[Congressional Record Volume 143, Number 22 (Wednesday, February 26, 1997)]
[Extensions of Remarks]
[Pages E317-E318]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 MODERNIZING THE WHITE COLLAR EXEMPTION OF THE FAIR LABOR STANDARDS ACT

                                 ______
                                 

                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                      Wednesday, February 26, 1997

  Mr. PETRI. Mr. Speaker, on February 6, 1997, I introduced a bill, 
H.R. 647, to clarify and modernize the white collar exemption of the 
Fair Labor Standards Act. I hope this bill will receive close attention 
during this session of Congress.
  The Fair Labor Standards Act is intended to protect workers with 
provisions like the minimum wage and the 40-hour workweek. As a result, 
any attempt to tinker with the FLSA is immediately perceived as an 
attack on these basic protections or at least is so portrayed by 
political opponents. It is apparent, however, that after a half century 
of hands-off politics, we are left with a law that is out of step with 
the times and needs improvement.
  Two recent developments have brought the issue to a head. First, 
disgruntled employees have begun to use the FLSA's salary basis

[[Page E318]]

test as a tool for seeking revenge and not for logically distinguishing 
exempt from nonexempt employees. They do this by claiming that anyone 
subject to a pay reduction for taking partial day leave is not paid on 
a salary basis and is therefore entitled to overtime pay, including 
retroactively. The problem would not be so bad if it were limited to a 
few individual overtime awards; but it is not. Instead, seizing upon a 
two-word phrase in the regulations, employees and their attorneys have 
argued that everyone theoretically subject to a technically flawed 
payroll policy is entitled to the same windfall--regardless of whether 
the flaw affected any particular employee's pay. Employers, of course, 
rarely issue separate payroll policies for different groups of exempt 
employees; thus, every employee, up to the top levels of the corporate 
boardroom, becomes an equally viable candidate for a large windfall. 
The potential overtime liability is as enormous as it is irrational.
  Furthermore, the FLSA's duties test is being applied on an 
increasingly arbitrary basis. Concepts like ``discretion and 
independent judgment'' have always been difficult to define. These 
ideas seemed manageable in the era of assembly lines and hierarchical 
management structures, but this has radically changed. Instead, 
technology has diversified job duties, service-based employment has 
proliferated, and even old-line manufacturing operations have moved to 
team management concepts. In this environment, employers can no longer 
rely on cookie-cutter paradigms in making duties judgments. Employers 
often have to guess--and too many are guessing wrong. Even the courts 
struggle to achieve consistency, reaching irreconcilable results in 
cases involving the growing ranks of quasi-professionals such as 
accountants, engineers, insurance adjusters, and journalists.
  The legislation I have introduced addresses these problems in three 
separate ways. First, it restores original understandings of the salary 
basis test by requiring the Department of Labor and the courts to focus 
on actual pay reductions rather than speculation as to potential 
deductions under some nebulous policy. The FLSA still will protect 
exempt employees from inappropriate practices, since regulatory 
provisions denying exempt status for employees experiencing actual 
salary deductions for taking partial day leave would remain unchanged. 
My legislation, however, will prevent employees from using a policy's 
theoretical application to extort huge overtime windfalls for company-
wide classes of highly paid employees who never could have imagined 
themselves as nonexempt laborers.
  Second, my proposal will address perhaps the most confusing and 
indefensible requirement among the FLSA's duties tests: the attempted 
distinction between ``production'' and ``management'' workers. Under 
current regulations, for example, an administrative assistant might 
meet exemption standards simply by opening a management executive's 
mail and deciding who should handle it, because such a job is 
``directly related to management policies or general business 
operations of the employer or the employer's customers.'' On the other 
hand, employees with far more sophisticated, challenging, and lucrative 
jobs may be nonexempt simply because they work on production tasks. The 
regulations reasonably expect an administrative employee to exercise a 
certain level of discretion and independent judgment, and my 
legislation would not alter that requirement. There is no reason to 
think, however, that a production or management label on the object of 
an employee's discretion or judgment has anything to do with that 
employee's professionalism, or the need for FLSA protections. 
Therefore, my bill eliminates the requirement that the employee's 
exercise of discretion and judgment be ``directly related to management 
policies or general business operations of the employer or the 
employer's customers.''

  Finally, my legislation would create an income threshold that 
automatically exempts from FLSA scrutiny the highest paid strata of the 
workforce. This would directly reverse the trend toward questionable 
and irrational overtime awards for highly compensated employees. There 
is no reason that the FLSA, which was passed to protect laborers who 
``toil in factory and on farm,'' and who are ``helpless victims of 
their own bargaining weakness,'' should ever be interpreted to protect 
workers making high five-figure or six-figure incomes. Yet, without 
considering the policy implications, courts are reaching such 
conclusions on an alarmingly frequent basis.
  A worker drawing a large salary must perform some valuable services 
for an employer. Why, then, should that employer have to satisfy a 
complex set of artificial and archaic duties tests to prove that the 
employee is valuable? A worker drawing a large salary also must possess 
considerable bargaining leverage. Why then, should employers be forced, 
regardless of the employee's needs or preferences, to calculate 
paychecks only in the inflexible manner dictated by Government salary 
basis regulations?
  The FLSA, in nearly six decades, has strayed from its laudable goal 
of protecting the poorest and weakest laborers from workplace abuses. 
The Department of Labor and the courts need to refocus their efforts. 
By directly exempting highly paid employees and by making long overdue 
adjustments to the salary and duties tests, my proposal goes a long way 
toward providing this new direction.

                          ____________________