[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                        BAD FOR BUSINESS: DOL'S
                         PROPOSED OVERTIME RULE

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                                 OF THE

                COMMITTEE ON EDUCATION AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________


           HEARING HELD IN WASHINGTON, DC, NOVEMBER 29, 2023
                               __________

                           Serial No. 118-28
                               __________

  Printed for the use of the Committee on Education and the Workforce
  
  
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]  


        Available via: edworkforce.house.gov or www.govinfo.gov
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
56-007 PDF                WASHINGTON : 2024           


                COMMITTEE ON EDUCATION AND THE WORKFORCE

               VIRGINIA FOXX, North Carolina, Chairwoman

JOE WILSON, South Carolina           ROBERT C. ``BOBBY'' SCOTT, 
GLENN THOMPSON, Pennsylvania             Virginia,
TIM WALBERG, Michigan                  Ranking Member
GLENN GROTHMAN, Wisconsin            RAUL M. GRIJALVA, Arizona
ELISE M. STEFANIK, New York          JOE COURTNEY, Connecticut
RICK W. ALLEN, Georgia               GREGORIO KILILI CAMACHO SABLAN,
JIM BANKS, Indiana                     Northern Mariana Islands
JAMES COMER, Kentucky                FREDERICA S. WILSON, Florida
LLOYD SMUCKER, Pennsylvania          SUZANNE BONAMICI, Oregon
BURGESS OWENS, Utah                  MARK TAKANO, California
BOB GOOD, Virginia                   ALMA S. ADAMS, North Carolina
LISA McCLAIN, Michigan               MARK DeSAULNIER, California
MARY MILLER, Illinois                DONALD NORCROSS, New Jersey
MICHELLE STEEL, California           PRAMILA JAYAPAL, Washington
RON ESTES, Kansas                    SUSAN WILD, Pennsylvania
JULIA LETLOW, Louisiana              LUCY McBATH, Georgia
KEVIN KILEY, California              JAHANA HAYES, Connecticut
AARON BEAN, Florida                  ILHAN OMAR, Minnesota
ERIC BURLISON, Missouri              HALEY M. STEVENS, Michigan
NATHANIEL MORAN, Texas               TERESA LEGER FERNANDEZ, New Mexico
JOHN JAMES, Michigan                 KATHY E. MANNING, North Carolina
LORI CHAVEZ-DeREMER, Oregon          FRANK J. MRVAN, Indiana
BRANDON WILLIAMS, New York           JAMAAL BOWMAN, New York
ERIN HOUCHIN, Indiana
                       Cyrus Artz, Staff Director
              Veronique Pluviose, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                   KEVIN KILEY, California, Chairman

GLENN GROTHMAN, Wisconsin            ALMA ADAMS, North Carolina,
ELISE M. STEFANIK, New York            Ranking Member
JAMES COMER, Kentucky                ILHAN OMAR, Minnesota
MARY MILLER, Illinois                HALEY M. STEVENS, Michigan
ERIC BURLISON, Missouri              MARK TAKANO, California

                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page

Hearing held on November 29, 2023................................     1

                           OPENING STATEMENTS

    Kiley, Hon. Kevin, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     4
    Adams, Hon. Alma, Ranking Member, Subcommittee Workforce 
      Protections................................................     6
        Prepared statement of....................................     8

                               WITNESSES

    DeCamp, Hon. Paul, Member, Epstein, Becker & Green P.C.......    10
        Prepared statement of....................................    12
    Panwala, Jagruti, Member of Board of Directors, American 
      Hotel and Lodging Association..............................    24
        Prepared statement of....................................    26
    Conti, Judith, Director of Government Affairs, National 
      Employment Law Project.....................................    32
        Prepared statement of....................................    34
    Holtz-Eakin, Dr. Douglas, President, American Action Forum...    44
        Prepared statement of....................................    46

                         ADDITIONAL SUBMISSIONS

    Chairman Kiley:
        Letter dated November 28, 2023 from Associated Builders 
          and Contractors........................................    62
        Letter dated November 29, 2023 from Credit Union National 
          Association............................................    63
        Letter dated November 7, 2023 from Independent Electrical 
          Contractors............................................    65
        Letter dated November 7, 2023 from Independent Woman's 
          Forum..................................................    69
        Letter dated November 7, 2023 from National Association 
          of Wholesaler-Distributors.............................    74
        Letter dated November 7, 2023 from America First Policy 
          Institute..............................................    80
        Letter dated November 7, 2023 from Partnership to Protect 
          Workplace Opportunity..................................   104
        Letter dated November 29, 2023 from American Society of 
          Travel Advisors........................................   132
        Letter dated November 29, 2023 from the College and 
          University Professional Association for Human Resources   139
        Letter dated November 7, 2023 from the College and 
          University Professional Association for Human Resources   143
        Letter dated November 29, 2023 from the National Retail 
          Federation.............................................   163
    Foxx, Hon. Virginia, a Representative in Congress from the 
      State of North Carolina:
        Letter dated November 2, 2023 from the American Bus 
          Association............................................   168
        Letter dated December 1, 2023 from the Customized 
          Logistics and Delivery Association.....................   170
    Scott, Hon. Robert C. ``Bobby'', a Representative in Congress 
      from the State of Virginia:
        Letter dated November 28, 2023 from the Center for Law 
          and Social Policy......................................   172
        Letter dated November 27, 2023 from the American 
          Federation of State, County and Municipal Employees....   178
    Takano, Hon. Mark, a Representative in Congress from the 
      State of California:
        Signed letter dated November 7, 2023 to Acting Secretary 
          Julie Su...............................................   181

                        QUESTIONS FOR THE RECORD

    Responses to questions submitted for the record by:
        Ms. Judith Conti.........................................   184
        Hon. Paul DeCamp.........................................   187

 
                        BAD FOR BUSINESS: DOL'S
                         PROPOSED OVERTIME RULE

                              ----------                              


                      Wednesday, November 29, 2023

                  House of Representatives,
             Subcommittee on Workforce Protections,
                  Committee on Education and the Workforce,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:16 a.m., 
2175 Rayburn House Office Building, Washington, DC, Hon. Kevin 
Kiley [Chairman of the Subcommittee] presiding.
    Present: Representatives Kiley, Grothman, Miller, Burlison, 
Foxx, Walberg, Adams, Stevens, and Takano.
    Staff present: Cyrus Artz, Staff Director; Nick Barley, 
Deputy Communications Director; Mindy Barry, General Counsel; 
Isabel Foster, Press Assistant; Daniel Fuenzalida, Staff 
Assistant; Sheila Havenner, Director of Information Technology; 
Paxton Henderson, Intern; Alex Knorr, Legislative Assistant; 
Georgie Littlefair, Clerk; John Martin, Deputy Director of 
Workforce Policy; Hannah Matesic, Deputy Staff Director; Audra 
McGeorge, Communications Director; Kevin O'Keefe, Professional 
Staff Member; Rebecca Powell, Staff Assistant; Seth Waugh, 
Workforce Policy Director; Maura Williams, Director of 
Operations; Nekea Brown, Minority Director of Operations; Ilana 
Brunner, Minority General Counsel; Stephanie Lalle, Minority 
Communications Director; Kristen Lemus, Minority Intern; 
Raiyana Malone, Minority Press Secretary; Kevin McDermott 
Minority Director of Labor Policy; Kota Mizutani, Minority 
Deputy Communications Director; Kyra Patterson, Minority 
Intern; Veronique Pluviose, Minority Staff Director; Jessica 
Schieder, Minority Economic Policy Advisor; Dhrtvan Sherman, 
Minority Committee Research Assistant; Bob Shull, Minority 
Senior Labor Policy Counsel; Clinton Spencer IV, Minority Staff 
Assistant; Banyon Vassar, Minority IT Administrator
    Chairman Kiley. The Subcommittee on Workforce Protection 
will come to order. I note that a quorum is present. Without 
objection, the Chair is authorized to call a recess at any 
time. The Subcommittee is meeting today to hear testimony on 
the Department of Labor's Proposed Overtime Rule, including the 
Department's failure to analyze the impact of its proposed rule 
properly, and the costs and burdens that will be imposed by the 
rule on workers and businesses, especially small businesses.
    Good morning, everyone, and welcome to today's hearing. On 
June 9, 2016, over 7 years ago, this Committee held a hearing 
titled ``The Administration's Overtime Rule and its 
Consequences for Workers, Students, Nonprofits and Small 
Businesses.''
    Back then the Obama administration proposed a rule to 
increase the overtime salary threshold by more than doubling 
it. Former Chairman John Kline, while recognizing that the 
overtime threshold should be responsibly reformed, called the 
administration's drastic move extreme and partisan.
    Today we are in much the same place. President Biden has 
proposed a new poorly conceived rule to change the overtime 
requirements, and it could not come at a worse time. As 
businesses and nonprofits work to recover from the pandemic 
era, and still face record high inflation, the Biden 
administration wants to implement a new rule that will 
jeopardize their survival and put workers at risk.
    What is more, this rule has been issued under the supposed 
authority of an Acting Secretary of Labor, Julie Su, who the 
U.S. Senate has declined to confirm for 9 months. Every action 
of the Labor Department is under a legal cloud as long as this 
end run around the Constitution continues.
    Today I am again calling on President Biden to end the 
tenure of the now longest serving Acting Secretary in the 
United States history. The President must nominate a Secretary 
who will perform his or her duties competently, who will be on 
the side of American workers, and who can win Senate approval. 
Only then will the Labor Department be free of the legal 
uncertainty that currently clouds its important work.
    This administration's proposed overtime rule poses a threat 
to the livelihoods of the very people that the administration 
claims it wants to help. The rule is expected to impact an 
estimate 3.6 million working Americans and cost employers an 
estimate 1.3 billion dollars, sticking them between a rock and 
a hard place. If employers cannot afford the new mandate, many 
will be forced to simply lay-off their employees.
    Employees currently exempt from overtime statuses enjoy 
greater freedom to pursue professional development 
opportunities that fit their unique interests and enhance their 
lifetime earning potential. Nonprofits, especially, benefit 
from being able to offer exempted employees flexible work 
arrangements, like telework, which will be less practical if 
more employees become subject to strict timekeeping 
requirements.
    While some employers may choose to increase salaries to 
surpass the new threshold, these possible benefits to a small 
percentage of the workforce must be balanced against the many 
certain harms, cost hikes at certain universities that students 
will face in the form of higher tuition, the greater 
administrative costs will be shouldered by charities, resulting 
in fewer services to those in need, the diminished efficiency 
in Federal grant research that will affect all taxpayers, and 
of course the harm to workers themselves, as well as to 
consumers. The most concerning part about this rule is that it 
puts the policy on autopilot. Future changes should be subject 
to the regular policy review, including consultation with 
stakeholders, rather than a one size fits all formula.
    Automatic increases are bad policy and bad government 
practice. Americans are already struggling to recover from the 
economic challenges imposed by Bidenomics. This new rule is 
simply unneeded at this time. It was just updated by the last 
administration. That update, unlike its proposal, only came 
after a very careful consultation process where the necessary 
stakeholders were involved.
    It represented a widely agreed upon consensus, and now the 
Biden administration is trying to undue the goodwill produced 
by those conversations, and the eventual salary increase. I 
urge the DOL to withdraw the proposed rule until it has 
completed a more thorough consultation with stakeholders. It 
must permanently withdraw the provision which would tie the 
hands of future administrations and Congresses.
    With that, I yield to the Ranking Member for an opening 
statement.
    [The statement of Chairman Kiley follows:]

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    Ms. Adams. Thank you, Mr. Chairman, and thank you to our 
witnesses for your testimony today. The investments made by 
congressional Democrats and the Biden administration spurred 
the historic economic and wage growth, effectively rebuilding 
our economy from the bottom up and middle out.
    It is not a talking point. That is a fact. The Economic 
Policy Institute reports that from 2019 to 2022, low wage 
workers experienced the fastest real wage growth during a 
business cycle peak of any time since 1979, and our economy has 
added more than 14 million jobs since President Biden took 
office. This historic economic growth was not coincidental.
    It is a direct result of congressional Democrats and 
President Biden's policy choices to support workers and 
businesses. For example, the American Rescue Plan Act passed 
without a single congressional Republican vote, secured 
investments that helped vulnerable workers make ends meet, and 
keep them in the workforce.
    The Inflation Reduction Act accelerated economic growth, 
lowering costs for workers and families and helping them keep a 
roof over their heads and food on their tables. Furthermore, 
President Biden has fully embraced a progressive, pro-worker 
regulatory agenda by raising Federal contract workers pay to 
$15.00 an hour, and repealing harmful restrictions imposed by 
the previous administration that allowed unscrupulous employers 
to misclassify workers, and deny them overtime pay, minimum 
wage and worker's compensations, just to name a few.
    Additionally, the Biden administration proposed a rule to 
raise the overtime threshold for an additional 3.6 million 
Americans. Moreover, it includes safeguards to automatically 
and routinely update the threshold so that employees and 
businesses do not have to wait for future Federal updates.
    These protections are essential for workers who must work 
long hours to provide for themselves and their families. You 
know working hard is not enough if you do not make enough. 
However, I am concerned that my Republican colleagues are 
attempting to undermine workers financial security by limiting 
their access to overtime pay.
    Employees should not have to bargain for what they are due 
by their employers. Your companies should pay you for every 
hour you work, including time and a half. It is that simple. 
Regrettably, Committee Republicans proposals would instead 
protect unscrupulous employers at the expense of hardworking 
American's wages, and well-being.
    For example, in the last Congress Committee Republicans 
reintroduced the Working Families Flexibility Act, which allows 
private sector employers to compensate hourly workers with comp 
time instead of overtime pay. In stark contrast, congressional 
Democrats have reintroduced the Wage Theft Protection and Wage 
Recovery Act, which authorizes a civil penalty, and increases 
the maximum penalty for employers who fail to adequately 
compensate workers for overtime work.
    Congressional Democrats also reintroduced a Family and 
Medical Insurance Leave Family Act to ensure that every worker 
can access paid leave. I would welcome my colleagues' support 
on these proposals to help improve the lives of workers and 
their families. I want to thank the witnesses again for their 
time. I look forward to a productive discussion. Mr. Chair, I 
yield back.
    [The statement of Ranking Member Adams follows:] 

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    Chairman Kiley. Pursuant to Committee Rule 8-C, all 
Committee members who wish to insert written statements into 
the record may do so by submitting them to the Committee Clerk 
in Microsoft Word format by 5 p.m., 14 days from the date of 
this hearing, which is December 13, 2023.
    Without objection, the hearing record will remain open for 
14 days after the date of this hearing to allow such statements 
and other extraneous material referenced during the hearing to 
be submitted to the official hearing record.
    I will now turn to the introduction of our distinguished 
witnesses. The first witness is Hon. Paul DeCamp, who is a 
practicing wage and hour attorney at Epstein, Becker and Green 
in Washington, DC. He previously served as Administrator of 
DOL's Wage and Hour Division during the George W. Bush 
administration.
    In this role he was the Chief Federal Officer responsible 
for interpreting and enforcing the Nation's wage and hour laws, 
including the FLSA.
    Our second witness is Ms. Jagruti Panwala, who is 
testifying on behalf of the American Hotel and Lodging 
Association that's located in New Hope, Pennsylvania. As an 
owner of multiple hotel franchises, Ms. Panwala has spent many 
years in various positions from administrator to owner 
operator.
    The third witness is Ms. Judi Conti, who is the Director of 
Government Affairs at the National Employment Law Project, 
which is located in Washington, DC. Ms. Conti previously served 
as Co-Founder and Executive Director of the D.C. Employment 
Justice Center.
    The fourth witness is Dr. Douglas Holtz-Eakin, who is the 
President of the American Action Forum, which is located in 
Washington, DC. Dr. Holtz-Eakin previously served as Chief 
Economist of the President's Council of Economic Advisors from 
2001-2002, and Director of the Congressional Budget Office from 
2003 to 2005.
    We thank all of the witnesses for being here today and look 
forward to your testimony. Pursuant to Committee rules, I would 
ask you each to limit your oral presentations to a 5-minute 
summary of your written statement. I would also like to remind 
the witnesses to be aware of their responsibility to provide 
accurate information to the Subcommittee. I will first 
recognize Mr. DeCamp.

  STATEMENT OF HON. PAUL DECAMP, MEMBER OF THE FIRST EPSTEIN, 
            BECKER AND GREEN P.C., WASHINGTON, D.C.

    Mr. DeCamp. Good morning, Chairman Kiley, Ranking Member 
Adams, and distinguished members of the Subcommittee. Thank you 
for inviting me to testify at this hearing to address the 
Department of Labor's proposal to amend the regulations 
implementing the executive, administrative, and professional 
exemptions set forth in Section 13 A-1 of the Fair Labor 
Standards Act.
    I am here today to express my opposition to that proposal, 
focusing on four main points. First, the proposed rule rejects 
85 years of Department of Labor practice and would transform 
the salary threshold into a completely unprecedented regulatory 
device.
    Since 1940, the Department's regulations have consistently 
embodied the principle that the purpose of the salary threshold 
is to screen out obviously nonexempt employees. Weeding out 
those individuals avoids the Department, employers, and workers 
wasting time analyzing job duties of employees whose pay is so 
low that there is little chance that they would satisfy the 
duty's test for exemption.
    The Department has repeatedly cautioned that the salary 
level must not be so high as to exclude a substantial number of 
workers, yet the proposed rule acknowledges that it would deny 
exempt status to at least 3.4 million workers who duties 
qualify for exemption today.
    The Department admits in a footnote that the real salary 
threshold it intends to put into the final rule is quite a bit 
higher than the already high level stated in the proposal. In 
short, the proposed threshold of more than $55,000.00 per year 
would, for the first time in the near century long history of 
the FLSA, transform the salary threshold into an entirely new 
regulatory tool, one that operates to deny exempt status to 
millions of workers whose job duties qualify for exemption.
    It is not up to the Department to rewrite and to undermine 
in this manner the law Congress enacted. Second, the proposed 
salary threshold increase is wildly out of step with prior 
increases. In the most recent update to the salary threshold, 
the Department raised the $455.00 weekly standard established 
in 2004 to the current level of $684.00 per week, effective at 
the start of 2020.
    Today, less than 4 years later, the Department aims to 
increase the salary threshold again by just under 55 percent to 
$1,059.00 per week, and perhaps quite a bit more than that. 
That change would represent roughly an 11.5 percent average 
annual rate of increase from the previous change.
    Looking back at all the salary threshold increases from 
1940 to 2020, the average annual rate of change has varied from 
a low of roughly 2.6 percent to a high of just under 7 percent. 
The proposed rule, however, represents an average annual rate 
of increase that is between two and three times the historical 
norm, and nearly 66 percent higher than the highest level of 
annual increase ever seen over the past 80 plus years.
    Such a dramatic increase is unwise and unnecessary. Third, 
the proposed rule seeks to implement automatic updates to the 
salary threshold every 3 years without further formal 
rulemaking. The Administrative Procedures Act, however, 
requires agencies to use notice and comment rulemaking when 
issuing substantive rules.
    There can be no doubt that change in the salary threshold 
involves a substantive rule because the Department uses the 
threshold as part of the legal test for distinguishing exempt 
workers from the nonexempt.
    Nothing in the FLSA or the Administrative Procedure Act 
allows the Department to avoid formal rulemaking for future 
changes to the salary threshold, merely because the Department 
currently believes that it would like to adhere to the same 
method for selecting the salary threshold in perpetuity.
    Finally, if anyone should make the kinds of policy laden 
broadly impactful choices reflected in the proposed rule, it is 
Congress, not the Department. The FLSA says nothing about a 
salary requirement for these exemptions.
    From the very beginning the Department's approach to both 
the salary threshold and the job duties requirements for these 
exemptions has proceeded from a legally invalid premise: that 
the law supposedly requires narrow interpretation of the 
exemptions. The Department invoked that principle in its 1940 
rulemaking where it first established the salary requirement 
and substantially revised the duty standards. It has done 
nothing since then to undo the effect of weaving that principle 
into the entire fabric of the regulations.
    More recently, the Supreme Court has made it clear that 
because the exemptions are just as much a part of the FLSA as 
the overtime requirement itself, it is legal error to construe 
exemptions narrowly. In the end, there is no objectively right 
salary threshold that one can determine through expertise in 
wage and hour law, or experience in enforcing the law.
    As underscored by the present proposal's stated goal of 
undoing what the Department accomplished when it revised these 
regulations a generation ago, what is really at issue here is 
nothing more than policy preferences that oscillate from 
administration to administration.
    Congress, not the Department, should set Federal labor 
policies. This concludes my prepared remarks. I welcome any 
questions that the members of the Subcommittee may have. Thank 
you.
    [The prepared statement of Mr. DeCamp follows:]

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    Chairman Kiley. Thank you for your testimony. I will next 
recognize Ms. Panwala.

STATEMENT OF MS. JAGRUTI PANWALA, PRINCIPAL, SITA RAM LLC, NEW 
                       HOPE, PENNSYLVANIA

    Ms. Panwala. Good morning, Chairman Kiley, Ranking Member 
Adams, and distinguished members of the Subcommittee. Thank you 
for the opportunity to testify before you today. My name is 
Jagruti Panwala, my family and I own and operate eight hotels 
across the United States.
    I am a first generation American, an entrepreneur and a 
franchisee. I was born in Gujarat, India. My family and I 
immigrated to the United States in 1988 in the search for 
opportunities for education and entrepreneurship. Very shortly 
after graduating from college I decided to take the biggest 
risk of my life in purchasing a hotel at the age of 22 years 
old and going into business for myself.
    Today, we own and operate eight hotels located in 
Pennsylvania, Texas, New York, New Jersey and Ohio. Among these 
properties we employ over 200 people and maintain a closely 
knit relationship with each of them. In addition to running my 
own family business, I currently serve on the Board of 
Directors for American Hotel and Lodging Association.
    I am here today to explain my perspective as a small 
business owner and a hotel operator, and to describe how the 
Department of Labor's proposed changes to the overtime rule 
will have damaging, devasting effects on my business, my 
employees and the lodging industry.
    It is critical to note that the proposal does not simply 
increase salaries for a few employees at a marginal level, 
rather up to 70 percent increase will drastically impact the 
entire business plan well beyond compensation. We expect not 
only a significant jump in direct staffing costs, but also 
substantial increases in associated labor costs, including 
payroll taxes, Federal and State unemployment taxes, insurance, 
and none of which seems to be included in much of the 
discussion.
    In order to handle these increases, employers will be 
forced to take actions that we do not want to take, including 
actions that could set workers back in their careers. The last 
thing small business owners want to do is to lay-off their 
employees. Unfortunately, some hotels may be forced to do so 
because of this new rule in order to stay in business.
    While it is true that some exempt workers may see their 
salaries increase to the new minimum threshold, in order to 
ensure they remain exempt from overtime pay, many workers will 
likely be reclassified from salaried to hourly, making them 
nonexempt, but also constraining their access to benefits, 
hours, potential flexible work arrangements, and even 
opportunities for career advancement.
    As I have shared earlier, I have spent my entire adult life 
in the hotel business, and have done every job there is to do 
from housekeeping to maintenance, to bookkeeping and 
management. I know firsthand what it takes to advance in a 
career. The benefits of salaried positions afford employees the 
opportunity to learn aspects of the business, beyond their 
immediate job duties.
    The Department seems to have ignored the fact that 
different regions of the country have significant variations in 
the cost of living, and therefore will see significant 
variations in the impact of the proposed rule on their economy.
    In 2023, the first line housekeeping supervisors in New 
York earned an average in the range of $62,000.00, while the 
same position in Texas saw an average earning of $42,000.00. 
Finally, the Department's effort to implement automatic updates 
to the minimum salary threshold will create immense problems 
for the hotel leaders, especially regarding financial 
projections and their ability to plan for the future.
    According to the proposed rule the automatic updates will 
occur every 3 years, regardless of economic circumstances at 
the time, which means that the threshold will be updated even 
if there's an economic problem that exists.
    Chairman Kiley, Ranking Member Adams, and the members of 
the Subcommittee, I sincerely thank you for the opportunity to 
share my story with you today. In the hotel industry our 
employee's success is our success. This misguided rule by the 
administration will provide less flexibility and many will be 
forced to lay-off their employees just to stay in business. 
This is an outcome no one wants.
    I strongly urge you to consider the adverse implications of 
the overtime proposed rule on small businesses owners, and 
workers when deliberating policy proposals. Thank you.
    [The prepared statement of Ms. Panwala follows:]

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    Chairman Kiley. Thank you very much for your testimony. I 
will now recognize Ms. Conti.

 STATEMENT OF MS. JUDI CONTI, DIRECTOR OF GOVERNMENT AFFAIRS, 
       NATIONAL EMPLOYMENT LAW PROJECT, WASHINGTON, D.C.

    Ms. Conti. Thank you. Good morning, Chairman Kiley, Ranking 
Member Adams, and members of the Subcommittee. My name is Judy 
Conti, and I am the Government Affairs Director at the National 
Employment Law Project, an advocacy organization with the 
mission to build a just and inclusive economy, where all 
workers have expansive rights and thrive in good jobs.
    I am grateful for the opportunity to testify, and I will 
make three primary points. One, DOL's proposed overtime 
regulation corrects the current, overly broad exemptions that 
end up excluding overtime eligible workers from the legal 
protections they should enjoy.
    Two, employers have ample tools at their disposal to handle 
the new salary threshold proposed in the regulation, and three, 
automatically updating the salary threshold is good for both 
workers and employers. The FLSA's guarantee of premium pay for 
overtime hours was meant to discourage dangerous overwork of 
employees, and to encourage employers to spread out work to 
more people, thereby creating jobs.
    The executive, administrative and professional employee 
exemptions are meant to be limited to workers who both earn 
salaries and have job duties that truly set them apart from 
those entitled to overtime pay. Unfortunately, because of 
decades of administrative neglect and flawed rulemaking 
processes, the current salary threshold is so low, and the 
duty's test made so weak and opaque by the 2004 revisions, that 
it allows employers to easily misclassify millions of workers 
each year, giving them titles that sound like they should be 
exempt, even when the vast majority of their job duties are 
clearly nonexempt.
    Because the duties test is so opaque, workers by and large 
do not know any better, and end up deprived of wages they have 
earned and should be paid. In January this year, the National 
Bureau of Economic Research released a report documenting that 
in 2019 alone, employers avoided paying about 4 billion in 
overtime that workers earned with these phony job titles.
    Clearly, this is a problem that DOL needs to mitigate and 
given the scope and consequences of the misclassification, and 
the sheer impossibility of wage and hour enforcement adequately 
solving the problem, it must be done through regulation. By 
raising the salary threshold to $55,068.00 per year, DOL will 
provide new and enhanced protections for approximately 3.6 
million people who are now working more than 40 hours per week 
for free.
    By historical standards, this is actually a rather modest 
threshold. In 1975, 63 percent of full-time salaried workers 
were covered by overtime protections, regardless of their 
duties. Today that share is a mere 9 percent. Had the relevant 
1974 salary threshold for the current duties test merely been 
updated for inflation, it would stand at nearly 68,000.00 per 
year, and make no mistake about it, excessive overtime is 
dangerous for workers, leading to cardiovascular disease, 
stress, depression, increased alcohol and tobacco use, and 
mental health issues.
    It can also lead to increased absenteeism, low 
productivity, low morale, and higher turnover, all of which are 
significant costs to employers, and make their workplaces less 
attractive to their current workforce for potential job 
candidates.
    Employers have many tools available to manage the new 
overtime obligations, it can raise salaries over the new 
threshold, decide to pay overtime, reassess workloads, better 
manage their worker's time, hire additional staff, or give more 
hours to part-time workers, fostering both healthier work life 
balance, and an environment where employees are compensated 
with fair pay and better working conditions that will result in 
higher productivity and less turnover.
    To be clear, while the significance of this new regulation 
will be profound on the affected employees, the overall impact 
on employers is quite small, especially because the threshold 
is pegged to the lowest wage region in the country. According 
to the Economic Policy Institute, the new threshold will 
account for a mere 0.023 percent of the total wage bill 
employers paid in 2022.
    Of course these costs are aggregate to employers as a 
whole, and circumstances do vary by individual employers, but 
there are many voices of small businesses in the administrative 
record, including Mitch Cahn, of the Unionwear in Newark, New 
Jersey, Rebecca Hamilton of W.S. Badger Company, and Brian 
England, owner of BA Auto Care in Columbia, Maryland, who 
enthusiastically support this new regulation and write 
compellingly about how good overtime policies are good for 
their business and their bottom line.
    Finally, the proposal to update the threshold is beneficial 
for both workers and employers. It will ensure that overtime 
workers protections do not erode for workers, and employers 
will benefit from regular, predictable increases that are 
pegged to the economic circumstances of the times, and they can 
plan for them and implement them.
    Thank you for your time and attention today, and I look 
forward to your questions.
    [The prepared statement of Ms. Conti follows:]

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    Chairman Kiley. Thank you for your testimony. I will next 
recognize Dr. Holtz-Eakin.

   STATEMENT OF DR. DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN 
                 ACTION FORUM, WASHINGTON, D.C.

    Mr. Holtz-Eakin. Thank you, Chairman Kiley, Ranking Member 
Adams, members of the Committee for the privilege of being here 
today to discuss the proposed rule that would raise the 
threshold for the salaries test from roughly $36,000.00 to 
$55,000.00, and indexes automatically rise further thereafter.
    I want to make three points about the proposed rule. First, 
based on sort of traditional criteria, there is no compelling 
case for raising the threshold at this time, and instead the 
rule is advertised as an attempt for distributional policy, to 
compensate low wage workers.
    Interpreting from that perspective it is a really poorly 
targeted redistributional policy. $55,000.00 is only $2,000.00 
below the median of the wage distribution, so these are hardly 
the lower tail of the wage distribution. These are, in many 
cases, very highly compensated people.
    Our estimates done using the 2022 survey of income and 
program participation say there will be about 3.1 million 
workers affected. Only 2.4 percent of them live in families in 
poverty, and fully 45 percent of them are three times the 
poverty line. This is hardly the kind of distributional policy 
that most people would endorse.
    The biggest point is that we estimate that about 20 billion 
dollars-worth of additional wages and salaries should have to 
be paid to compensate for the overtime, and simply passing a 
rule doesn't create the economic resources to pay those wages. 
They have to come from somewhere.
    First could be imagined to react in a variety of ways. They 
could not hire people, in which case we would essentially 
redistribute this income from people without a job, to people 
with a job, which is a perverse form of redistribution at best. 
It could come at the expensive of raises for those people who 
are retaining their job, but do not work any overtime. It could 
be very low wage non-overtime workers.
    The redistribution would be perverse within the firms. It 
could come at the expense of additional investment by these 
firms. They could not upgrade their capital stock. They could 
not adopt new technologies. In the long run this has a 
predictable consequence; productivity will be lower, the wages 
paid to all workers in those firms will be lower, and again, 
the consequence is not to make workers better off, but 
ultimately to harm them.
    Certainly, an initial impact might be that firms would try 
to pass along these additional costs in the form of higher 
prices. As the Committee is well aware, the preeminent economic 
challenge of this era has been 40-year highs in inflation. 
Adding additional cost pressures to firms at this time is an 
unwise course for policy.
    It is hard to defend this particular proposal, and the 
economic fallout is by and large going to be negative for the 
U.S. economy, so I thank you for the chance to be here, and I 
look forward to your questions.
    [The prepared statement of Dr. Douglas Holtz-Eakin 
follows:]

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    Chairman Kiley. Thank you very much. Under Committee Rule 
9, we will now question witnesses under the 5-minute rule. The 
representative from Missouri, Mr. Burlison, is recognized.
    Mr. Burlison. Thank you, Mr. Chairman. Mr. DeCamp, the 
overtime proposed rule is deeply concerning for the well-being 
of our Nation's small businesses and all other employers, even 
universities. The Department of Labor's approach has raised 
serious issues, particularly regarding the insufficient comment 
period, and the lack of consideration for the challenges that 
it is going to be to the businesses that are impacted.
    The rush to push through this rule without reasonable and 
meaningful comment period is a disservice to both employers and 
workers because a 60 day window is insufficient. In your 
experience, have you ever seen such a short comment period for 
a policy of this magnitude?
    Mr. DeCamp. Not of this magnitude. I have seen other, 
lesser impactful rules that have 60-day comment periods, but 
typically when the Department engaged in major rulemaking with 
broad economic impacts throughout the economy, it tends to 
honor requests for extensions of the comment period.
    Mr. Burlison. Why do you think that they have had such a 
short comment period? Why are they trying to rush this through?
    Mr. DeCamp. You would have to ask them. They want to move 
quickly.
    Mr. Burlinson. In addition, it is important that we 
recognize that we have been here before. The past 
administration, the Obama administration, issued a similar 
change, and it faced legal challenges. I think it was 
determined to be arbitrary and capricious. What do you foresee? 
What legal challenges do you foresee with this rule?
    Mr. DeCamp. Essentially the same challenge, coupled with 
the argument that the proposed rule is contrary to the FLSA. 
The ruling out of the District Court of Texas, which remains on 
the books, was that the Department's decision in 2016 to raise 
the salary threshold so substantially that it would exclude 
millions of people at the time--I think that one was 3.6 
million people--from exempt status, based solely on their 
compensation, and without regard to their job duties, was 
inconsistent with the FLSA.
    It was arbitrary and capricious, and not what Congress 
intended. I think we would see a similar challenge to this 
proposal if it were to become a final rule because again, we 
would have a very large number of individuals denied exempt 
status without regard to their job duties, based solely on 
their compensations, and I think we would see a similar 
challenge now.
    Mr. Burlison. Thank you. Ms. Panwala, this proposal that we 
are discussing, as you have said in your testimony, fails not 
only to address the need for modernization, but also poses a 
significant burden on businesses like yours. As a hotel owner 
and operator, how do you anticipate that this rule will affect 
your business and the rules that you have with your employees?
    Ms. Panwala. Yes, no, absolutely. You just mentioned the 
60-day implementation. Look, I am a business owner, and I am 
busy doing day to day, you know, the hotel operations, but not 
many business owners, or not many hotel owners, will even 
understand, or will have enough time to understand what this 
rule means to their business, their financial projections.
    I think we all can also agree that running a business now 
versus 10-15 years ago, it has changed completely. There is a 
lot of higher costs, a lot of fixed costs involved. When we are 
implementing a rule with this just succeeding implementation, 
the business owners will have to make a lot of changes very 
quickly.
    One of the changes will be that the employees that they 
have for 10-15 years, who are not salaried employees, who feel 
like they are a part of the business, they are part of the 
winning team working together, will have to be moved to salary, 
and that is in my opinion, demoralization for other employees.
    I do not think as a business owner I want to take that 
step, and I do not think my employees would be happy with that 
action either, so it is a lose/lose situation on both sides 
when it comes to the employers and employees.
    Mr. Burlison. I mean, I did not even think of this 
question, but as you are talking this through, I am thinking of 
my previous career, and most of my career I worked as an IT 
professional. A lot of my salary probably would have fallen 
under this new rule, and I would have seen it as a demotion. I 
know that people may not understand that, but I would have seen 
it as a demotion.
    I enjoyed, as a salaried employee, not having to clock in 
and clock out, right? Not having to have every minute of my day 
tracked. I think that at the end of the day the employer and I 
had a relationship that you do the work you get paid, 
regardless of how much time that you are here, and so if you 
can.
    Ms. Panwala. Yes. I would like to just add one more thing. 
We are not looking over the shoulders for most of our team 
members, and I call them team members when I am with them 
instead of employees, because they are part of the team. We are 
not looking at--OK, what time are you coming in, what time are 
you leaving?
    I will give you a perfect example. This morning when I was 
up, you know, six in the morning, I received a text from one of 
my employees, and I have a text saying ``hey, I need to leave 
one o'clock today, is it OK,'' because she is changing her 
apartment from one apartment to another location, and they have 
people helping today.
    Now this was not something that was expected, it was a 
last-minute thing. Stuff like this happens. I want to say not 
like once in a while, I would say weekly basis if somebody has 
to go to the doctor's, or they have to pick up their child, 
there are so many examples that I can give you.
    Mr. Burlison. Yes.
    Ms. Panwala. As a business owner, but because the 
relationship with our employees is so close that they also know 
that Jagruti is never going to say no, because she knows how 
important the family and your medical situations are.
    Mr. Burlison. Right.
    Ms. Panwala. I think a lot of this relationship would 
change, and I think that would be devastating, especially for 
me as a business owner, to see my employees in that position, 
and to see my business in that position as well.
    Mr. Burlison. Thank you. My time has expired. I yield back.
    Chairman Kiley. The Ranking Member, Dr. Adams, is 
recognized.
    Ms. Adams. Thank you, Mr. Chairman, and again I want to 
thank the witnesses. I will say it again, working hard is not 
enough if you don't make enough. I am--I want to direct my 
question to Ms. Conti. First of all, let me just say I am 
concerned with how we cannot just protect worker's paychecks, 
but also protect their time, so that people can earn a 
meaningful income, and have the time to enjoy it.
    The overtime threshold has been allowed to stay flat for 
long periods of time. In fact, at one point it had stayed the 
same for 29 years. If the overtime threshold is set at a flat 
unchanging amount, what does that mean for worker's pay and for 
worker's time?
    Ms. Conti. Well, actually ma'am, if the overtime threshold 
is set at what seems like a static amount, it actually is a 
changing amount because every year it erodes, and it means less 
in terms of absolute dollars. Whether we index for inflation, 
which just keeps the status quo, or we set a number that erodes 
every year, it is a number that continues to change in effect, 
and in reality every year.
    It is detrimental to workers. I mean we saw that period 
from what 1975 to 2004 when there was no change of the 
threshold. The Trump administration signaled that it planned to 
revisit the threshold every 3 years, acknowledging that that is 
a best practice, but of course we have not been able to revisit 
it that quickly again.
    The administrative process is by definition time-consuming, 
expensive, it is fabulous government practice to do something 
that is efficient, that keeps things steady for workers, and 
again keeps things steady for employers. I have been doing this 
work for 30 plus years, and I have testified at a number of 
these hearings before, and what I always hear from my 
colleagues in the business community is they want to be able to 
plan. They want predictability, and they want bright line 
rules.
    Well, this rule gives them a bright line threshold, and the 
predictability that every 3 years there will be modest 
increases that just keep pace with costs, and if we are in a 
recessionary period, in fact, there would probably be no 
increase, or there might be a decrease in fact in the 
threshold.
    Ms. Adams. Thank you. Let me ask you, let me say that the 
venture capitalists and entrepreneur Nick Hanauer writes that 
the low overtime threshold has enabled some employers to reduce 
jobs that just by converting three 40-hour work week jobs into 
two 60 hour work week jobs, and to pocket the 40 hours in lost 
wages.
    Do you agree, and what would the Biden administration's 
proposed overtime rule mean for jobs?
    Ms. Conti. I absolutely agree that is what is happening. 
The National Bureau of Economic Research confirmed that in its 
groundbreaking study this year. We see lawsuits and media 
accounts all the time, in particular in retail and in 
hospitality, and I am certainly not saying this about my 
distinguished colleague here, but in the restaurant industry, 
that people are routinely working 50, 60, sometimes more hours 
per week, with phony job titles, if you will.
    They are not only not getting paid overtime for those 
hours, they are not getting paid anything at all extra for 
those hours. Then they are losing time with their families and 
in their personal lives as well.
    Ms. Adams. OK. Let me ask about other policies that could 
protect worker's time and ability to balance work and life. For 
example, who in our economy is working variable hours each 
week, and what do we know about the importance of a predictable 
scheduling on worker's mental health?
    Ms. Conti. Yes. By and large it is low wage workers who are 
subject to what we call just in time scheduling where they do 
not have enough advanced notice to plan adequately for 
childcare, transportation, other aspects of their life 
including things like going to take care of their health. They 
can all finish a report for work and not have enough work to 
do, and then are sent home, so they do not earn the full wage 
that they expect to that day, even if they have already brought 
their child to daycare, and paid for a whole day.
    This just in time and unpredictable scheduling really 
wreaks havoc, not just on the temporal lives of workers, but it 
really impacts their ability to build a steady work history, to 
have predictable incomes, to build security as they go along, 
so that is why we support the Schedules that Work Act, which 
would give workers substantial advanced notice about their 
schedules.
    When they show up they get an adequate wage, an adequate 
number of hours, and they are able to plan the rest of their 
lives.
    Ms. Adams. Well, thank you very much. You have answered the 
questions before I asked, I appreciate it very much, and thank 
you for your testimony. I yield back, Mr. Chairman.
    Ms. Conti. You are welcome, ma'am.
    Chairman Kiley. The representative from Illinois, Ms. 
Miller, is recognized.
    Mrs. Miller. Thank you, Chairman Kiley. Over the past 2 
years we have seen record high inflation, supply chain issues, 
and workforce shortages. In addition, hundreds of harmful, new 
Federal regulations issued under the Biden administration. This 
proposal by the Biden Department of Labor will create yet 
another burden for small businesses struggling to survive in 
the Biden economy.
    In my district, I hear countless sad stories from employers 
about the difficulty in finding employees. The Biden 
administration is putting 3.6 million American jobs at risk 
with this proposed rule, which will only add to the current 
workforce shortage.
    Ms. Panwala, if this rule goes into effect would the hotel 
industry be forced to fire or lay-off some of their employees?
    Ms. Panwala. Thank you, both. Unfortunately, that will be 
the scenario. The hotels run on a very, very, very tight 
margin, and I think one of the aspects that also has changed 
now is the borrowing money, right? When we have to renovate the 
property, or anything to do with the property, the rates have 
increased.
    I will just give you a quick example. Two of our properties 
out of eight properties went through the refinancing, and where 
we were paying the lower rate, now it is double the rate. Our 
debt, pretty much doubled what we were paying. In this time 
period where we are struggling as business owners to just 
keeping everything steady, just to make sure that even we can 
keep all of our businesses open because at the end of the day 
we are successful when our employees are successful, and vice-
versa.
    I think it is really, really important that, you know, not 
losing flexibility, making sure that we're keeping our 
employees, we are making sure that they have a consistent 
paycheck, and they have stability. Because that is one of the 
major things the employees look for is this stability, 
consistency and also flexibility and I have said that example 
to you, which I have thousands of examples.
    I think that really keeps the employee morale up, and I 
feel like it keeps the economy going because the businesses are 
running, and the economy is also running.
    Mrs. Miller. Well, in light of talking about flexibility, 
what challenges would this cookie cutter nature of this rule 
create for hotels and other businesses that are operating in 
multiple states?
    Ms. Panwala. Yes, no, absolutely. If you have somebody who 
is just coming in at nine o'clock to five o'clock, and who is a 
manager, manager position, when there is a time of crisis, if 
somebody is checking in late, or checking out late, if there is 
a computer issue there is nobody there to take care of the 
customers, or the hotel, and that creates a challenge.
    Like I said, the flexibility is one thing, but also on an 
operations side it will create a major issue because now we 
have to really look over the shoulders of our managers of the 
property and say OK, did you get this done, what time did you 
come in? Right now when they are on a salary, they feel like 
they are a part of the business. They are coming in, not just 
doing A, B, C, but learning about more aspects of it as I 
stated in my testimony, they are learning and broadening the 
horizon on some of the other things that, you know, for the 
hotel.
    I think the operations would be very tight, and also to 
figure out how if this was implemented, how do you have the 
financial projects for the business, right? How do you make 
sure that you are still able to pay your mortgage? You will 
still be able to pay electricity? You are still able to make 
sure to pay your employees?
    It would just be devastating in my opinion to the hotel 
business.
    Mrs. Miller. Specifically, if a business owner had 
operations in multiple states, how would this rule impact them?
    Ms. Panwala. Oh yes, absolutely, and so you know, that's 
the one thing. Its a regional difference, right? The cost of 
living is different, so we have a hotel in Ohio, and we have a 
hotel in New York. The cost of living is very different, as we 
all know. Even running a property is very different when the 
property that we purchased in Ohio and purchased in New York, 
has a completely different parameter.
    Keeping everything, putting everything, and saying that one 
size fits all approach, it does not really work.
    Mrs. Miller. Absolutely. I want to thank all of our 
witnesses for being here today and I yield my remaining time to 
Chairman Kiley.
    Chairman Kiley. Thank you. The representative from 
Michigan, Ms. Stevens, is recognized.
    Ms. Stevens. Thank you. How much time do Americans spend 
working, and how much are they compensated for it? Dr. Holtz-
Eakin, you were citing some of the facts surrounding overtime 
in your testimony, referencing depression era standards. When 
was the Great Depression? Wast that almost 100 years ago?
    Mr. Holtz-Eakin. The depths of the Great Depression were 
1932.
    Ms. Stevens. Right. Are you aware, sir, of the average cost 
of a home in the United States of America?
    Mr. Holtz-Eakin. There are estimates in the median house 
prices every month.
    Ms. Stevens. Right. Are we aware of what economists are 
saying now that an American worker needs to make for the median 
price of a home today to qualify? It is $100,000.00, sir.
    Mr. Holtz-Eakin. A little higher.
    Ms. Stevens. Look, I think that we are reckoning with a 
reality here on this Committee and in this country, in terms of 
not raising the minimum wage for as long as we have refused to 
raise it. Obviously, salary and what people bring home is often 
times deeply personal.
    My colleague, the Ranking Member of the Subcommittee, 
talked about daycare. Certainly, you can drop your kid off at 
daycare and then commute. Dr. Holtz-Eakin, I am not sure if you 
are aware of the average commute time of Americans.
    Mr. Holtz-Eakin. I am not.
    Ms. Stevens. Yes. It is 330 hours a year, so people spend 
upwards of 2 weeks. American workers spend upwards of two full 
weeks commuting, and they are not compensated for that, all 
right? They are paying for it. They are paying energy costs, 
they are paying for daycare, their clock does not start when 
they begin their commute.
    As we start thinking about worker fairness, and obviously 
Democrats on this Committee were, you know, delighted about the 
40-hour work week, and what that meant historically. Certainly, 
I believe that the 40-hour work week came about when we 
primarily had single earning households. Now we have dual 
income earning households, raising children, getting them to 
school, checking through doctor's appointments.
    I come from Michigan where we just had an incredible 
victory for the American worker led by the UAW, talking about 
worker wages, and increasing wages. We are so proud of a 21st 
Century labor movement that hails from the American auto 
industry, led by the UAW and our manufacturing base.
    I think that it is incumbent on us here in this Committee, 
and as true partners with the Biden administration on the 
Democratic side for the American worker, to think about what 
this means to increase the wage, the qualifying wage for 
overtime. Because who else is going to pay it? We have 
colleagues on the other side of the aisle who voted for, you 
know, a tax scam bill.
    It certainly did not help the middle-class worker. We are 
coming out of a pandemic, we have got global wars, we have got 
rising costs, we have got an energy challenge. I certainly want 
to thank Ms. Conti for her contributions to today's hearing, 
and I would like to take a minute to ask you about how we 
expand long hours at work, and how that is hurting working 
families in the additional responsibilities they bear.
    According to a 2019 Gallop poll, 52 percent of full-time 
workers reported working over 40 hours a week.
    Ms. Conti. We see that workers are increasingly willing to, 
especially younger workers, are willing to leave jobs where 
they have to do mandatory overtime, especially if it is 
uncompensated. They are willing to strike over it like the 
FritoLay workers did, over all of the forced overtime that they 
had to do.
    We are also reckoning with a generational shift where 
younger workers do not feel the same need to be paid their dues 
so to speak, that people in my generation did for example. 
Employers have to be responsive to that as well. Part of the 
workplace shortages we are seeing right now is not because 
there are not workers, but there are not workers that want to 
work for the jobs when the conditions and the pay that 
currently exist.
    Ms. Stevens. As a daughter of small business owners, I grew 
up in that environment. I saw it and you know, certainly 
appreciate our small business owner testimony. Thank you, Mr. 
Chair. I yield back.
    Chairman Kiley. The Chair of the full Committee, Dr. Foxx, 
is recognized.
    Mrs. Foxx. Thank you, Chairman Kiley. I appreciate it, and 
I thank our witnesses for being here today. It is an important 
issue, and I am very grateful for this. I will make one just 
brief comment before I ask my question. Unfortunately, what Ms. 
Conti was talking about is there is just a lot of people in 
this country who do not want to work period, and want somebody 
else to take care of them, and that is not what this country is 
all about. What we need, we have great opportunities in this 
country for people to be successful if they want to work hard. 
Ms. Panwala, being considered an exempt employee, has benefits 
for both the employer and employee. As noted in your written 
testimony and in your comments, for many the flexibility of 
being a salaried employee allows them to grow within the 
organization.
    As you said earlier to Ms. Miller, to feel a part of the 
organization. What else can you tell us about how your 
employees value their exempt status that you might not have 
said to Ms. Miller?
    Ms. Panwala. I think--thank you, Chairwoman, and I will go 
back to what you just said. When I started in 1991 in the hotel 
business, actually 2001, I will correct that. When I started 
the hotel business, I did everything. I did the housekeeping, I 
did the front desk, I did the maintenance. I cleaned the 
toilets, everything that I needed to do.
    Even during the pandemic, to your point, when we had a huge 
labor shortage, nobody wanted to work, I was doing that. I was 
doing that with my kids. My daughter is 19 years old. I was 
doing that with my husband. I think the flexibility is a huge 
part of it for our employees, because as I mentioned earlier to 
Congressman Miller, that it is not a once in a while kind of 
situation.
    It is pretty much almost a weekly basis with the different 
employees. That is definitely one of it. I also think that the 
relationship and demoralization of the employees is also--if I 
am on a salary for five to 10 years with my employer, and all 
of a sudden I am on hourly because of this new rule 
implementation, how would that--how would I pay my bills on a 
consistent basis?
    We have hotels, a couple of hotels in New Jersey by in 
Ocean City, and during the summer we have more occupancy. In 
winter, we have a very small occupancy, there we have 10-15 
rooms per day. Our salaried employees are salaried throughout 
the year because they are getting a consistent paycheck 
throughout the year. They are not worried that oh, now in 
wintertime I have to find another job, or fill my hours.
    I think that there are a lot of things, but my concern is 
not just the financial burden, which is a huge concern, the 
implementation, and also how the relationship turnout between 
the employee, employees that we have had.
    Mrs. Foxx. Thank you very much. Mr. DeCamp, we have heard 
from countless industries and individuals that this rule is bad 
for exempt employees. Based on your experience with wage and 
hour division regulations, what will be the effect of raising 
the overtime salary threshold on currently exempt employees, 
who will need to be reclassified?
    Mr. DeCamp. The main issue that happens when you get 
reclassified from exempt to nonexempt is that you go from the 
security of a week in, week out salary or a bimonthly salary. 
It is regular--you can pay your bills to a great level of 
insecurity of knowing that your income depends on the 
vicissitudes of the workflow.
    It is also seen, and it has been said by other witnesses, 
it is a huge demotion, morally. When you are thinking about it 
you lose the opportunity to participate in the higher level of 
benefits that are typically available for exempt employees. You 
lose flexibility in your working arrangement, and the employer 
now does not have the ability to offer the same kind of 
training and developmental opportunities to you because now 
that comes in a marginal cost per dollar.
    Mrs. Foxx. Right. Why did the Department of Labor 
originally implement an overtime salary threshold?
    Mr. DeCamp. The purpose was very simple. The purpose was to 
weed out those individuals who merely had a title of manager or 
supervisor but were not really doing manager supervisory work. 
The notion of the bona fide executive administrative or 
professional employee really focuses on people who were doing 
the real work that those exemptions were meant to cover.
    The salary threshold was meant to essentially weed out 
people whose pay was so low that there was very little chance, 
very little likelihood that they would actually be exempt under 
the duty's test. It was never meant to do anything more than 
that. It was never meant to weed out people who are actually 
performing exempt, qualifying duties who are bona fide, 
executive, administrative or professional.
    Mrs. Foxx. Thank you very much. Mr. Chairman, my time has 
expired. I yield back.
    Chairman Kylie. Thank you very much. I would like to focus 
my questioning on weighing the costs versus the benefits of 
this policy to workers themselves, and Ms. Panwala, I think you 
did an excellent job of laying out a lot of the costs to 
workers, and so I want to ask you some more questions about 
that.
    First, let us actually look at the purported benefits, 
because I do think it is probably true that there are some 
folks out there who are falling through the cracks of the 
existing regulatory scheme, and probably do deserve overtime 
and are not getting it right now. As we just heard from Mr. 
DeCamp, the lever that is being pulled in an unprecedented way, 
in a very aggressive way, with this particular regulation or 
proposed rule, is not the appropriate one to hone in on those 
folks who really are falling through the cracks.
    What is more, we heard from Dr. Holtz-Eakin that the folks 
who will benefit are not necessarily the ones who really need 
the help the most. I think that was a really important point 
that you made, and so I just want to give you a chance to 
repeat it. When you said that this would only benefit 2.4 
percent of the people who would benefit are living in poverty. 
Is that correct?
    Mr. Holtz-Eakin. That is correct.
    Chairman Kylie. What was your broader point there about the 
distributional effects of this policy?
    Mr. Holtz-Eakin. Well, you know, as my colleague said, this 
was intended as a backstop to catch people who were 
misclassified, and this aggressive raising of the threshold 
appears to be not driven by those considerations, but instead 
by just an attempt to redistribute wages toward lower wage 
individuals.
    Viewed from that perspective, it is a really poorly 
targeted policy. It does not help those who were living in 
poverty. Nearly 50 percent of it goes to families who are at 
three times the poverty level, and it comes with a set of costs 
that we are going to distribute to some people, but it has to 
come from somewhere.
    Chairman Kiley. That is right.
    Mr. Holtz-Eakin. In many cases the implied redistribution 
is very perverse. It is people who do not get a job, people who 
have a job. You never want to do that.
    Chairman Kiley. Right. The benefits are fairly poorly 
targeted, and certainly not overwhelming for all that many 
folks who really need help, so let us, you know as a 
policymaker, again those are the benefits, now to weigh those 
against the costs.
    Ms. Panwala, you told us a little bit about your personal 
story. You immigrated from India and came to the United States 
in search of opportunities for education and entrepreneurship. 
Bought your first hotel at age 22. You now own eight hotels, 
employee 200 people. Would you say you are an example of the 
American dream?
    Ms. Panwala. 100 percent yes. I would say that there is 
just not me, there are many, many, many immigrants who you 
know, work really, really hard, and I know one of the 
Congresswomen mentioned that she grew up a small business 
owner, so she would understand that. As an immigrant when you 
come with nothing, you are basically doing everything, right?
    I started in this industry in the same exact way. I started 
my job as a housekeeper. I was doing housekeeping. I was doing 
everything I needed to do. I think yes, I would agree that that 
is really.
    Chairman Kiley. You said something that I found very 
interesting. You said the single most important aspect of our 
business is our employees. What did you mean by that? You want 
to give them the chance of the American dream as well, right?
    Ms. Panwala. I have always believed, and I think many 
business owners will look at that as it is a team effort, a 
business, right? When you are running a business, you want to 
make sure that everybody is a part of not just the 
decisionmaking process, but they feel like they are part of 
that organization. That is how I view our employees as part of 
our team.
    Chairman Kiley. Yes.
    Ms. Panwala. When you are with them for so many years, you 
want to make sure that you are taking care of them, which we 
are.
    Chairman Kiley. Right.
    Ms. Panwala. We are always taking care of our employees by 
providing flexibility, proper pay. If you--if the government 
gets involved, which it seems like it is, and starts doing the 
regulations, that hurts the relationship between employers and 
employees.
    Chairman Kiley. That is a great point.
    Ms. Panwala. Nothing is broken, well what are we trying to 
fix? In my opinion, at least for my business perspective, I can 
see that.
    Chairman Kiley. It interferes with the relationship, right? 
You in fact made a point here that hotels operate on very tight 
margins. Shocks to your businesses handed down by the 
government with barely any time to adjust, could be the 
difference in staying open and closing doors.
    Do you think hotels will shut down if this goes into 
effect?
    Ms. Panwala. Absolutely. Absolutely.
    Chairman Kiley. Then what happens to the workers?
    Ms. Panwala. They do not have a job.
    Chairman Kiley. They do not have a job.
    Ms. Panwala. They do not have a job, right. If like I said, 
our success, our employee's success, is our success. If we are 
not successful, if we are not able to keep our lights on and 
keep the doors open, and keep the business running, then those 
200 employees, the majority of employees would be out of a job, 
and they would have to go somewhere else, you know, look for 
different positions.
    Chairman Kiley. Then even those who are able to stay open, 
do you think they might have to lay off workers if this rule 
goes into effect?
    Ms. Panwala. Yes. Yes. Obviously, there is a tight budget 
over on your property, and as I mentioned, especially now, 
because of so much fixed costs are going up, and because of the 
lending part of it. Like so, when I mentioned the refinancing 
of the property, when you have a property that we are paying 5, 
5 = percent, all of a sudden that interest goes to 10, 10 =. 
Your debt now doubles on a monthly basis, so those projections.
    We know as owners how to handle those, but then on top of 
that, if you are putting regulations, such as overtime rule, it 
would be just very difficult. If they want the business to 
still stay open, we would have to move some of the salaried 
employees to hourly employees, to make sure that we are 
managing the budget.
    Chairman Kiley. Thank you. My time has expired. I now 
recognize the representative from Michigan, Mr. Walberg.
    Mr. Walberg. Thank you, Chairman, and thanks to the 
witnesses for being here today. During the 114th Congress, as I 
had the privilege to chair this Subcommittee, and along with 
over 200 of our fellow House members, I introduced the 
Protecting Workplace Advancement and Opportunity Act, which 
would have prevented the Obama DOL from implementing the flawed 
2016 version of the overtime rule.
    Thankfully, seldom do I say that about the courts, but 
thankfully that rule was invalidated by the court. However, the 
Biden administration has now sought, as we are discussing 
today, to resurrect a similar flawed approach. Just 4 years 
ago, the Trump DOL raised the overtime limit over 50 percent to 
its current $35,568.00 level in a widely supported compromise.
    Now I understand the importance of returning to regular 
adjustments in the salary threshold, however I am concerned 
that raising the threshold an additional 55 percent in such a 
short timeframe will impose significant burdens on businesses, 
and limit opportunities for workers as has been clearly brought 
up today.
    Dr. Holtz-Eakin, as succinctly as possible, from a guy who 
has written widely on this, and maybe could write another book 
on it as well, what economic difficulties are likely to surface 
should the proposed overtime rule go into effect just 4 years 
after the previous rule?
    I say succinctly, because simple sometimes catches our 
attention more, especially those who will be reading the 
documents.
    Mr. Holtz-Eakin. There are two kinds of costs imposed by 
the rule. The first is the administrative implementation of the 
rule, the burden imposed on businesses to comply. That is the 
billion dollars or so that we've seen in most of the `16, `19 
and this proposed rule. That is not to be ignored. This 
administration has finalized 750 rules in its time in office, 
and they have imposed a 437-billion-dollar cost on the U.S. 
economy.
    That is a record pace of burdens on the private sector to 
comply with rulemaking. This would be yet another burden of 
that type. The second costs are those of the economic 
adjustments to accommodate the additional wages and salaries 
that must be paid, either by raising salaries to keep people 
exempt, or by paying the overtime itself.
    That is very simply not captured in the regulatory analysis 
because it is viewed as a transfer in the private sector. That 
transfer has real consequences. Some people will not get a 
raise because you have to pay someone else more. That comes at 
their expense. Some businesses will--they want to modernize. 
They will not be able to expand.
    That will come at the expense ultimately of the worker's 
productivity and their ability to raise their wages. Some 
businesses will try to pass this along as additional price 
increases at a time when that is the No. 1 economic problem. 
That will hurt consumers broadly, and so this is not a costless 
move in any way.
    It has administrative costs, and it has deep economic 
consequences.
    Mr. Walberg. Yes. It adds to the pain of Bidenomics, 
significantly more. Thank you. Mr. DeCamp, in your written 
testimony you note that the proposed salary threshold is 
historically excessive. Could you discuss the history of these 
adjustments in more detail?
    Mr. DeCamp. Sure. When we look at the adjustments that have 
happened over the years it is sometimes difficult on an apples-
to-apples basis to compare them because we see increases that 
happen over different increments of time, and so sometimes they 
raise it after 4 years, sometimes they raise it after 29 years.
    In my testimony, I have tried to level for that by looking 
at the average rate of increase between different changes to 
the regulations. What we see is that historically before this 
proposal, the average annual rate of increase over the past 80 
something years varied between about 2.6 percent per year, and 
a high of 6.97 percent per year.
    This proposal would increase 11.55 percent or more per 
year. I say, ``or more'' because the actual number that the 
Department will use will probably be higher than the figure 
represented in the proposed rule. This proposed increase is 
again, two to three times the historical average annual rate of 
increase, and it is about two-thirds higher than even the 
highest increase the Department has ever adopted at any point 
in the last 85 years.
    Mr. Walberg. Amazing. The impact that that could be 
primarily for political purposes, and hurting the people 
allegedly that the administration says they want to help. Thank 
you. My time has expired. I yield back.
    Chairman Kiley. Without objection, I enter into the record 
letters of support from the Associated Builders and 
Contractors, the Credit Union National Association, Independent 
Electrical Contractors, the Independent Women's Forum, the 
National Association of Wholesaler Distributors, the America 
First Policy Institute, the Partnership to Protect Workplace 
Opportunity, the American Society of Travel Advisors, College 
and University Professional Association for Resources, and the 
National Retail Federation.
    [The information of Mr. Kiley follows:]

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    Chairman Kiley. I would like to thank our witnesses again 
for taking the time to join us today, and I now recognize the 
Ranking Member for a closing statement.
    Ms. Adams. Thank you, Mr. Chairman, and thank you to our 
witnesses for your testimoneys today. Today's hearing has 
underscored why President Biden's proposed rule to raise the 
overtime threshold is critical for American workers, businesses 
and the economy.
    Everyday millions of hardworking Americans work long and 
strenuous hours without adequate pay to provide for themselves 
and their families. I will say it again, working hard is not 
enough if you do not make enough. Adding insult to injury, many 
workers push 50-to-60-hour work weeks without fair pay, or 
adequate overtime pay protections.
    These unscrupulous practices encroach on worker's rights, 
and they hinder their ability to have a work life balance where 
they can spend quality time with their family, get adequate 
rest, and work a full-time job. A basic promise of work that 
workers organized for decades to secure. That is just not 
right.
    Employees must be paid for every hour they work, including 
time and a half. Now is not the time to shortchange America's 
workers. Republicans should join Democrats in supporting 
overtime pay protections and building upon President Biden's 
work to build our economy from the bottom up and the middle 
out.
    Thank you very much for your testimony, and Mr. Chairman, I 
yield back.
    Chairman Kiley. Thank you very much, and I want to again 
thank all of our witnesses today. This is a Subcommittee on 
Workforce Protections. Unfortunately, again and again, we have 
seen from this administration attacks on American workers.
    Anti-worker agenda that is truly a central feature of what 
has become known as Bidenomics. We have seen it, for example, 
with the attacks on independent contractors, with potentially 
millions of workers losing their livelihoods with a new rule 
that is being proposed by this administration.
    When you see a rule like the one that we have considered 
today that says we are going to deny by fiat, millions of 
workers their exempt status, their ability to work under 
conditions that they have chosen, that is something that I 
think ought to raise serious alarms for everyone on this 
Committee, on both sides of the dias because that is our 
charge.
    We are the Subcommittee on Workforce Protections, and here 
you have an administration that is looking to strip rights away 
for millions of workers. They argue that nevertheless, eroding 
the rights of workers is justified in this case, because of 
benefits that might follow in a material sense.
    I think the testimony we have heard today has thoroughly 
debunked that argument when you weigh the costs versus the 
benefits. We have seen that the benefits are actually quite 
narrow, and not really targeted to the folks who really need 
help, whereas the costs are sweeping for workers themselves. 
First of all, we are going to see if this rule goes into 
effect, many businesses will be forced to shut down and all of 
their workers will lose their jobs. Other businesses will be 
forced to lay people off because they simply cannot afford the 
additional costs that this rule would pass on to them. Those 
workers will lose their jobs as well.
    You have some workers who are in seasonable industries, the 
hotel industry is one of them, who now are not going to be able 
to get the sort of hours they need when they need it and face 
unpredictable work schedules, whereas if they are salaried, and 
they have a predictable paycheck that is coming each month, 
those folks are going to suffer.
    You have people who want to be salaried employees, who get 
workplace flexibility, who can telework, who get better 
benefits in those sort of situations who have opportunities for 
career advancement, who can learn other facets of the business 
in order to promote their career, and to enhance their lifetime 
earnings. All of those opportunities are going to be taken away 
from potentially millions of workers by this proposed 
regulation.
    Those are all of the costs. That is the basic balance of 
the sort of fairly minimal benefits to workers, and the 
sweeping cost to workers, not to mention the other costs 
associated with this policy. Raising costs for consumers at a 
time when inflation has already made life so difficult for so 
many families.
    Making it more difficult for non-profits to operate and to 
serve vulnerable populations. Raising administrative costs at 
universities to make tuition even higher for consumers. When 
you look at the erosion of rights, and the very significant 
costs of this policy, it really is not even a close call from a 
policymaking perspective, which is why perhaps the 
administration is trying to take this out of the hands of 
policymakers, by really imposing a policy that in the first 
instance is more properly crafted by Congress.
    Perversely, it is saying we are now going to lock this 
policy in, and have a stipulated increase every 3 years without 
Congress having an opportunity to participate, without even 
having a new process under the Administrative Procedures Act, 
at the agency's level, without having stakeholders have the 
opportunity to participate in that process, and it is going to 
happen by the way, regardless of the State of the economy, 
regardless of the unique circumstances that may counsel for or 
against a change at any given time.
    It is really a perfect example of why Americans across the 
board, across party lines, overwhelmingly say that we are on 
the wrong tracks when it comes to the economy. Bidenomics has 
been a failure for the economy, and it has been a failure for 
workers. I will tell you in closing, that as someone who comes 
from California, we do not need to speculate about what the 
further consequence of this agenda is going to be because the 
sort of policies that are being proposed here by this 
administration, we--they have already taken effect in 
California.
    By the way, who was the Secretary of Labor in California 
for our current Governor? It was Julie Su, the current Acting 
Secretary of Labor for this administration. The effect of these 
policies in California is right now we have the second highest 
unemployment rate in the country.
    Last year we had the lowest level of wage growth of any 
State in the country, or 50th out of the 50 states, and we have 
the highest level of rate of real poverty in the country as 
well. That is not what I want for the rest of the country, and 
so I would strongly urge the administration to withdraw this 
rule, to certainly withdraw the nomination of now the longest 
serving Acting Secretary in U.S. History, Julie Su, and to take 
a new approach toward economic stewardship that respects the 
rule of Congress and respects the rights of workers. Without 
any further business, this Committee stands adjourned.

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    [Whereupon, at 11:30 a.m., the hearing was adjourned.]

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