[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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[Whereupon, at 12:02 p.m., the Subcommittee meeting was
adjourned.]
[all]