct great oversight of the
    Wage and Hour Division to make sure they don't do that. They
    shouldn't do that.
        Mr. Scott. Thank you, Madame Chair. I yield back.
        Chairwoman Adams. Thank you. Thank you, Chairman Scott, and
    appreciate you being here. And I want to just thank all of the
    witnesses. I don't think there are any other Members present,
    at least that's the information I have. So, let me thank all of
    the witnesses for their participation today.
        Members of the Subcommittee may have some additional
    questions for you, and we ask the witnesses to please respond
    to those questions in writing. The hearing record will be held
    open for 14 days in order to receive those responses. I do want
    to remind my colleagues that pursuant to Committee practice,
    witness questions for the hearing record must be submitted to
    the Majority Committee staff or Committee Clerk within 7 days.
    The questions submitted must address the subject matter of the
    hearing.
        I want to recognize the distinguished Ranking Member now
    for a closing statement.
        Mr. Keller. Thank you. As we've heard throughout today's
    hearing, Republicans and Democrats share a common goal in
    ensuring that workers are paid in full for their work as
    required under the Fair Labor Standards Act.
        Unfortunately, Democrats are advancing a partisan proposal
    which will fail to meet that goal. Instead, the DeLauro bill
    will add to the challenges job creators and American workers
    are already facing in our struggling economy. The bill's gotcha
    still treatment of unintentional or technical violations of the
    FLSA, combined with its disproportionate penalties will have a
    chilling impact on employers.
        In addition, the DeLauro bill drastically expands the
    authority of the Department of Labor's Wage and Hour Division,
    requiring the agency to enforce all pay-related contracts and
    collective bargaining agreements, interfering with its core
    mission of enforcing Federal wage and hour requirements.
        Workers and employers both benefit from clear and concise
    rules, but this bill is a step in the wrong direction. A supply
    chain crisis, raising inflation are already wreaking havoc on
    our economy. This legislation, if signed into law, could be the
    nail in the coffin for many struggling job creators.
        The DeLauro bill is counterproductive and will harm
    America's job creators and workers. These economic engines
    deserve better, and I urge my colleagues across the aisle to
    promote bipartisan solutions that ensure collaboration among
    the Department of Labor, employers, and workers.
        I'd like to thank our witnesses again for participating in
    today's hearing and I yield back.
        Chairwoman Adams. Thank you, Ranking Member Keller. I want
    to thank our witnesses for being here today. Today our
    witnesses underscored the pervasive and the severe consequences
    that wage theft has on our workforce. Everyday workers across
    the Nation keep our communities running and the economy
    growing. Unfortunately, unscrupulous employers stiff their
    workers out of the wages they have earned.
        Again, if we want to raise people out of poverty, if we
    want to ensure that Americans have the opportunity to enter the
    middle class, and if we believe that workers deserve a decent
    wage for an honest day's work, then we must enact a meaningful
    deterrent to wage theft and help workers seek justice. To do
    so, Congress must pass the Wage Theft Prevention and Wage
    Recovery Act, and finally ensure that wage theft is no longer
    profitable for dishonest employers.
        So, thank you again to our witnesses for your time and your
    testimony. If there's no further business, without objection,
    the Subcommittee stand adjourned.
        [Additional submissions by Ranking Member Keller follow:]

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        [Whereupon, at 12:02 p.m., the Subcommittee meeting was
    adjourned.]

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