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House Committee Holds Hearing on DOL’s Overtime Proposal

overtimeOn July 23, the House Education and the Workforce Subcommittee on Workforce Protections held a hearing entitled “Examining the Costs and Consequences of the Administration’s Overtime Proposal.” At the hearing, members of the subcommittee and witnesses discussed the impact of the Department of Labor’s proposed changes to the rules governing federal overtime regulations under the Fair Labor Standards Act (FLSA). Witnesses testified on the possible impact of the proposal on workplace opportunity and flexibility for workers and budgets and operations for nonprofits, businesses and other employers.

DOL’s proposal would more than double the minimum salary requirement for overtime pay exemptions from $445/week to $970/week in 2016 when the final rule is likely to come into full effect. The department also has proposed automatic annual increases to the minimum salary threshold and requested comments on whether it should make changes to the duties test.

Both sides of the aisle are taking the issue very seriously; every member of the subcommittee as well as the full committee’s chairman, John Kline (R-MN), and ranking member Bobby Scott (D-VA), attended the hearing to listen to and question the four witnesses. Elizabeth Hays, director of human resources at MHY Family Services, a nonprofit organization serving at-risk youth, testifying on behalf of the Society for Human Resource Management, touted the FLSA for its pivotal and foundational role in establishing fundamental rights for the American worker and the guidance it provides employers in protecting those rights. However, Hays noted that the dramatic raise in the salary threshold had the very real potential to force MHY to close its doors, which have been open to at-risk youth since 1948. Specifically, she reported that the changes could create a 9 percent increase in costs that the nonprofit organization cannot fund.

Hays’ concerns were echoed by Eric Williams, chief operating officer of CKE Restaurants and owner of several franchised establishments, as he recounted to the committee his own story of the American dream. He explained how, through perseverance, hard work and management training opportunities, he worked his way up from a non-exempt crew member at a fast-food restaurant to the position he is in today. Of note in Williams testimony was that his career progression accelerated as he was promoted from an hourly, non-exempt employee to an exempt managerial position, where he could work the necessary hours to create a successful franchise and attend pivotal management training initiatives crucial for his career progression to the top — an opportunity that was not afforded to him while his hours were limited to 40 per week.

He testified that the proposed overtime regulations would negatively impact economic opportunity, job creation and worker productivity by requiring many of his salaried managers, who earn an average salary of $45,000 annually plus a performance-based bonus, to be put back on the clock and in so doing, hinder their ability to work their way up to a general manager position.

The Honorable Tammy D. McCutchen, the former DOL Wage and Hour administrator who penned the 2004 FLSA regulations, also served as a witness, testifying on behalf of the U.S. Chamber of Commerce.  She noted that the need to update the minimum salary threshold was long overdue but also shed light on the complicated process such an update entails. She pointed out DOL’s failure, in the current proposal, to factor in the effects such an unprecedented raise will have on lower wage regions and industries within the U.S. McCutchen stressed that the purpose, as has been consistently stated by DOL and by Congress, of implementing a minimum salary threshold is to screen out the obviously non-exempt employees and not to impose a minimum hourly wage, thus “DOL should not set the level so high that it expands the number of employees eligible for overtime beyond what Congress envisioned when it created the exemptions.”

In contrast, the final witness, Highlighting the decrease of overtime rights over the last four decades and emphasizing the importance of the proposal to middle-class workers and their families, Eisenbrey stated that “the federal government should be using every tool at its disposal to help lift the wages of America’s middle class” and that “raising the salary threshold … is an action entirely within the administration’s authority, one that can both lift wages and free up time for overworked middle-class Americans.”

DOL will be collecting comments on the proposed FLSA changes until September 4. However, CUPA-HR, and many in the employer community, have requested an extension of the comment period to provide us more time to collect data on the impact the changes would have and provide detailed comments. It is unclear whether or not DOL will grant an extension.

In order to help us craft our comments, CUPA-HR recently sent out a survey to its members to collect data and specifics on the impact the proposed changes would have on their institutions. We will be collecting survey responses through August 5.

 

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