[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF WAGE LAWS: ASSESSING
THE FLSA'S EFFECTIVENESS, CHALLENGES, AND
OPPORTUNITIES
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HEARING
Before The
SUBCOMMITTEE ON WORKFORCE
PROTECTIONS
OF THE
COMMITTEE ON EDUCATION AND WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, MARCH 25, 2025
__________
Serial No. 119-5
__________
Printed for the use of the Committee on Education and Workforce
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via: edworkforce.house.gov or www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
61-284 PDF WASHINGTON : 2025
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COMMITTEE ON EDUCATION AND WORKFORCE
TIM WALBERG, Michigan, Chairman
JOE WILSON, South Carolina ROBERT C. ``BOBBY'' SCOTT,
VIRGINIA FOXX, North Carolina Virginia,
GLENN THOMPSON, Pennsylvania Ranking Member
GLENN GROTHMAN, Wisconsin JOE COURTNEY, Connecticut
ELISE M. STEFANIK, New York FREDERICA S. WILSON, Florida
RICK W. ALLEN, Georgia SUZANNE BONAMICI, Oregon
JAMES COMER, Kentucky MARK TAKANO, California
BURGESS OWENS, Utah ALMA S. ADAMS, North Carolina
LISA C. McCLAIN, Michigan MARK DeSAULNIER, California
MARY E. MILLER, Illinois DONALD NORCROSS, New Jersey
JULIA LETLOW, Louisiana LUCY McBATH, Georgia
KEVIN KILEY, California JAHANA HAYES, Connecticut
ERIN HOUCHIN, Indiana ILHAN OMAR, Minnesota
MICHAEL A. RULLI, Ohio HALEY M. STEVENS, Michigan
JAMES C. MOYLAN, Guam GREG CASAR, Texas
ROBERT F. ONDER, Jr., Missouri SUMMER L. LEE, Pennsylvania
RYAN MACKENZIE, Pennsylvania JOHN W. MANNION, New York
MICHAEL BAUMGARTNER, Washington VACANCY
MARK HARRIS, North Carolina
MARK B. MESSMER, Indiana
R.J. Laukitis, Staff Director
Veronique Pluviose, Minority Staff Director
------
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
RYAN MACKENZIE, Pennsylvania, Chairman
MARK B. MESSMER, Indiana ILHAN OMAR, Minnesota,
GLENN GROTHMAN, Wisconsin Ranking Member
JAMES COMER, Kentucky HALEY M. STEVENS, Michigan
MARY E. MILLER, Illinois GREG CASAR, Texas
JAMES C. MOYLAN, Guam MARK TAKANO, California
C O N T E N T S
----------
Page
Hearing held on March 25, 2025................................... 1
OPENING STATEMENTS
Mackenzie, Hon. Ryan, Chairman, Subcommittee on Workforce
Protections................................................ 1
Prepared statement of.................................... 5
Omar, Hon. Ilhan, Ranking Member, Subcommittee on Workforce
Protections................................................ 7
Prepared statement of.................................... 13
WITNESSES
McCutchen, Tammy, Senior Affiliate, Resolution Economics..... 15
Prepared statement of.................................... 17
Boughan, Paige, Senior Vice President/Director of Human
Resources, Farmers and Merchants Bank...................... 28
Prepared statement of.................................... 30
Stettner, Andrew, Director of Economy and Jobs, The Century
Foundation................................................. 39
Prepared statement of.................................... 41
Wolfson, Jonathan, Chief Legal Officer and Policy Director,
Cicero Institute........................................... 51
Prepared statement of.................................... 53
ADDITIONAL SUBMISSIONS
Ranking Member Omar:
Letter dated February 27, 2025, to the Department of
Labor.................................................. 9
Project 2025, Heritage Foundation, Mandate for
Leadership: The Conservative Promise................... 63
Article dated January 24, 2025, titled ``Trump's Early
Actions Mirror Project 2025, the Blueprint He Once
Dismissed''............................................ 64
Memorandum dated February 25, 2025, to the U.S.
Department of Labor.................................... 86
Hearing dated February 4, 2025, titled ``Fair Labor
Standards Act Reform: Review of Flexible Workplace
Measures''............................................. 96
Walberg, Hon. Tim, a Representative in Congress from the
State of Michigan:
Letter dated March 25, 2025, from the National Restaurant
Association............................................ 172
Letter dated March 25, 2025, from the Independent Work
Coaliton............................................... 174
Letter dated March 25, 2025, from the Associated Builders
and Contractors (ABC).................................. 176
Letter dated March 18, 2025, from Americans for Tax
Reform................................................. 178
Coalition letter dated March 24, 2025.................... 179
Letter dated March 25, 2025, from the College and
University Professional Association for Human Resources 181
Letter dated February 26, 2025, from the Coalition for
Workforce Innovation................................... 183
Letter dated March 25, 2025, from NFIB................... 185
Letter dated March 25, 2025, from Independent Women...... 187
Letter dated July 1, 2024, from the Financial Services
Institute.............................................. 190
Statement for the record dated March 25, 2025, from the
Financial Services Institute........................... 195
Letter dated March 4, 2025, from HR Policy Association
(HRPA)................................................. 198
Letter dated March 10, 2025, from Independent Women...... 202
Letter dated March 24, 2025, from 1Huddle................ 204
Letter dated March 25, 2025, signed by various
organizations supporting the Ensuring Workers Get PAID
Act.................................................... 206
Letter dated March 25, 2025, signed by various
organizations supporting the Working Families
Flexibility Act........................................ 208
Letter dated March 24, 2025, from the Partnership to
Protect Workplace Opportunity (PPWO)................... 210
Letter dated March 18, 2025, from the Partnership to
Protect Workplace Opportunity (PPWO)................... 212
QUESTIONS FOR THE RECORD
Responses to questions submitted for the record by:
Mr. Andrew Stettner...................................... 217
THE FUTURE OF WAGE LAWS: ASSESSING
THE FLSA'S EFFECTIVENESS, CHALLENGES,
AND OPPORTUNITIES
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Tuesday, March 25, 2025
House of Representatives,
Subcommittee on Workforce Protections,
Committee on Education and Workforce,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:16 a.m., in
Room 2175, Rayburn House Office Building, Washington, DC, Hon.
Ryan Mackenzie (Chairman of the Subcommittee) presiding.
Present: Representatives Mackenzie, Messmer, Walberg,
Grothman, Miller, Omar, Stevens, Casar, Takano, and Scott.
Also present: Kiley, Owens, and Lee.
Staff present: Vlad Cerga, Director of Information
Technology; Maren Emmerson, Intern; Libby Kearns, Press
Assistant; Trey Kovacs, Director of Workforce Policy; Campbell
Ladd, Clerk; R.J. Laukitis, Staff Director; Georgie Littlefair,
Investigator; Danny Marca, Director of Information Technology;
John Martin, Deputy Director of Workforce Policy/Counsel; Audra
McGeorge, Communications Director; Daniel Nadel, Legislative
Assistant; Kevin O'Keefe, Professional Staff Member; Ethan
Pann, Deputy Press Secretary and Digital Director; Kane
Riddell, Staff Assistant; Sara Robertson, Press Secretary; Ann
Vogel, Director of Operations; Heather Wadyka, Professional
Staff Member; Ali Watson, Director of Member Services; James
Whittaker, General Counsel; Ariel Box, Minority Intern; Ilana
Brunner, Minority General Counsel; Stephanie Lalle, Minority
Communications Director; Jessica Schieder, Minority Economic
Policy Advisor; Dhrtvan Sherman, Minority Research Assistant;
Bob Shull, Minority Senior Labor Policy Counsel; Raiyana
Malone, Minority Press Secretary; Kevin McDermott Minority
Director of Labor Policy; Marie McGrew, Minority Press
Assistant; Eleazer Padilla, Minority Staff Assistant; Veronique
Pluviose, Minority Staff Director; Banyon Vassar, Minority
Director of IT.
Chairman Mackenzie. Good morning. The Subcommittee on
Workforce Protections will come to order. I note that a quorum
is present. Without objection, the Chair is authorized to call
a recess at any time. I would like to welcome everybody to our
first hearing, the first Workforce Protection Subcommittee
Hearing of the 119th Congress.
Before I get started, I would like to recognize the
Chairman and Ranking Member for the Full Committee. Chairman
Walberg, you are recognized for as much time as you may
consume.
Mr. Walberg. Thank you, Mr. Chairman, and today I just want
to take an opportunity to recognize the loss of one of our
valued Committee members and friends. Representative Raul
Grijalva was here a term and a half before I got here, so I had
the opportunity of serving with him for the entire--my entire
tenure on this great Committee.
It is interesting that before joining Congress,
Representative Grijalva practiced what he preached to us over
and over again. He served as a school board member in Tucson
for 8 years, where he advocated for access to education for all
students but especially underserved communities.
Then in the workforce area, he was a champion for workers
and demonstrated why this was a Committee he chose to serve on
for his entire tenure. I greatly respected his commitment to
serving the Nation, serving his District, his community, his
purposes. He will be dearly missed on this Committee, and I
hope his friends and loved ones can find comfort in the legacy
that he has left behind.
Mr. Chairman, thank you for allowing me the privilege to
recognize a good member for the work that he did. Thank you. I
yield back.
Chairman Mackenzie. Thank you, Chairman Walberg. Ranking
Member Scott, you are recognized for as much time as you may
consume.
Mr. Scott. Thank you. Thank you, and I want to associate
myself with the comments of the Chairman. We are deeply
saddened to learn of the passing of our friend and colleague,
Raul Grijalva. Raul and I sat next to each other for many years
on this Committee, and we could always rely on him for a sense
of optimism and humor during some of the toughest legislative
fights.
In addition to being a talented doodler, he was a champion
for his constituents. He was a fierce defender of unions and
civil rights in the workplace, and at the Committee he was a
lead sponsor fighting for legislation to fight heat illness,
which would help protect indoor and outdoor workers from
occupational exposure to excessive heat.
He was an advocate for universal education, regardless of
immigration status, and he pushed to expand funding for English
as a second language. Along with the late Donald McEachin, he
was a champion on his other Committee for environmental
justice. He will be deeply missed, not only as a colleague, but
also as a friend and advocate, and so we send our deepest
condolences to his family, staff, and everyone impacted by his
loss.
Mr. Chairman, thank you for the opportunity to speak, and I
yield back.
Chairman Mackenzie. Thank you, Ranking Member Scott, and I
would also like to express my condolences to the family and
friends of the departed Representative. A great member of our
House, and he and his presence here will surely be missed.
Now, we will continue with the hearing, and today's hearing
we are going to be examining the critical reforms to modernize
labor law in the United States of America.
We are seeking to bring more clarity to workers, and
employers, and today's hearing we will be discussing what I
hope is the bipartisan goal of bringing a much-needed update to
our Federal statutes and be bringing them into the 21st
Century.
As the foundation of our Nation's wage and hour
protections, the Fair Labor Standard Act covers employees at
nearly every workplace across the country, totaling about 140
million individuals. The American workforce has transformed
dramatically since the law was adopted 87 years ago, but many
of the workplace laws and policies have not been updated.
We saw during the last administration, unfortunately, even
more onerous burdens being placed on workplaces and workers all
across our country. They were forced into complying with many
of these burdensome regulations that stifled innovation and set
arbitrary standards, some of which even violated the
Administrative Procedure Act, the cornerstone governing many
Federal agencies that issue regulations.
For instance, the Biden-Harris administration's unlawful
overtime rule attempted to raise the salary threshold to be
considered an exempt employee under the FLSA by a whopping 65
percent, with automatic increases every 3 years. This rule
threatened to restrict workplaces, limit professional
development opportunities, and eliminate the flexible
advantages exempt employees have.
Moreover, the rule was estimated that it was going to be a
significant cost to employers, and actually in many ways
disadvantaged the very employees that they were seeking to
help. While we also saw the Department of Labor under President
Biden, issue an unworkable, confusing, ABC style worker
misclassification test to determine which workers are
employees, and which are independent contractors.
This rule limits the ability of as many as 70 million
freelancers, ride share drivers, and other independent workers
to earn a living on terms that they set for themselves. The
last 4 years, again we have seen this excessive, administrative
ruling also continue for tipped workers.
Tipped workers can perform their duties and provide great
services all across our country for so many people, but at the
same time the limiting restraints that were placed on them only
allowed them to do tasks for 20 percent of an employee's
workday, which is essentially impossible to monitor and
enforce.
Rules like this raise the question if the government cannot
enforce its own standard, what is the purpose of even setting
it? Finally, we saw the wage and hour division abandon the
Trump administration's Payroll Audit Independent Determination
Program.
This was something that was actually helping workers. We
found that employees who had unknowingly in some cases,
committed violation reporting themselves and then bringing this
forward, making sure that back pay and overtime violations were
corrected getting that money to workers faster, but the Biden
Department of Labor unwisely decided to end this program, and
instead focused their energy on cracking down on lawful job
creators.
Thankfully, Americans chose change last November, and they
are starting already to see relief from this Trump
administration, as they work to undue many of these terrible
mandates the workplace placed on employers all across the
country.
Now, I think we also have an opportunity as a Committee.
Members of our Committee, and also throughout the entire House,
have offered so many positive changes that can help employers
and employees as we try to update FLSA.
I would like to thank all of those who have brought forward
their ideas, and among many items for us to consider at today's
hearing, are simple changes that modernize FLSA, such as
evaluating the methodology for overtime regular rate
calculations, which often discourage employers who wish to
offer childcare benefits to their employees.
Today we will hear from witnesses about how non-exempt
workers are not given the same voluntary professional
development opportunities as exempt workers because of FLSA's
definition of compensable time. Finally, we will discuss how
employee status and independent contractor status should be
clearly and concisely defined under the common law standard.
I look forward to hearing our witnesses, and yield to the
Ranking Member for her opening statement.
[The statement of Chairman Mackenzie follows:]
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Ms. Omar. Thank you, Mr. Chairman. Good morning, everyone.
Thank you to our witnesses for being here today. Mr. Chairman,
congratulations on your position, and I look forward to working
with you on this Subcommittee. I hope you will indulge me for a
moment.
It is an honor to serve as the Ranking Democrat, not only
because of the important work that we are going to do
overseeing our Nation's labor laws, but because I am following
in the footsteps of one of my political heroes, the late
Senator Paul Wellstone of Minnesota.
Senator Wellstone served as the Ranking Member of our
Senate Subcommittee counterpart, and in 1997 his first opening
statement in that role was on this very topic, the Fair Labor
Standards Act. Today, as we discuss this landmark law, I hope
that we will do it with the same commitment to uphold fairness
and strengthen worker protection and prioritize the well-being
of the working people.
Now, let us be honest about what's happening in our
country. Millions of workers wake up every morning, put in long
hours, and still struggle to make ends meet. Meanwhile,
billionaires and CEOs are making record profits off their
labor. For too long our economy has only worked for the wealthy
and the well-connected, while workers have been left behind.
Over the past 4 years the Biden administration and
congressional Democrats fought to level the playing field, but
now that progress is under attack. Since returning to the White
House, President Trump has wasted no time implementing Project
2025 to attack workers, ripping away protections, dismantling
labor enforcement, and handing over more power to the same
corporate interests that have exploited workers for decades.
The future of the American economy depends on American
workers. Today, economic inequality is reaching levels not seen
since the 1920's. The Fair Labor Standards Act of 1938 was
created as a reaction to that inequality and the Great
Depression when workers lacked basic workplace protection.
That is why we must strengthen this landmark law, not
weaken it. That means finally raising the Federal minimum wage,
which has been stuck at a shameful $7.25 an hour since 2009. It
means tackling wage theft because every year employers steal
over 50 billion dollars from workers' pockets.
It means increasing penalties for child labor violations.
It means eliminating sub-minimum wage and the 14(c) so that
workers with disabilities are paid fairly, like everyone else.
There is so much we can and should be doing. I hope that is the
kind of conversation that we will be having today, Mr.
Chairman.
I hope this hearing is not just the latest in the long line
of Republican-led efforts to undermine the FLSA under the guise
of updating it. Last month, Ranking Member Scott and I wrote a
letter to the Department of Labor, demanding to know the impact
of DOGE's takeover and firing of countless staff at a critical
DOL program, such as the Wage and Hour Division, which enforces
the FLSA.
Trump's DOL failed to respond by the March 14th deadline,
leaving Congress and working Americans in the dark about the
future of these programs. I invite Chairman Mackenzie and my
Republican colleagues to join us in demanding answers on behalf
of our constituents.
I would like to submit this letter into the record.
Chairman Mackenzie. Without objection.
[The information of Ranking Member Omar follows:]
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Ms. Omar. Democrats are providing concrete solutions to
safeguarding workers during these difficult times, and looking
to build an economy for the future, instead of dragging our
country backward. We want workers to come home safe and be paid
fairly for their labor. We want children in the classrooms, not
on the factory floor.
We want to raise the minimum wage so that no one is in
poverty while working full-time. These goals should not be
controversial. This is why we must pass key legislation, such
as Raise the Wage Act, which would increase the minimum wage,
and the Let's Protect Workers Act, which would hold employers
accountable for breaking the law.
As we sit here today, thousands of Federal workers across
the country, such as medical personnel, scientists, park
rangers, face losing their livelihoods, and the ability to
support their families, while the American public stands to
lose essential services they provide. Workers deserve better.
America deserves better. Thank you and I yield back.
[The statement of Ranking Member Omar follows:]
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Chairman Mackenzie. Thank you. Pursuant to Committee Rule
8(c), all members who wish to insert written statements into
the record may do so by submitting them to the Committee
electronically, the Committee Clerk electronically, in
Microsoft Word format by 5 p.m., 14 days after the hearing.
Without objection, the hearing record will remain open for
14 days to allow such statements and other extraneous material
noted during the hearing to be submitted for the official
hearing record.
I note that the Subcommittee has some of my colleagues who
are permanent members, or they are not permanent members of
this Subcommittee, but they may be waving on for the purpose of
today's hearing. All right.
To begin with our witnesses, I would like to thank all of
you for joining us here today, and we are going to introduce
each of you. The first witness is Ms. Tammy McCutchen, a Senior
Affiliation for Resolution Economics in New Market, Tennessee.
Our second witness is Ms. Paige Boughan, who is a Senior
Vice President and Director of Human Resources for Farmers and
Merchants Bank in Hampstead, Maryland, and is testifying on
behalf of the Society of Human Resource Management.
Our third witness is Mr. Andrew Stettner, who is the
Director of Economy and Jobs for the Century Foundation in
Washington, DC. Our final witness is Mr. Jonathan Wolfson, who
is the chief Legal Officer and Policy Director for the Cicero
Institute in Richmond, Virginia.
We thank the witnesses again for being here today, and we
look forward to each of your testimony. Pursuant to the
Committee Rules, I would ask that you each limit your oral
presentation to a 3-minute summary of your written statement.
The clock will count down from 3 minutes, as Committee members
have many questions for all of you, and we would like to spend
as much time as possible on questions.
Pursuant to Committee Rule 8(d) and Committee practice,
however, we will not cutoff the testimony until you reach the
5-minute mark. I woud like to remind the witnesses to be aware
of their responsibility to provide accurate information to the
Subcommittee, and I will first recognize Ms. McCutchen for your
testimony.
STATEMENT OF MS. TAMMY McCUTCHEN, SENIOR AFFILIATE, RESOLUTION
ECONOMICS, NEW MARKET, TENNESSEE
Ms. McCutchen. Thank you for inviting me to speak to you
today. I have made specific recommendations for FLSA reform in
my written testimony. I suggest all of these with three
principles in mind. First, the FLSA is out of date. Key
sections have been unchanged for three-quarters of a century or
more, although the type of work, how we work, and where we work
has changed significantly in that time.
Second, we need clear and simple rules that workers and
small business owners can understand without an H.R.
professional or an attorney. Third, justice delayed is justice
denied. Workers cannot wait months or years for their wages.
They need them now.
The greatest need for reform I think comes in four areas.
First, the definitions. The FLSA requires employers to pay
employees for work, employers, employees, and work. The
definitions of these terms are so vague and circular as to be
useless. DOL's regulations run to 10,000 words.
Is it surprising that we have been debating joint
employment and independent contractor for nearly a decade,
millions spent on litigations, thousands of Court and agency
cases, dueling regulations from one administration to the next?
Only Congress can stop the madness.
Second, the overtime calculation. Most believe that
overtime is 1.5 times the hourly rate. Wrong. It is 1.5 times
your regular rate. Regular rate was defined in the 1949
amendments as all remuneration for employment with seven
exclusions, gifts, some bonuses, some benefits, except for
adding stock options in the year 2000, these have not been
changed for 76 years.
DOL regulations, 43,000 words--so long and complex. How can
we expect workers and small business owners to get the right
answers? Congress could simplify and benefit workers greatly by
amending Section 7(e) to exclude non-monetary benefits provided
to employees, regardless of the hours that they work.
Then an employer can give workers free meals, free public
transit, childcare, college tuition, even repayment of student
loans without fear of unplanned and uncontrolled overtime
costs. The last two areas for reform are overtime exemptions
and providing incentives to employees to self-audit.
I see my time is up, so I will end here, so thank you.
[The Statement of Ms. McCutchen follows:]
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Chairman Mackenzie. Thank you. I appreciate that strict
adherence to the timing. I will now recognize Ms. Boughan, for
your testimony.
STATEMENT OF MS. PAIGE BOUGHAN, SENIOR VICE PRESIDENT AND
DIRECTOR OF HUMAN RESOURCES, FARMERS AND MERCHANTS BANK,
HAMPSTEAD, MARYLAND, ON BEHALF OF THE SOCIETY FOR HUMAN
RESOURCES MANAGEMENT (SHRM)
Ms. Boughan. Chairman Mackenzie, Ranking Member Omar, and
Subcommittee members, thank you for the opportunity to testify
about the Fair Labor Standards Act. My name is Paige Boughan,
and I serve as State Council Legislative Director for Maryland
SHRM. SHRM, made up of nearly 340,000 members, is the foremost
expert, researcher, advocate, and thought leaders on issues
impacting today's evolving workplaces.
With over 15 years of experience in human resources, and
more than a decade of advocating on behalf of SHRM, I am
pleased to share real world challenges employers face when
complying with the FLSA. At the time of its enactment in 1938,
workplaces looked very different. The law's provisions are
critical but outdated.
To reach our workforce's full potential, SHRM believes in
turning essential keys to modernizing this pivotal law, closing
the workforce participation gap, and shaping the future of
work. Opening doors that lead to innovation, economic growth,
and more dynamic, competitive workforce.
Modernization efforts must focus on Federal and legislative
solutions that prioritize clarity on which workers are covered,
consistency in application, and compliance-oriented language.
For the purposes of time, I will focus my oral testimony on the
modernization efforts that will lean into our three C's,
clarity, consistency and compliance.
Clarity, one issue is the lack of clear definitions,
especially for terms essential like ``employee.'' It must also
be clear whether an employee is exempt or non-exempt from
overtime pay, as uncertainly increases the risk of
misclassification.
When the classification rules no longer match actual jobs,
it is time for Congress and agencies to assist as there are
consequences to relying on outdated definitions, or the
assumption that a simple solution is to label all employees as
non-exempt. From experience, some employees actually negotiate
to be exempt because they value the associated flexibility and
benefits that come from overtime exemption.
Consistency, a real-world example of regulatory whiplash
involves mortgage loan officers, and qualification for the
administrative exemption based on the duties analysis. This
back and forth between agency and Court span nearly a decade
before resolution at the Supreme Court.
This uncertainty and others like it affect how employees
work, and businesses operate. Compliance, the unpredictability
of our FLSA regulations is a concern. When DOL attempted to
raise salary thresholds for EAP employees in 2024, many
businesses made adjustments. When a Federal Court blocked the
rule, they were left in limbo.
Smaller businesses do not always have the dedicated legal
resources to respond to shifting regulations. Additionally, the
absence of clear Federal standards has led to a patchwork of
conflicting State mandates, making multi-State compliance more
complex.
To build a stronger, more resilient economy we must unlock
the full potential of the American workforce. This will only
happen when we modernize workplace laws and policies, close the
workplace, workforce participation gap, and shape the future of
work.
I urge the Subcommittee to consider these reforms
carefully. The FLSA is the foundation of U.S. labor law, but
for it to remain effective, it must evolve. Thank you for the
opportunity to share these insights, and I welcome any
questions you may have.
[The Statement of Ms. Boughan follows:]
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Chairman Mackenzie. Thank you. Next, I will recognize Mr.
Stettner for your testimony.
STATEMENT OF MR. ANDREW STETTNER, DIRECTOR OF ECONOMY AND JOBS,
THE CENTURY FOUNDATION, WASHINGTON, D.C.
Mr. Stettner. Good morning, Chairman Mackenzie, Ranking
Member Omar, and other members of the Subcommittee. A 13-year
old working the nightshift cleaning the kill floor of a meat
packing plant. Working people putting in a 50-hour work week
and getting paid for just a fraction of those hours.
Mothers forced to choose between their children and their
income when they are denied a place to pump at work. These are
just some of the nightmare scenarios that Americans depend on
the U.S. Department of Labor to prevent. Those protections are
at risk.
If Elon Musk's so-called Department of Governmental
Efficiency gets its way and strips the DOL of its talent and
capacity, as it closes scores of DOL offices across the
country. The truth is that 15,000 plus DOL employees, like I
did in 2022, raised their hand to swear an oath to the
Constitution to uphold the laws of Congress enacted to protect
workers.
They toiled into every corner of the country to ensure the
workers come home safe and alive at the end of their shift with
the pay they have earned. Through consistent and targeted
enforcement, the Biden administration recovered 1 billion
dollars in underpaid wages and damages. We should be increasing
the budget of DOL and its enforcement powers to get at 50
billion dollars in wage theft annually.
Enforcement can only do so much. We need to change the law.
The Federal minimum wage of $7.25 has not been increased since
July 2009, losing half of its purchasing power. Congress should
pass the Raise the Wage Act of 2023, gradually raising the
Federal minimum wage to $17.00 an hour by 2028, benefiting an
estimated 28 million workers.
The minimum wage and salary threshold for overtime pay
should be indexed to inflation, so they never fall behind
again. All Americans should be protected by the same Federal
minimum wage standards. Congress should eliminate the tip
credit, which allows tipped workers to be paid as little as
$2.13 an hour, a level set in 1991.
Eliminating the tip credit is the easiest way to relieve
the administrative burden on workers and employers. It is also
time to end the discriminatory provisions for sub-minimum wage
worker's disability, as little as 25 cents per hour. DOL should
cease issuance of 14(c) certificates, phasing out this program,
which is already steeply declining in popularity.
14(c) should be replaced by programs helping disabled
individuals find jobs in non-segregated environments, such as
through the Transition to Competitive Integrated Employment Act
of 2023. As one of the last actions of Acting Secretary Julie
Su, DOL secured a 4-million-dollar settlement for children
employed at Perdue poultry plants, in dangerous jobs deboning
and processing chicken.
More is needed, like the Protect the Children Act. Over the
last 15 years, employers and workers have had whiplash from
changing regulations on independent contractors. Now is the
time to return to core precedents. In 2024, DOL returned to the
six-factor test to analyze whether a worker is, as a matter of
economic reality, economically dependent on an employer for
work.
This rule distinguishes between those individuals who are
genuinely in business with themselves, and those who are
employees, and should be paid the minimum wage and overtime.
Let me close by saying that the risk of DOGE and the Trump
administration to the American worker is rising.
President Trump inherited an economy that added a record 16
million jobs during the Biden administration. Workers finally
had leverage in the economy to see wage gains that actually
outpaced inflation. Unions won record contracts, like a 25
percent increase for the UAW.
Legislation like the Chips and Science Act catalyzed 1
trillion dollars in private investment. Even this strong
recovery ran up against powerful forces. The richest 1 percent
of our country, people like Elon Musk, have captured an
outsized share of national wealth.
While 70 percent of American support unions, the erosion of
labor law means that less than 1 in 10 can benefit, and women
are paid only 83 cents for every dollar paid to a man,
something we recognize today on Equal Pay Day.
Let us stand on the side of workers, and strengthen
worker's rights, starting with modernizing FLSA. Thank you, and
I am happy to answer any questions.
[The Statement of Mr. Stettner follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Mackenzie. All right. Last, we will recognize Mr.
Wolfson for your testimony.
STATEMENT OF MR. JONATHAN WOLFSON, CHIEF LEGAL OFFICER AND
POLICY DIRECTOR, CICERO INSTITUTE, RICHMOND, VIRGINIA
Mr. Wolfson. Chairman Mackenzie, Ranking Member Omar, and
members of the Subcommittee, it is an honor to testify today
before this Committee on ways to grow the Nation's economy, and
free workers to earn by modernizing the Fair Labor Standards
Act.
I would also like to recognize my daughter, Hartwell, who
is here with me today. My name is Jonathan Wolfson. I am the
Chief Legal Officer and Policy Director at the Cicero
Institute. We are a think tank with the mission of identifying,
developing and advancing entrepreneurial solutions to public
policy problems.
Previously, I had the honor of leading the U.S. Department
of Labor Policy Office. In addition to my remarks submitted for
the record, I would like to focus on two key observations
today. First, is that legislation is a highly preferable way to
go about amending the Fair Labor Standards Act.
Second, there is some pending legislation before this
Subcommittee and other parts of this broader Committee, which
are ways to address the multiple difficulties facing today's
workers. First, legislation is preferable to regulation. As
everyone on this panel has said, there are things that the
Department of Labor has done, and that has been done in order
to try to assist workers, or try to assist businesses, but
ultimately old and unclear Fair Labor Standards Act leaves many
vital decisions to the regulators.
For example, the definition of a tipped employee is any
employee, under the statute, is ``any employee who receives
more than $30 a month in tips,'' but on top of that, the U.S.
Department of Labor has issued pages upon pages of regulations.
This leaves employers vulnerable to liability and
investigation, not because they pay their worker the minimum
wage as required under the law, but because they treat workers
who spend less than a certain amount of time in a day
performing work that the Wage and Hour Division deems to not be
tipped work, a term that is not defined by the Fair Labor
Standards Act.
Unclear and outdated laws are not unique to Wage and Hour
Division, or the Department of Labor. Every year regulatory
agencies fill thousands of pages of the Federal Register,
published hundreds of regulations, and issued tens of thousands
of opinions, interpretations, rulings and other guidance.
An ever-changing regulatory landscape is good for lawyers,
but it does not help innovators innovate, business build, or
workers to work, and it is bad for the citizens who pay more
for everything that they buy, and for the economy as a whole.
It is time for Congress to act and improve the Fair Labor
Standards Act, rather than asking DOL to try to use its power
to nibble around the edges.
Congress can improve workers' lives with pending
legislation. Modern workers and businesses are looking to
Congress to bring the Fair Labor Standards Act into the 21st
Century. Three bills that would do that include the Modern
Worker Empowerment Act, which protects the large and growing
number of self-employed workers who wish to remain self-
employed.
Some 72 million Americans are independent workers, and the
vast majority of them prefer to be independent workers instead
of employees. This law would reduce the risks from contacting
with an independent worker and open more opportunities for work
and flexibility for the self-employed worker, by making it
easier for everyone to identify who is an independent
contractor.
I would also recommend that this legislature consider
providing some sort of an opt-in provision for individual
workers who might be interested in becoming independent workers
as well. The Working Families Flexibility Act lets private
sector employers choose comp time instead of overtime pay, just
like government employees can.
The Modern Workers Security Act lets businesses contribute
to affordable benefit accounts for independent workers, without
risking a determination that they misclassified those workers
as independent instead of employees. By protecting access to
benefits, it supports independent workers, while preserving the
flexibility and autonomy of those workers.
In conclusion, the Fair Labor Standards Act was created to
protect workers, but as the economy and country have changed,
many of those protections now block workers from the kinds of
business relationships that they may themselves want. From
benefits workers want, that the Fair Labor Standards Act
prohibits, or relationships workers hope to develop that
trigger Wage and Hour scrutiny.
A revised FLSA would benefit many of today's workers.
Rather than relying on the administrative State to look for
gaps in the statute to create rules that address today's
challenges, Congress can and should act to bring the FLSA into
the 21st Century, promoting employment law systems that
benefits workers, businesses and consumers alike, while helping
our economy to grow.
Thank you, and I am grateful for the opportunity to be here
and happy to answer any questions.
[The Statement of Mr. Wolfson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Mackenzie. Thank you all. Under Committee Rule 9,
we will now question witnesses under the 5-minute rule. I will
recognize myself first, and then our Ranking Member, so again,
I will be recognizing myself right now for 5 minutes.
My three questions go to Ms. Boughan, Mr. Wolfson and Mr.
McCutchen, or Ms. McCutchen in that order. Ms. Boughan, you
talked about seeking clarity, consistency and compliance,
making compliance easier. The 2024 Overtime Rule had a negative
impact on each of those things though.
As an H.R. Director, I would love to hear your experience
performing your duties, and can you describe the challenges
that a small bank like yours would face if the Federal
Government were to finalize an overtime standard that caused a
large number of your workers to lose their exempt status?
Ms. Boughan. Thank you, Mr. Chairman. Sure. In my bank I
have about 101 employees, and funny enough, 3 years ago before
they hired me, the bank did not have a dedicated H.R. staff.
These types of issues, if overtime thresholds change, would
actually roll up to the Corporate Secretary and President of
the bank.
They are not, you know, they do not have formal education,
they are not formally trained in, you know, H.R. things. They
use an outside legal counsel, which surely, they would have
gotten the update and made the appropriate changes. I am
mentioning that because so many small employers, they often are
relying on an office manager to make these decisions.
Are we counting on them to make the right call? I hope that
helped answer your question.
Chairman Mackenzie. Absolutely. Thank you. Mr. Wolfson, BLS
reported in November that 80 percent of independent contractors
preferred their current work arrangement to actually being an
employee.
In my home State of Pennsylvania, we have seen bipartisan
support for a program around portable benefits, a pilot program
being offered by DoorDash. This program allows independent
contractors across the Commonwealth to access health,
retirement, paid leave, and other benefits without risking
their independent contractor status.
Do you have any recommendations on how this Committee could
increase access to portable benefits without triggering any
unwanted worker classification changes?
Mr. Wolfson. Thank you, Mr. Chairman. Yes, I believe that
the Modern Workers Security Act is a great step in that
direction. It would make it very clear that when a worker wants
to receive that sort of compensation in the form of a portable
benefits payment, and that the business that they are
interacting with on an independent basis, wants to put that
money into the account, that those dollars do not count toward
a determination that that business is in fact their employer,
Under the multi-factor test that the Wage and Hour Division
is currently using under regulation for independent
contracting, providing dollars in the form of a benefit, even
if that is what the worker wants, even if that is what the
business wants, that is one fact that the Wage and Hour
Division could use to determine that a worker is in fact an
employee.
A lot of businesses are afraid to do that because the
worker and the business do not want the employer/employee
relationship, they want an independent relationship, and so
this opens the door for that opportunity. It is something that
Governor Shapiro and the democrats and republicans support
together in Pennsylvania to do, and I think it is a really good
idea for us to take national.
Chairman Mackenzie. Great, thank you. My final question is
for Ms. McCutchen, as is the case with so many laws and
regulations, oftentimes the smallest of businesses are the ones
that are the hardest hit. They just do not have the compliance
ability. They do not have the resources.
In your view, what challenges have small businesses faced
when dealing with FLSA compliance in recent years?
Ms. McCutchen. Well, they do not have lawyers, and they
often do not have H.R. personnel, so they are relying on their
advice generally from their accountants who just do not know
the law. It is not wage theft when they make a mistake, it is
more like forgetting to run one of 50 items through the
automatic checkout at a grocery store. It is an oops.
If they do the oops right now, there is no settlement of
claims, there is no waivers, there is no affirmative defense
like there is under Title 7. What happens is they get hit with
a sudden, huge bill, and it means bankruptcy. I have seen it.
That is my lived experience.
Chairman Mackenzie. All right. Well, thank you to each of
you for those responses to my opening questions. I now
recognize the Ranking Member for the purpose of questioning the
witnesses.
Ms. Omar. Thank you, Mr. Chairman. Due to the relentless
cuts to the Department of Labor's capacity, the agency is
struggling to fully enforce the laws already on the books and
protect the rights of all workers. Thankfully, some laws, such
as the FLSA, provide workers with the right to bring their
claims in Court themselves to recover lost wages, and receive
other remedies.
However, with the rise of forced arbitration agreements,
more and more workers are finding the courthouse doors closed
to them. Mr. Stettner, can you explain how forced arbitration
agreements harm workers, and allow more law-breaking
corporations to evade accountability for labor violations?
Mr. Stettner. Sure. In recent years, forced arbitration
agreements have expanded from business to business, to business
to consumers and workers. That means when someone's rights are
violated, they do not have the same ability to take that claim
to Court and get full restitution, and they are forced to go
into arbitration.
Ms. Omar. President Trumps Project 2025 playbook calls for
eliminating Federal child labor rules that identify which jobs
are too hazardous for children to be allowed to work. Mr.
Stettner, what do you think would be the consequences of
removing rules that limit children from being employed in jobs
that are dangerous workplaces?
Mr. Stettner. You know, the simple answer is more children
will get injured, and maybe even die. There are a list of
occupations that the Fair Labor Standards Act, through its
regulations, based on research from Occupational Safety and
Health, you know, are too dangerous for children.
This is common sense things; operating a saw in a meat
processing plant is an example. Working in a coal mine. These
are things that we do not want children in the 21st Century to
be forced to work in when they should be in school. It will
mean that more children are going to be working at night, and
not being able to, you know, complete their homework.
Unfortunately, we have seen this go in the wrong direction.
Despite many criticisms of what the Biden administration did on
child labor, wanting to enforce more, states are going in the
opposite direction, and we have had 30 states propose changes
to child labor law and eight states actually roll back
protections for children in workplaces that are unsafe.
We should not be going back to the 19th Century, we should
be allowing kids to learn and get the safe work experience as
they build for their own future.
Ms. Omar. Thank you, Mr. Stettner. Mr. Chairman, I request
unanimous consent to add to the record the Project 2025
proposal to weaken Federal child labor rules, and an article
titled ``Trump's Early Actions Mirror Project 2025, the
Blueprint He Once Dismissed.''
Chairman Mackenzie. Without objection.
[The information of Ms. Omar follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ms. Omar. According to the New York Times, the resurgence
of child labor appears to be linked, at least in part, to the
exploitation of migrant children. Mr. Stettner, to what extent
do you think the current administration's approach to
immigration enforcement could affect child labor enforcement?
Mr. Stettner. When you make it harder for immigrants to
work lawfully with status, you are forcing themselves, and
unfortunately, their children to go underground into the
economy and work in dangerous conditions.
Also, you are making a cloak of fear that is impacting
immigrants and their willingness to complain when the law is
being violated, that is enacted to protect them, but they are
so worried about risking their immigration status, you know,
that they will not complain.
Last, if we see a return to policies like family
separation, you are going to be leaving more children isolated
with no other way to support themselves, than working in very
dangerous jobs, for example, cleaning at night in factories
with dangerous chemicals and equipment.
Ms. Omar. Thank you, Mr. Stettner. Mr. Chairman, I hope we
can all agree that children are the biggest assets of our
Nation, and that we will work to make sure child labor is
enforced, and that we are doing everything to protect our
children. I yield back.
Chairman Mackenzie. Thank you. Next, we go to Chairman of
the Full Committee, Mr. Walberg from Michigan.
Mr. Walberg. Thank you, Mr. Chairman. Thank you for this
hearing, and thanks to an excellent Committee for being here.
Mr. Wolfson, 25 years ago the Worker Economic Opportunity Act
amended the Fair Labor Standards Act, to exempt certain types
of equity compensation, such as employee stock options from
inclusion in overtime regular rate calculations.
While this law appropriately exempted many types of
compensation, it did not exempt restricted share units, and
other full value share awards. How should restricted share
units be treated when it comes to calculating overtime pay?
Mr. Wolfson. Thank you, Mr. Chairman. I think that the
concept that I would propose would be that any sort of
compensation that is not based on you have to work this number
of hours to get this amount of pay, should not be calculated as
part of an overtime calculation.
Ultimately, restricted stock options, those should all be
included as items that we want to encourage employers to
provide to their employees and so including them as part of the
overtime pay calculation reduces the likelihood that those
employers are going to provide that to their employees.
I think that we should treat it in the same way that we do
a contribution to a pension plan, or a contribution to a 401K
where we want to encourage employers to do this, and so we are
not going to punish the employer when that worker then does
overtime hours, by making them figure out how much that is
worth to a specific hour of time. We want to encourage those
things, and so I think that that exemption should be much more
broadly applied.
Mr. Walberg. Which benefits with that flexibility employee
in the long run.
Mr. Wolfson. Absolutely, yes it does.
Mr. Walberg. Thank you. Welcome to your daughter as well.
Ms. Boughan, community banks like the one you work for are an
essential tool for small businesses to gain access to capital
they sorely need. Federal regulations often make doing business
more challenging for these banks.
When an employee's classification is changed from exempt to
non-exempt under FLSA. How does that affect payroll processes,
and other H.R. requirements for that employee?
Ms. Boughan. Thank you. As I said in my oral testimony,
some employees actually prefer an exemption because it comes
with certain flexibility and benefits that are perceived by the
employee. When you are having if an overtime threshold is
changed, and you are having to place an employee from exemption
to non-exemption it places, you know, a burden on the
timekeeping system.
Mr. Walberg. Impacts the feelings of the employee himself
or herself as well.
Ms. Boughan. Absolutely. I think that is one thing that I
have seen and felt in the past year. We have had to change
employee exemptions, and sometimes the employee does not quite
understand why the exemptions, in my experience, why the
exemption is being taken away. They feel like a certain career
progression has been taken away from them.
Mr. Walberg. They have been downgraded.
Ms. Boughan. I would agree with that.
Mr. Walberg. Benefits are important, but also perception is
important as well. Thank you. Ms. McCutchen, in your written
testimony you mentioned that the FLSA should allow private
sector employees to choose compensatory time, or comp time,
which is extra paid time off work in lieu of receiving extra
wages for overtime hours worked.
Most government workers--let me State that again, most
government workers are eligible to receive comp time, but FLSA
prohibits the private sector from using comp time. Is this an
oops? I love your technical term. How should a straightforward
change like this benefit workers?
Ms. McCutchen. Well, this is an interesting one because
unions and large employers actually have objected to the many
comp times bills that have been proposed, but employees want
it. They want more paid time off, and that is what you get with
comp time, so this is a--this particular bill is something that
benefits workers.
If you want to benefit workers, you have to allow them to
choose cash, or paid time off, and if you look at any of the--
Forbes, or SHRM recent surveys about the types of benefits
employees today are looking for, paid time off is high on the
list.
Mr. Walberg. That is the benefits of flexibility?
Ms. McCutchen. Absolutely.
Mr. Walberg. It allows them to choose what they feel best
about.
Ms. McCutchen. Right. They could work 4 days a week, and in
a prior week they might have to work 50 hours, and then that--
the next week they can work 30, and that is the type of
flexibility that employees really, really want today.
Mr. Walberg. I love that for opening week of deer season.
Thanks.
Ms. McCutchen. Well, in Pennsylvania, in Hershey where I
worked, we got that first day off.
Mr. Walberg. OK. Well, thank you for your testimony. My
time has expired. I yield back.
Chairman Mackenzie. Thank you. Next, we will go to Mr.
Takano from California.
Mr. Takano. Thank you, Mr. Chair, and thank you to the
witnesses for being here. Mr. Stettner, overtime pay is among
the bedrock protections in the Fair Labor Standards Act. Where
might an unscrupulous employer seek to exploit insufficient
overtime protections? Where, and how might that happen?
Mr. Stettner. You know, what we have seen, you know, with
as we mentioned, the salary tests, and how it is moved around,
you might seek to put someone right that that threshold, and
then you are not paying them time and a half. To the point that
we were saying, you know, around comp time. You know, many--
most Americans in salaried jobs have paid time off. More
workers should have paid time off.
It does not mean you should not be paid overtime for that
week that you work 50 hours a week. Unfortunately, violations
of overtime are the bulk of the damages in the Wage and Hour
Division protects. Just keep working some extra hours to finish
the shift, come in a little bit early to open up off the clock,
all these things can be legal, but pay people the extra that
they are entitled to.
The goal of the law is to keep people working 40 hours a
week, so they can take care of themselves, and take care of
their families.
Mr. Takano. Well, thank you. Let me stress the importance
of overtime pay. Let us take an example of an eligible worker
who works 50 hours a week and makes $36,000 a year. Under the
Obama and Biden overtime thresholds, that worker would get
around $85 back in their pocket every week from overtime pay.
That is over $4,400 a year that could go toward gas,
groceries, rent, and a savings account and other expenses of
everyday life. Mr. Stettner, can you tell me how much that same
worker, making $36,000 a year would make in overtime earnings
under the Trump overtime threshold?
Mr. Stettner. Basically they would make zero in extra
overtime because this flexibility means they are being asked to
work at very low wages, nothing close to support a family, just
because they have been classified, wrongly or rightly, as a
salaried worker.
Mr. Takano. Under President Trump's overtime threshold,
someone making $36,000 a year, which is not enough to live
comfortably in any U.S. State, makes too much to qualify for
overtime pay, so that worker would earn no overtime pay for
additional hours worked. That is what you are saying?
Mr. Stettner. That is correct.
Mr. Takano. Now, Mr. Stettner, how many U.S. workers would
be deemed ineligible for overtime pay under the 2017 Trump
Rule, more or less?
Mr. Stettner. It would have been more than 8 million
workers would have lost either additional overtime pay or would
have lost the protections that would have been afforded to them
with the increase in the threshold.
Mr. Takano. 8 million Americans would have lost any ability
to earn overtime pay, so overtime hours worked would be
uncompensated. 8.2 million workers were left behind once the
Trump administration slashed the salary threshold. On a
national level, that cost Americans 1.2 billion dollars in lost
wages. Mr. Stettner, what did the Trump Overtime Rule mean for
the take home pay of that worker making $36,000?
Mr. Stettner. You are cutting, you know, thousands of
dollars a year, money that that family needed to meet basic
expenses, education, transportation, paying your rent. At least
in my family, that is why people worked overtime, either to
make the bills, or like my brother-in-law, to be able to buy a
boat. We wanted to buy something, put in extra overtime at the
factory.
That is what the union worker wants in America, and that is
what all workers in America should be able to receive.
Mr. Takano. hen it comes to overtime compensation, what is
more meaningful, A, being paid time and a half for hours
worked, or B, being paid, offered compensatory time off?
Mr. Stettner. I think given the choice of being you can
have a day off to go to the game because you want to be with
your son the next week, and getting overtime for the prior
week, people would rather have the money in their pocket, and
the paid time off.
I do not know why in this moment of record American profits
and economic growth for the wealthy, we cannot give people both
their right to overtime pay, and some paid time off.
Mr. Takano. Overtime protections, like other protections on
the FLSA represent the livelihoods of the American workers.
They are not throw away lines to use during campaign speeches
as a gimmick. Americans deserve to be compensated fairly for
their work, not conned out of the wages they earned through
sweat and hard work by billionaires.
After all, it is far harder to work a 50 to 60-hour week to
feed your family, than it is to spend 17 days of your first 3
months on the job golfing, like our President has. I yield
back.
Chairman Mackenzie. Ms. Miller from Illinois.
Ms. Miller. Thank you, Chairman. Ms. McCutchen, there is a
serious shortage of homecare services in this country, thanks
largely to the Obama administrations' 2013 home care
regulation, which removed the long-standing Fair Labor
Standards Act exemption for home care and companion care.
Department of Labor estimated that the cost of home care
services increased 1.6 billion during the 5-years after the
rule went into effect. How can the FLSA work better for those
who require home healthcare services?
Ms. McCutchen. Well, first of all you could reintroduce and
enact the bill that would restore the companionship service
exemption to its original form back when I was Wage and Hour
Administrator in the Bush administration.
This is an incredible, important issue to me. As we age, as
more people retire, it is much better for people to be cared
for in their home than to be institutionalized, but it is
become so expensive that most working families cannot afford
it, if they have to pay overtime in addition to wages that are
between $10 and $15 an hour for most home care workers.
In addition, another problem is that the attack on
independent contractors has really hurt the home care industry,
particularly, for example, in Florida, where most home care
workers are independent contractors, but the Department of
Labor has been attacking their status.
Everything that has been happening in the last 4 years have
just been increasing the cost, and I am afraid that working
families seeking home care will have to go to an underground
economy, hire people that are not employed by an agency that
screens, screens then for past felonies, that provides
insurance, and make sure that the home care worker is safe in
the homes of these families.
Mrs. Miller. Thank you for shedding light on that. Ms.
McCutchen, also as you note in your written testimony, the Fair
Labor Standards Act is nearly an 87-year-old statute that
desperately needs more clarity and simplicity. Can you
elaborate on the differences between the ABC test, and the
common law standard as stated in the Modern Worker Empowerment
Act for determining whether a worker is an employee or an
independent contractor?
Ms. McCutchen. Yes, so I will answer that for both the ABC
test and the current regulations of the Department of Labor.
There is--the proposed legislation is very simple. Who controls
the work of the employee? If it is the worker, then the worker
is an independent contractor. If it is an organization, then
they are the employer.
The ABC test is complicated. Nobody understands it, and
even in California where it was enacted into statute, there are
over 50 exceptions and exemptions to it, and the same thing
with DOL's regulations. There is a last section that says ``oh,
and we'll consider any other factor that we find relevant,''
which makes it impossible from the beginning for people to
understand whether they are independent contractors, or whether
they are employees, and for small businesses to understand that
too.
If they do not understand, if they do not know the rules,
then how can we expect them to get it right? We should not call
it wage theft. We should call it good people trying to follow
the law, but they need to be told what the law is clearly and
simply.
Mrs. Miller. Well, one thing the government does well is
complicate things, and we are excited to be in the majority
now, because we want to deregulate and make things work better.
Mr. Wolfson, survey after survey shows that independent
contractors prefer their current work arrangement to being an
employee.
The Biden administration's attempts to restrict independent
contracting were an affront to independent contractors, who
made their preference clear. What can Congress and the Trump
administration do to support and protect the independent
workforce?
Mr. Wolfson. I think there are three things that the
legislature could look at. One, is as Ms. McCutchen just
mentioned, the Modern Worker Empowerment Act, which goes back
to a standard of who is in control of the business, and making
that the determining factor.
The second as I alluded to in my oral testimony is the
attempt to allow certain workers to just opt-in to independent
contractor status. There were some bills in prior legislatures
that would allow that to happen, where a worker could simply
opt-in and say I am in fact an independent worker. I understand
the risks and benefits of that, and I am going to do that, and
take that to the worker.
The third thing is this Modern Worker Security Act, which
would allow independent workers who, to your point, prefer this
arrangement. Many of them may have been married to someone who
receives other benefits, but maybe they receive a health
savings account with their spouse's employment, and they would
like the business that they work with, maybe they are in
Pennsylvania, and they work for DoorDash.
They would like DoorDash to put some dollars into their
health savings account, and that would allow them to do that
without DoorDash having to count that person as an employee,
and that protects the worker and the business, and allows that
transaction to happen.
Mrs. Miller. Thank you and I yield back.
Chairman Mackenzie. Thank you. Mr. Casar from Texas.
Mr. Casar. Thank you. Just to break down what my colleague
from the Republican majority side of the aisle just advocated
for is this bill they are calling the Modern Worker Act that is
going to help you. Really, at the end of the day, let us break
down what it is the Republican majority wants to do to the
American worker.
They want to make it so that multi-billion-dollar companies
do not have to pay their taxes, instead you, their employee,
has to pay more in taxes. That is what their bill is all about.
The Republican majority's bill that is attacking the labor
standards that we won after the Great Depression, under FDR.
What they want is to say big multi-billion-dollar companies
do not need to pay overtime to you. No. You need to work over
40 hours a week and not get paid anything extra for it. That is
at the end of the day what this bill is all about. You are
going to continue to hear under this Republican majority that
they are for letting you be your own business owner.
If people are indeed independent contractors at small
businesses, we should absolutely support them, and support
that. What they want to do is to make it so that people who are
employees of large corporations can instead be mislabeled as
small business owners.
If you are just an employee being told where to go work,
when to go work, and to just go do your job for a big
corporation, call it a big corporation in big tech, or a big
corporation in big pharma, or big construction company, they
want to be able to say you are your own business, so you pay
the taxes, instead of the big corporation.
They want to say you are your own business, and so you do
not get overtime protections. You just have to labor away until
a job is done and get paid whatever you are told. We should not
buy some of these continued attacks on what workers won in the
1930's. I have seen this happen in my own district where a
group of workers that clearly basically ran all of YouTube
Music, and YouTube is part of Google, wanted to organize into a
union.
What we heard from Google was these are not our workers,
even though this contractor that they work for only exists
because of Google, only exists to run YouTube, but they wanted
to deny their ability, deny these Austin, Texas-based workers
their ability to negotiate for higher wages and higher pay.
Do not buy this stuff about how we are trying to help the
small businesses when really what this bill would do, would
make it so that the American worker cannot negotiate with
gigantic corporations like Google. There are ways that we could
support small businesses and independent workers.
I have spent a lot of time working on how big agriculture
is jacking up prices, not just at the grocery store for the
consumers, but is screwing over small businesses and small
producers all over America.
I have a bill that I thought we could get a lot of
Republican support for because many Republicans, small
ranchers, and small farmers and small producers, and small
processors, were all for it, to say let us take on the gigantic
companies that are paying less and less to small businesses for
their product, and jacking up prices at the grocery store.
You get almost no Republican support for that kind of
proposal. What we are seeing Republican support for is letting
companies off for child labor in that same sector. The Fair
Labor Standards Act should actually be protected and supported
and expanded for the American worker.
What I have heard this whole Committee, I have been
watching it from my office, came down here and watched some of
the testimony from the other side of the aisle just a moment
ago, is all about taking us to pre-1938 labor standards.
That is what is in Project 2025. That is what is being
executed right now, is making it easier to put children on the
cutting room floor to do child labor jobs, not making sure our
kids can have a good education, and making sure their parents
are paid well enough that they do not feel pressure to send
their kids to go work in a factory, or at the meat packing
plant illegally.
We should be talking about giving people more overtime pay,
but the bill that is being advocated for right before I got to
talk here is to deny more and more Americans their own overtime
pay. In the moment where we are talking about taxes here in
Congress, the Republican majority's tax bill is to give
billionaires an enormous tax cut.
You will be hearing lots about it. What people watching at
home have not heard enough about is this bill. This bill that
is being pushed by the Republican majority to make it so that
workers do not get paid for their overtime and then have to pay
tons more in taxes because they get called independent
contractors when they are really employees. Let us not fall for
this scam, let us actually support our small businesses, and
support workers by taking on big monopolies, and making sure
that working people and small businesses get to keep more of
their money in their pockets, not less. Thank you and I yield
back.
Chairman Mackenzie. Mr. Messmer from Indiana.
Mr. Messmer. Thank you, Chairman, and witnesses today. Ms.
McCutchen, you mentioned in your written testimony overtime pay
is based on an employee's regular rate of pay, not their hourly
rate of pay. Unfortunately, regular rate calculations
discourage businesses from offering benefits to employees, such
as childcare, elder care, and dependent care services.
Could you go into more detail into how the Empowering
Employer Child and Elder Care Solutions Act would help?
Ms. McCutchen. It would free employers to provide
childcare. For example, like the DOL does, they actually have
an onsite childcare facility where employees can drop off their
kids, but guess what, they do not pay overtime on the value of
that benefit.
In the private sector you have to, and the complexity is
how do you determine what the hourly value of full-time
childcare is going to be for the employees and have your
payroll system programmed correctly to include that in the
regular rate. By not--and it is not just childcare, right, to
me it is like you really want to help workers pay back their
student loans?
Make a change to that one section, and you can encourage
employers to offer repayment of student loans as a very valued
benefit. This is a change that is great for workers, and I
really, it is the one thing I would really love to see happen
because it is childcare, elder care, college tuition, and
repayment of student loans.
Public transit subsidies, another benefit that Federal
employees get, as you all know, but a private employer cannot
because if they do it, they might get sued, they might have a
huge overtime bill, it is hard to calculate what that overtime
would be, so this is--it has not been changed since 1949, 76
years ago. It is time to recognize that the benefits that we
pay our employees today, and that employees want is very, very
different than in 1949.
Mr. Messmer. Thank you. Are there any other legislative
fixes needed to the FLSA that would stop discouraging
businesses from offering these benefits?
Ms. McCutchen. Well, I would also suggest that we need to
put new provisions in the FLSA to allow businesses who make
mistakes to correct them, to self-audit and self-correct. The
FLSA is different from any other Federal employment law. There
are no affirmative defenses like in Title 7, right?
Let us have an affirmative defense to encourage employers
to have a wage and hour policy, to have complaint procedures,
to investigate those complaints, and to pay back wages when
they are due. Let us bring back that PAID Program, which I used
during the first Trump administration to bring millions of
dollars of back wages to workers under the PAID Program.
Let us allow private settlement of claims, and private
waivers just like under any other Federal employment law. Then
employers would be less scared to make those mistakes.
Mr. Messmer. Thank you. Ms. Boughan, the Biden
administration's Overtime Rule would have cost businesses
roughly 18.8 billion dollars according to an estimate from the
American Action Forum. Those increased compliance costs will
have to come from somewhere within the businesses themselves.
What decisions are businesses forced to make once its large
regulatory burden is enacted at the Federal level?
Ms. Boughan. Thank you, Congressman. I think you know it
can be hard, but you know, one thing you look at every year is
the need for labor, so you can be creative in perhaps getting
more done with less people.
Mr. Messmer. Thank you. Mr. Wolfson, not exempt or hourly
workers often want to participate in professional development
opportunities outside of regular work hours, but FLSA's
compensable time requirements restrict their ability to take
advantage of these opportunities.
Do you believe that non-exempt workers should have the same
ability under the FLSA to attend voluntary training as their
exempt or salary counterparts do?
Mr. Wolfson. Yes, Congressman. I think that the worker who
would like to enhance their skills and upskill, so that they
could move on to additional jobs in their career, should be
encouraged to do so, and many businesses want to train their
workers to do another thing. There might be professional
development opportunities for that worker.
If they are an exempt worker from overtime, then it is
really clear that those workers are doing those activities. To
the Chairman's question earlier, many workers want that status
of being able to move up, but by requiring employers to count
provision of additional training in the off hours, as hours
worked, or even at the training cost as part of the overtime
calculation, businesses are less inclined to offer that. Which
is going to further divide the exempt worker from the non-
exempt worker, and make it harder for that non-exempt worker to
move up in their career in that job.
I think it is really important that the Fair Labor
Standards Act recognize that, and all these changes, recognize
that the employer and the worker do have the opportunity to
negotiate. We want to give the worker the ability to ask for
the things they want, and the employer to provide that if that
is in everyone's best interest.
Mr. Messmer. Thank you. I yield back my time.
Chairman Mackenzie. Thank you, sir. Next up, my fellow
Pennsylvanian, Ms. Lee from Pennsylvania.
Ms. Lee. Thank you, Mr. Chairman. I do want to say that it
is a little interesting of a choice to be holding a hearing on
dismantling protections for equal pay on Equal Pay Day, but we
need Equal Pay Day because wage laws in our country were never
designed to be fair.
From the very beginning they have reflected the choices
that we make, the choices about who we value, whose labor are
fairly paid, and who we leave behind. For generations Black
workers, brown workers, women, and especially Black women, have
been trapped at the bottom of that hierarchy.
We see that clearly in today's economy where the people
holding up entire industries, nursing home aides, restaurant
servers, grocery store workers are often the lowest paid. Those
are overwhelmingly women. These are disproportionately women of
color, and they are working full-time jobs that still do not
cover the rent, food, childcare, their basic needs.
Mr. Stettner, in your testimony you share a report from the
Institute for Women's Policy Research, finding that women
earned about 83 cents on the dollar compared to men. For Black
women, of course, it is closer to 67 cents. For Latinas closer
to 58 cents on the dollar compared to white men.
When we talk about modernizing wage laws, we cannot afford
to leave this context out, as long as skyrocketing corporate
profits and poverty wages exist side by side in our country,
our communities will continue to suffer needlessly. We have
grown accustomed to the idea that some people are bound to be
wealthy, and others are bound to live paycheck by paycheck.
The billionaires in the White House are counting on us
staying accustomed to that idea. This should come as no
surprise given that our country, and my home State of
Pennsylvania, has been stuck at a minimum wage of $7.25 for the
last 16 years. Mr. Stettner, do you believe that $7.25 is
enough for a worker to take care of their families?
Will we ever address the wage inequity if that remains the
Federal wage floor?
Mr. Stettner. The $7.25 minimum wage I think everyone with
common sense can know even a full-time job you will not be able
to support yourself, you know, and most of us cannot even
support a family on that little bit of amount of money per
week.
Ms. Lee. My Democratic colleagues and I have supported
legislation to raise the minimum wage, and institute automatic
increases based on the cost of living. How will those types of
proposals benefit working people?
Mr. Stettner. It means that working people can know each
year, as the price of living goes up, that their wages will go
up. In many parts of the country, January 1st is a celebration
day because states have put indexing in place. Once Congress
does that, we will not have to be debating, and keeping as a
token or a chip, whether the minimum wage for the American
worker goes up each year.
Ms. Lee. Thank you. I can tell you from my time working on
the Fight for 15, that 15 is not enough. We need a wage that
reflects the real cost of living. Workers should not have to
cobble together multiple jobs just to stay afloat. We also need
to talk about the sub-minimum wage.
While Republicans in the House are fighting to give over
4.5 trillion in tax breaks to billionaires and large
corporations, tens of thousands of workers with disabilities
are being paid as little as 25 cents an hour. Mr. Stettner, can
you start by explaining the legal basis of separate treatment
for workers by disability?
Mr. Stettner. Section 14(c) of the FLSA allows people with
disabilities to work in what are called typically sheltered
workplaces. It is the employer that gets to see well, based on
your ability, how much can I pay you? Which is that is why
people have been paid as little as 25 cents per hour.
Only certain workplaces are allowed to operate in this way
under Section 14(c) through certificates. People with
disabilities do not want to work in segregated workplaces. They
want to live and work in their community. That is why the
number of certificates have gone down each year to just only
about 500 across the country, and many states are already
outlawing this practice.
The Department of Labor has done the right step. We have
issued a proposed rule to cease issuing anymore certificates,
and the idea that the Trump administration will not follow
through and rather would say let us put more workers with
disabilities in this discriminatory environment in 2025 is
something that is hard to contemplate.
Ms. Lee. Thank you. Just in the interest of time, I think
there is so much more that we can talk about. The sub-minimum
wage, right? Separate from the wages for those workers with
disabilities, but those workers who work in service industries,
restaurant workers, folks who we know live off of tipped wages
where they see their employer able to shift the burden to the
consumer, but we also know that those jobs are more likely to
come with sexual and workplace harassments.
We have not talked about the benefits cliff where we know
so many folks who work for lower wages, recognize the simple
math that if they get too little of an increase, but not
enough, then they would lose the benefits that keep them in
their homes, or keep them with healthcare.
Those are all issues that we have to take much more
seriously, so I thank you all so much for your time, and for
allowing me to join today and I yield back.
Chairman Mackenzie. Mr. Grothman from Wisconsin.
Mr. Grothman. Thank you. Interesting point, and in addition
to pointing out the benefits cliff, the current welfare
programs discourage people from working, and I guess because
some people like depending on the government. We should also
point out that they strongly discourage people from getting
married because obviously if you are a single parent, and you
marry somebody with an average income, all of a sudden you are
no longer in poverty, and you could lose $25,000 a year in
benefits.
I guess I will ask you guys, that is not exactly the topic,
but since it was brought up, is there a strong marriage penalty
in society that causes people to perhaps not want to be married
and lose all their Federal benefits? Would either Ms. Boughan
or Ms. McCutchen care to tackle that?
Ms. Boughan. Thank you, Congressman. That is something I
have not really thought too much about, so I probably cannot
answer in detail.
Mr. Grothman. OK. Well, we will just go with common sense
here, right? When you have a bag full of $30,000 worth of
benefits, daycare benefits, free and low income housing, free
food stamps, earned income tax credit or what not, and you get
married and you are no longer eligible for those benefits, do
you think it causes less marriages in our society? There is
like a $25,000 penalty for being married.
Ms. McCutchen. Let me take that up. Absolutely, and this
particularly goes to, and it is very similar with Section 14,
which by the way is in the FLSA, so the DOL cannot just write
it out to the FLSA because they are not Congress. When I was
wage and hour administrator, and I recovered back wages for
14(c) violations, the families came to me and say, we do not
want all these back wages in one lump sum, because we are going
to lose other Federal and State benefits if our son or daughter
gets that huge chunk of back wages.
Getting rid of 14(c) and other things in the Federal, can
discourage work and marriage.
Mr. Grothman. Yes, yes. Now, Mr. Stettner, I am kind of
appalled at your hostility toward 14(c). People here
understand, if you have certain disabilities, spina bifida,
down syndrome, quadriplegic even, in order to give you the
benefit of work, and make a little extra money, usually these
people are on SSI for most of their income, they are allowed to
work for under minimum wage, OK?
I wondered--and I love to tour these facilities. It makes
you feel really good to see these incredibly happy people who
at first blush how life has dealt kind of a tough situation,
but they are working for 2 bucks an hour, or 3 bucks an hour,
enough to buy--to work on their own, enough to be like their
siblings, have a job, maybe buy some clothes, buy some gifts
for people, what have you.
How many 14(c) certificate like workplaces have you seen in
the last few years?
Mr. Stettner. As a President of the Autism Society of
America of Maryland, taking care of my daughter who has autism,
what we have done is we have helped people with autism get good
jobs in the community, working in a manufacturing plant,
working in a defense intelligence agency in Northrop Grumman.
We can do better in 2025 than segregating people with
disabilities into shelter workplaces. Let us do better with
things like the Transition to Integrated Employment Act, which
would allow states and communities to give the supports,
coaching and otherwise, so people can actually work in their
own local restaurants, their own local bakeries where I buy my
baked goods.
They do not need to be in segregated workplaces.
Mr. Grothman. OK. What I am asking is have you talked to
these folks? Whenever I tour my facilities that take advantage
of 14(c) I am always impressed on how happy the people are who
are there. They are able to work there for an extended period
of time, and establish new friendships, which is also important
for these people.
Frequently, if you are that disabled, your parents have to
worry are you going to have any friends outside your parents.
Here you have friends that last for years and years and years.
Do you feel, and there are people who can work in a goal of
all these workshops is to have people work outside, but some
people can, and some people cannot. That would be obvious to
anybody who toured them that the vast majority of people here
are happy. The vast majority of the people working on the
floor, probably could not find somewhere to work in the
community.
Again, I will ask you, have you specifically touring these
places to talk to the employees to see whether they are happy
or unhappy?
Mr. Stettner. Most people with disabilities and their
parents want them to work, and a tribute to themselves.
Mr. Grothman. I will just cut you off, I am out of time,
but that is just plain not true.
Chairman Mackenzie. Mr. Kiley from California.
Mr. Kiley. Thank you, Mr. Chair. Mr. Wolfson, you have done
some outstanding work on supporting independent workers,
freelancers who comprise about a third of the American
population at this point. That number is fairly likely to grow.
I think it is very important that right now we take
advantage of the opportunity to put protections for independent
workers into statute, which is why I introduced the Modern
Worker Empowerment Act, Modern Worker Security Act, which I
know you mentioned in your introduction.
Before getting into that though, would you mind just giving
us a brief recap of the effect that the attacks on independent
workers have had in California with AB5 as your institute has
shown, and then the threat posed by the Biden administration's
effort to sort of mimic that legislation?
Mr. Wolfson. Mr. Chairman, thank you. I think the key thing
to remember is after California passed AB5, a number of
businesses, including businesses that no one would consider the
businesses that, you know, Mr. Zaydar is calling, they are
abusing their workers.
The New York Times told photographers, freelance writers in
California, that they would not work with them anymore because
they did not want to have to provide the benefits that
California was going to require them to provide those workers
for just a small amount of work.
People in the film industry, people in lots of industries
who were making significant sums of money lost their positions,
and so people in your district were losing their jobs, truckers
were told you are no longer going to be allowed to move
products from the ports out of the ports, including when we had
massive port challenges of moving goods during COVID.
We had people who were unable to move those goods because
those workers knew the risks and the benefits that they were
taking upon themselves in starting the business. Then
California's legislature came in, and they said we are not
going to allow you to make that decision anymore.
We are going to protect you from yourself. We are going to
protect you from making money because we think we know better
what your relationship with that other business ought to look
like. The reality is we do not do that in most places in
America. We wouldallow an individual who wants to contract with
someone to do work at their house, to hire who they choose to
work with, and to come to an arrangement for how much that is
going to cost.
If suddenly, anybody who is coming to do HVAC work at my
house, I had to provide them--I was legally required to provide
them with the same employee benefits that workers who worked
with me at the Cicero Institute receive from our organization,
that would change the entire calculus of how much I am willing
to pay them, what I am willing to pay them, what I am willing
to do.
We need to allow people to have those interactions, and so
I thank you for proposing those bills. I think both of those
bills will go a long way toward helping workers in states
across the country who want to be independent workers, to be
able to be independent workers to work with those businesses
and not discourage those businesses from hiring them.
Mr. Kiley. Absolutely. One of the bills seeks to actually
provide a clear, sort of common law-based standard for being an
independent worker, which is what has prevailed in this country
for a very long time.
You know, that of course, the Trump administration had a
similar standard in its first instantiation, which this
legislation essentially seeks to restore, but to do so in a
durable way, so that we do not have the uncertainty that comes
with the new administration coming in, potentially changing the
rules.
Then the other bill deals with this topic of portable
benefits that you have written a lot about, so could you just
tell us a little more about what those are, and why under
current law sometimes employers, or I should say, hiring
entities, are discouraged from offering them to independent
workers?
Mr. Wolfson. Yes, so as Ms. McCutchen mentioned, one of the
factors at the very end of the Wage and Hour Division's rule on
independent contracting, that is the current regulation. It is
obviously being challenged right now, but the one from the last
administration explicitly says, we can consider whatever
additional factors we want to.
One of the factors that has traditionally been considered
in deciding whether a worker is an employee or not, is whether
there are benefits that are provided to those workers. Your
bill would explicitly say that the mere provision of access to
benefits, if that is the arrangement that the worker and the
higher entity want to do, is not going to be considered as a
factor in determining whether that person is an employee.
I will give you an example. If an individual worker has a
spouse who has, as I mentioned earlier, a health savings
account, or a retirement account, and their employer does not
fill the entire account, but they would prefer to have the tax
preferences of having those dollars put into the health savings
account, maybe they recognized that they can actually save tax
dollars by putting it into the account from the business
directly, and then they do not have any of the business taxes
that Mr. Casar is worried about.
In those circumstances right now, if they put that money--
if the business puts money into the health savings account, so
you have a business in town that asks someone to do computer
repair for them on an independent basis, they put money in that
health savings account. Right now, that could be a factor that
the Labor Department considers employment, even though the
worker will benefit by getting the tax preferences of putting
that money directly into the health savings account.
That is what the portable benefits concept is, it allows
workers to have an arrangement with the hiring entity to put
dollars into those accounts, so that the worker can get the
benefits from those types of retirement, other types of savings
accounts, and the business can interact in the relationship in
the best way that gives both the worker and the business the
relationship that they want.
Mr. Kiley. Yes, it is a total win/win. I mean under current
law the dynamic you describe is sort of a no good deed goes
unpunished, whereas if you want to provide this level of
security and benefits to an independent worker, then that might
cause, you know, the entire relationship to be recharacterized
in a way that is in neither the interest of the hiring entity,
or of the worker.
What we are trying to do is provide a safe harbor to
prevent that from happening. Thanks so much for your work on
this topic, I yield back.
Chairman Mackenzie. Mr. Owens from Utah.
Mr. Owens. Thank you. Ms. McCutchen, in 2018, President
Trump signed an executive order to exempt seasonal outdoor
recreational businesses operating on Federal lands from certain
FLSA requirements, such as overtime. These businesses offer
mostly trips that quickly hit the 40-hour mark to trigger an
overtime requirement.
The executive order stated that unless an exemption was in
place, Federal regulations would threaten to raise
significantly the cost of guided hikes and tours on Federal
lands, preventing many businesses from enjoying this great
experience.
With your background at the Wage and Hour Division and
private practice, can you explain what relief this executive
order provided for these businesses?
Ms. McCutchen. Yes, thank you for the question. There are,
and that was great, but it is also any sort of business that
does tours, whether on Federal lands or not because, you know,
when you are doing an overnight hike, which Americans love to
do. I live now in the foothills of the Great Smoky Mountains.
We love to do those overnight hikes. If you have an
employee who is on Federal land doing those overnight hikes,
you are going to hit over 40 hours very, very quickly because
you are basically on duty 24 hours. A 2-day trip gets you into
overtime, and that means more costs, and that means charging
Americans more to go on those trips.
Again, it is a win/win for America because more people get
to enjoy our national parks and our national lands at a much
lower cost.
Mr. Owens. I would imagine also it negatively impacts a
small business owner trying to run a business because of the
extra cost that is demanded at this point?
Ms. McCutchen. That is what most of these businesses are,
are the small, independent businesses. I was just looking up
the other day to rent an e-bike to go on Cades Cove Drive in
Great Smoky Mountains, on No Car Day, and that is a small
business, right?
The people who are providing this work are small
businesses, who by the way, this gets hooked to the whole wage
theft thing, they do not know that they are violating the law.
If they do not know, and they get hit with the dealing with
investigation or private litigation, they can be bankrupted
because they are just trying--no good deed goes unpunished.
Mr. Owens. I am going to kind of wrap with this one last
statement, but I will just say this. It is time for us now to
truly protect the small business owners. That is where that
powers our middle class, which is where our culture comes from,
so I implore the business owners to take this risk, go out, and
we are going to make sure we do everything we can to protect
them.
Later this spring I will be introducing an Outdoor
Recreational Outfitting and Guiding Act. This would exempt
eligible employees from overtime limits, in order to support
and expand the outdoor tourism industry.
I would encourage more Americans to experience the natural
beauty of our Nation that it has to offer, and this bill will
be a step in the right direction to create a long-term solution
for outfitters and guides, that would have been unfairly
affected by this onerous requirement of the Fair Labor Standard
Act. Thank you Chairman, and I yield back.
Chairman Mackenzie. All right, the Ranking Member of the
Full Committee, Mr. Scott from Virginia.
Mr. Scott. Thank you. Thank you, Mr. Chairman. Mr.
Stettner, a lot has been said about workers wanting to be
independent contractors. Let me just check. If you are an
employee, you get minimum wage. You are entitled to minimum
wage. Is that right?
Mr. Stettner. That is correct.
Mr. Scott. If you are an independent contractor, you are
not?
Mr. Stettner. That is correct.
Mr. Scott. If you are an employee, you are entitled to
overtime, and if you are an independent contractor, you are
not?
Mr. Stettner. That is correct.
Mr. Scott. If you are an employee, if you lose your job
through no fault of your own, you are entitled to unemployment
compensation?
Mr. Stettner. That is correct.
Mr. Scott. If you are an independent contractor, you are
not. If you get hurt on the job, if you are an employee, you
get worker's comp?
Mr. Stettner. That is correct.
Mr. Scott. If you are an independent contractor, you do
not?
Mr. Stettner. That is correct.
Mr. Scott. If you are an employee, your employer pays part
of your Social Security responsibility?
Mr. Stettner. That is correct.
Mr. Scott. If you are an independent contractor, you have
to pay it all yourself?
Mr. Stettner. You pay the whole thing.
Mr. Scott. Your safe workplace under OSHA, you are entitled
to a safe workplace under OSHA if you are an employee. It does
not apply to independent contractors.
Mr. Stettner. For the most case, yes.
Mr. Scott. If some of the--if the employees have health and
pension benefits, if you are an employee, you get those. An
independent contractor you do not.
Mr. Stettner. That is correct.
Mr. Scott. We just heard if you spend hours in training, if
you are an independent contractor you get to volunteer. If you
are an employee, you actually get paid for the time you spent
in that kind of training. Is that right?
Mr. Stettner. That is correct.
Mr. Scott. What are the advantages, so you lose all that,
what are the advantages of being an independent contractor?
Mr. Stettner. You know, no one probably in this Committee
disputes that if you are genuinely in business for yourself to
make profit, you should be an independent contractor. In the
world that I live in, I have seen janitors and said well, you
are conditioned of working to clean this business building in
Boston is to pay for a franchise and get paid less than you
would get paid in the minimum wage.
In the world that I live in, we found dishwashers in a
restaurant in Minnesota who were given the privilege of washing
dishes because they had a business, and that was their skill.
These do not make common sense. What these workers are losing
when we call them businesses, call them independent
contractors, they are losing their right to the minimum wage
and overtime.
Mr. Scott. The employer saves a lot of money when he
misclassifies people as independent contractors. Do workers in
your opinion want to be independent contractors, or are they
relegated to be independent contractors because the businesses
only will hire them if they call themselves, and agree to be,
independent contractors, so the businesses can avoid the costs?
Mr. Stettner. There are just so many myriad of examples of
businesses misclassifying their workers as independent
contractors, and those workers really having no choice, and it
is really to cut corners, and to increase their profits.
Mr. Scott. The Department of Labor is going through
staffing reductions. The Economic Policy Institute suggests
that more than 50 billion dollars could be stolen from workers
through wage theft. What would the impact of reductions at the
Wage and Hour Division have on the ability to recover stolen
wages for workers that have earned them?
Mr. Stettner. We have just about one investigator for every
250,000 workers in the economy. Already DOGE has canceled
leases for offices across the country. That means that the few
investigators that we have are going to have to drive hundreds
of miles to investigate.
They are not going to be there to answer calls from
employers seeking to comply or workers seeking to complain. It
is going to increase the amount of wage theft that goes
unchecked in our economy.
Mr. Scott. We have had headlines about a recent dip in the
stock market, and we also know that under President Biden, the
economy created 16.2 million jobs, a record for a single term,
and more jobs than any Republican President created whether
they served four or 8 years.
Unemployment rate fell. He was the first--President Biden
was the first President on record not to have a single month of
seasonally adjusted job loss. What indicators do you--are you
watching to see if the Trump administration is performing from
an economic perspective?
Mr. Stettner. Well, we are already seeing consumer
sentiment dropping, business sentiment dropping, and we are
waiting for the other shoe to drop, which will be people losing
their jobs with the rising unemployment claims.
Mr. Scott. Thank you, Mr. Chairman, I yield back.
Chairman Mackenzie. Thank you to the Ranking Member of the
Full Committee. I would like to recognize the Ranking Member of
the Subcommittee now for her closing remarks.
Ms. Omar. Thank you, Mr. Chairman. Thank you once again to
our witnesses for speaking with us today. For far too long, the
American economy has not properly served workers who uplift it.
Instead, the wealthy and well-connected benefit from the labor
of millions of working Americans, and now, the ultra-wealthy
oligarchs like Elon Musk are trying to tip the scales even
further in their own favor at the expense of working families.
As we sit here today, Republicans' disastrous economy and
labor policies are threatening the future of millions of
workers across America. DOGE has stripped the Department of
Labor of critical resources and fired countless Federal
workers, and the Department has failed to answer basic
questions to inform us and the American public about the extent
of these cuts.
To top it off, the Trump administration appears poised to
tank the strong economy they inherited. The Fair Labor
Standards Act was written at a time when workers were similarly
threatened. At this critical moment where workers futures hang
in the balance, we absolutely cannot dismantle or diminish the
FLSA, and further strip workers of their protection.
Committee Democrats have a vision for the economy in which
our labor laws deliver for workers. We must build on the FLSA
to increase the minimum wage, combat wage theft, eliminate the
sub-minimum wage, and increase penalties for child labor
violations. I hope that we can continue to have this important
conversation to discuss how Congress can strengthen this
landmark legislation.
The FLSA must always prioritize the health and safety of
workers. Thank you, and I yield back.
Chairman Mackenzie. Thank you to the Ranking Member, and
thank you to all of our witnesses again for taking the time to
join us today with this Subcommittee. This discussion again it
is not only our first Subcommittee Hearing of this Congress,
but it is also just the start of our work to update and
modernize FLSA.
It is an important piece of legislation for employers and
employees all across this country, and we want to continue to
encourage our businesses to do the right thing, make sure that
they can expand and grow right here in the United States of
America by offering good paying jobs, family sustaining wages,
and all of the products and services that so many Americans
enjoy in their daily lives.
This law has not been updated significantly in the way that
it should be for 87 years. We need to do that to help
employees. Employees were devastated during the Biden
administration, with rising inflation that did not keep pace
with wage growth. There was no way that was going to be
possible because inflation was so out of control from the
massive spending that was going on here in Washington, DC.
We all know that employees were devastated by Bidenflation.
What could we do to help our workers? We can innovate. We can
modernize our labor laws to help them. Our Republican members
have put forward a series of legislation that I think is going
to be something that we should really consider to help as we go
forward.
Representative Kiley, he has the Modern Worker Empowerment
Act is one possible option to help clear up worker
classification issues, and clear out decades of litigation and
confusion, which have frustrated both businesses, and workers.
We also have Mr. Messmer's proposed legislation around
Empowering Employer Child and Elder Care Solutions Act.
We know that far too many working families right now are
struggling with the cost of childcare, and elder care as well,
and so this is something that could help potentially in those
situations. Finally, we should also consider codifying programs
at the Department of Labor, such as the Payroll Audit
Independent Determination or PAID Program.
Mr. Grothman's bill, the Ensuring Workers Get Paid Act
could be one potential avenue to pursue. Finally, the topic of
migrant children and all children across our country, making
sure that they are safe is something that was brought up in
this hearing. I could not agree with you more. That is
something that we want to make sure that child labor is stopped
in its tracks here in the United States of America.
For far too long we thought this was a dead issue, only to
see its resurgence during the Biden administration. We saw the
New York Times, as was mentioned, put out a piece that said,
``As Migrant Children We're Put to Work. The U.S. Ignored
Warnings.'' The White House and Federal agencies were
repeatedly alerted to signs of children at risk.
The warnings were ignored or missed. That is what the Biden
administration did to children, and migrant children right here
in the United States of America. A total disgrace. It is up the
Trump administration to clean up that mess of the Biden
administration, and make sure that we protect all workers, all
employers, and most certainly all children in this country.
I want to thank our panelists again for testifying. I would
like to thank everybody who asked questions, and hopefully we
can work together to actually improve the lives of all
Americans throughout this Congress.
Without objection, there will be no further business, and
the Subcommittee stands adjourned. Thank you.
[Whereupon at 11:34 a.m., the Subcommittee on Workforce
Protections was adjourned.]
[Additional submissions from Ranking Member Omar follows:]
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[Additional submissions from Rep. Walberg follows:]
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[Questions and responses submitted for the record by Mr.
Stettner follows:]
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