[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]









                     THE ADMINISTRATION'S OVERTIME
                     RULE AND ITS CONSEQUENCES FOR
                     WORKERS, STUDENTS, NONPROFITS,
                          AND SMALL BUSINESSES

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

                                HEARING

                               before the

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

              HEARING HELD IN WASHINGTON, DC, JUNE 9, 2016

                               __________

                           Serial No. 114-51

                               __________

  Printed for the use of the Committee on Education and the Workforce

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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California              Ranking Member
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Joe Courtney, Connecticut
Brett Guthrie, Kentucky              Marcia L. Fudge, Ohio
Todd Rokita, Indiana                 Jared Polis, Colorado
Lou Barletta, Pennsylvania           Gregorio Kilili Camacho Sablan,
Joseph J. Heck, Nevada                 Northern Mariana Islands
Luke Messer, Indiana                 Frederica S. Wilson, Florida
Bradley Byrne, Alabama               Suzanne Bonamici, Oregon
David Brat, Virginia                 Mark Pocan, Wisconsin
Buddy Carter, Georgia                Mark Takano, California
Michael D. Bishop, Michigan          Hakeem S. Jeffries, New York
Glenn Grothman, Wisconsin            Katherine M. Clark, Massachusetts
Steve Russell, Oklahoma              Alma S. Adams, North Carolina
Carlos Curbelo, Florida              Mark DeSaulnier, California
Elise Stefanik, New York
Rick Allen, Georgia

                    Juliane Sullivan, Staff Director
                 Denise Forte, Minority Staff Director
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on June 9, 2016.....................................     1

Statement of Members:
    Kline, Hon. John, Chairman, Committee on Education and the 
      Workforce..................................................     1
        Prepared statement of....................................     2
    Scott, Hon. Robert C. ``Bobby'', Ranking Member, Committee on 
      Education and the Workforce................................     5
        Prepared statement of....................................     6
     Walberg, Hon. Tim, a Representative in Congress from the 
      state of Michigan..........................................     3
        Prepared statement of....................................     4
     Wilson, Hon. Frederica S., a Representative in Congress from 
      the state of Florida.......................................     7
        Prepared statement of....................................     8

Statement of Witnesses:
    Bernstein, Dr. Jared, Senior Fellow, Center on Budget and 
      Budget Policy Priorities...................................    20
        Prepared statement of....................................    22
    Passantino, Mr. Alexander J., Esq., Partner, Seyfarth Shaw 
      LLP, Washington, D.C.......................................    38
        Prepared statement of....................................    41
    Rounds, General Michael, Associate Vice Provost of Human 
      Resource Management, University of Kansas, Lawrence, KS....    30
        Prepared statement of....................................    32
    Sharby, Ms. Tina, Chief Human Resources Officer, Easter Seals 
      New Hampshire, Manchester, NH..............................     9
        Prepared statement of....................................    12

Additional Submissions:
    Guthrie, Hon. Brett, a Representative in Congress from the 
      State of Kentucky:
        Prepared statement of Dr. William Luckey.................    65
    Hinojosa, Hon. Ruben, a Representative in Congress from the 
      State of Texas:
        Letter from Professors at Colleges and Universities......    94
    Mr. Kline:
        Prepared statement of the Society for Human Resource 
          Management.............................................   114
        Letter from America Association of Colleges of Pharmacy 
          (AACP).................................................   116
        Letter from Consumer Technology Association..............   118
        Letter from Credit Union National Association (CUNA).....   120
        Letter dated June 9, 2016, from College and University 
          Professional Association for Human Resources (cupa-hr).   123
        Prepared statement of Independent Electrical Contractors.   125
        Prepared statement of Independent Insurance Agent........   128
        Prepared statement of National Association of Federal 
          Credit Unions (NAFCU)..................................   131
        Prepared statement of National Association of Home 
          Builders (NAHB)........................................   133
        Prepared statement of National Federation of Independent 
          Business (NFIB)........................................   134
        Letter dated June 6, 2016, from National Multifamily 
          Housing Council (NMHC) and the National Apartment 
          Association (NAA)......................................   136
        Letter dated June 17, 2016, from National Retail 
          Federation (NRF).......................................   137
        Letter dated June 9, 2016, from Partnership To Protect 
          Workplace Opportunity..................................   139
        Letter dated June 9, 2016, from WorldatWork..............   169
    Mr. Scott:
        Economic Policy Institute: Facts on the updated overtime 
          rule...................................................   172
    Takano, Hon. Mark, a Representative in Congress from the 
      State of California:
        Economic Policy Institute: Nonprofit organizations in 
          support of the Department of Labor's new overtime 
          regulations............................................   175
    Questions submitted for the record by Stefanik, Hon. Elise, a 
      Representative in Congress from the State of New York to 
      General Rounds                                                183
    General Rounds response to questions submitted for the record   185

 
                     THE ADMINISTRATION'S OVERTIME
                     RULE AND ITS CONSEQUENCES FOR
                     WORKERS, STUDENTS, NONPROFITS,
                          AND SMALL BUSINESSES

                              ----------                              


                         Thursday, June 9, 2016

                     U.S. House of Representatives

                Committee on Education and the Workforce

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2175, Rayburn House Office Building, Hon. John Kline [Chairman 
of the Committee] presiding.
    Present: Representatives Kline, Wilson of South Carolina, 
Foxx, Roe, Thompson, Walberg, Salmon, Guthrie, Rokita, Heck, 
Messer, Carter, Bishop, Grothman, Curbelo, Stefanik, Allen, 
Scott, Hinojosa, Davis, Courtney, Fudge, Polis, Wilson of 
Florida, Bonamici, Pocan, Takano, Jeffries, Clark, Adams, and 
DeSaulnier.
    Staff Present: Bethany Aronhalt, Press Secretary; Andrew 
Banducci, Workforce Policy Counsel; Janelle Gardner, Coalitions 
and Members Services Coordinator; Ed Gilroy, Director of 
Workforce Policy; Jessica Goodman, Legislative Assistant; 
Callie Harman, Legislative Assistant; Nancy Locke, Chief Clerk; 
John Martin, Professional Staff Member; Dominique McKay, Deputy 
Press Secretary; Brian Newell, Communications Director; Krisann 
Pearce, General Counsel; Molly McLaughlin Salmi, Deputy 
Director of Workforce Policy; Alissa Strawcutter, Deputy Clerk; 
Juliane Sullivan, Staff Director; Olivia Voslow, Staff 
Assistant; Joseph Wheeler, Professional Staff Member; Tylease 
Alli, Minority Clerk/Intern and Fellow Coordinator; Austin 
Barbera, Minority Press Assistant; Pierce Blue, Minority Labor 
Detailee; Denise Forte, Minority Staff Director; Christine 
Godinez, Minority Staff Assistant; Brian Kennedy, Minority 
General Counsel; Kevin McDermott, Minority Senior Labor Policy 
Advisor; Kiara Pesante, Minority Communications Director; Arika 
Trim, Minority Press Secretary; Marni von Wilpert, Minority 
Labor Detailee; and Elizabeth Watson, Minority Director of 
Labor Policy.
    Chairman Kline. A quorum being present, the Committee on 
Education and the Workforce will come to order. I will 
recognize myself for a brief opening comment.
    In July of 2011, Chairman Walberg held a subcommittee 
hearing to examine whether the Fair Labor Standards Act was 
meeting the needs of the twenty-first century workplace. And 
the answer, of course, was a resounding no. We learned the 
rules implementing the law are too complex, bureaucratic, and 
outdated. Trial lawyers profit while workers are denied their 
fair share under a broken regulatory system. That is precisely 
why this Committee, more specifically Republicans on this 
Committee, have repeatedly called for responsible effort to 
streamline and modernize Federal overtime rules.
    Workplaces are more dynamic and innovative than they have 
ever been, and the needs of today's workers are much different 
than for those who worked when the law was written more than 75 
years ago. Workers and employers have a better shot to succeed 
when Federal policies reflect the changing realities of our 
economy.
    The Department of Labor had an opportunity to build 
consensus around a set of responsible reforms that would have 
garnered broad bipartisan support. Yet the Department chose, 
once again, to take an extreme partisan approach that will hurt 
the very people they claim they want to help. This rule will 
disrupt the lives of countless individuals and do nothing to 
remove the regulatory landmines that are harmful to workers and 
employers. That is what small business owners, college and 
university administrators, State and local officials, and heads 
of nonprofit organizations have warned about. But these 
warnings were ignored.
    The Department ignored the voices of those who must 
implement this rule in the workplaces, on their campuses, as 
they serve the needs of people in their communities. Instead, 
the Department listened to the same progressive voices who have 
been wrong for so long about how to address the challenges 
facing working families, the same voices who claimed a 
trillion-dollar stimulus bill would create jobs and deliver a 
strong economy. It didn't. The same voices who claimed the 
government takeover of health care would lower costs and 
protect the health care people liked. It hasn't. The same 
voices now claim this overtime rule will provide a pay raise 
for millions of Americans. It won't.
    The regulatory onslaught under this administration is 
unprecedented. The President and his liberal allies have 
advanced new rules governing retirement advice, health and 
safety, energy, union organizing, Federal contracting, 
financial markets, health care, and wages. Still, there are 
those who can't understand why the economy is anemic or why job 
growth is sluggish or why wages are largely stagnant.
    Now we have an overtime rule that will do more harm than 
good, particularly for lower-income workers and younger 
Americans. Chairman Walberg has led our efforts in this area 
for years, and I--where is Chairman Walberg? Ah, there he is, 
and I will now yield to him the remainder of my time to explain 
in more detail the costs and consequences of this rule.
    [The statement of Chairman Kline follows:]

            Prepared Statement of Hon. John Kline, Chairman 
                Committee on Education and the Workforce

    In July 2011, Chairman Walberg held a subcommittee hearing to 
examine whether the Fair Labor Standards Act was meeting the needs of 
the twenty-first century workplace. The answer was a resounding `no.' 
We learned the rules implementing the law are too complex, 
bureaucratic, and outdated. Trial lawyers profit while workers are 
denied their fair share under a broken regulatory system.
    That is precisely why this committee--more specifically, 
Republicans on this committee-- have repeatedly called for a 
responsible effort to streamline and modernize federal overtime rules. 
Workplaces are more dynamic and innovative than they have ever been, 
and the needs of today's workers are much different than for those who 
worked when the law was written more than 75 years ago. Workers and 
employers have a better shot to succeed when federal policies reflect 
the changing realities of our economy.
    The Department of Labor had an opportunity to build consensus 
around a set of responsible reforms that would have garnered broad, 
bipartisan support. Yet the department chose once again to take an 
extreme, partisan approach that will hurt the very people they claim 
they want to help. This rule will disrupt the lives of countless 
individuals and do nothing to remove the regulatory landmines that are 
harmful to workers and employers.
    That's what small business owners, college and university 
administrators, state and local officials, and heads of nonprofit 
organizations have warned about. But these warnings were ignored. 
That's right--the department ignored the voices of those who must 
implement this rule in their workplaces, on their campuses, and as they 
serve the needs of people in their communities.
    Instead, the department listened to the same progressive voices who 
have been wrong for so long about how to address the challenges facing 
working families. The same voices who claimed a trillion dollar 
``stimulus'' bill would create jobs and deliver a strong economy. It 
didn't. The same voices who claimed a government takeover of health 
care would lower costs and protect the health care people liked. It 
hasn't. Those same voices now claim this overtime rule will provide a 
pay raise for millions of Americans. It won't.
    The regulatory onslaught under this administration is 
unprecedented. The president and his liberal allies have advanced new 
rules governing retirement advice, health and safety, energy, union 
organizing, federal contracting, financial markets, health care, and 
wages. Still there are those who can't understand why the economy is 
anemic, or why job growth is sluggish, or why wages are largely 
stagnant.
    Now we have an overtime rule that will do more harm than good, 
particularly for lower-income workers and younger Americans. Chairman 
Walberg has led our efforts in this area for years, and I would like to 
yield to him to explain in more detail the costly consequences of this 
final rule.
                                 ______
                                 
    Mr. Walberg. I thank you, Mr. Chairman, for recognizing me 
on this. This is an important issue, and we have spent 
significant time on it with the hopes, that someone out there 
dealing with this would listen, and listen to reality. I mean, 
today, I received a copy of a letter sent out by professors and 
nonprofits, none of which who have anything to do, as far as I 
can tell, with establishing a budget and dealing with paying 
people, and making sure institutions continue. And in fact, 
what I see here, professors of theater and others, no wonder we 
have got the problem with misunderstanding what realities are 
and making sure that people have opportunities for expansion, 
opportunities for experience, opportunities for resume 
building, opportunities to do things that happen in America. 
Whew, now that I got all that out of my system, let me go on 
with a statement here.
    Because of this rule, many Americans will soon realize that 
they have fewer job prospects, less flexibility in the 
workplace, and fewer opportunities to climb the economic 
ladder. Thousands of salaried workers will be demoted to hourly 
status. These workers will feel as though they have taken a 
step back in their careers when they are forced to clock their 
hours and they no longer have flexible schedules to balance 
work and family. With this shift, workers will have fewer 
opportunities for on-the-job training and career advancement.
    Last year we heard from Eric Williams, who started his 
career working on the line at a fast food restaurant and then 
climbed the ranks to become an industry executive. He testified 
how the Department's actions will limit the ability of 
hardworking men and women to achieve the same success, and that 
is reality. He also owns businesses now, but it started with 
the opportunity, the opportunity to expand his capabilities. 
Younger Americans in particular will be hurt.
    At a time when rising college costs and student debt are a 
national concern, the administration is pushing a rule that 
will make matters even worse. Colleges and universities 
nationwide, including the University of Michigan in my home 
state, who testified in front of our subcommittee and said, 
``Absolutely. Tuition costs will raise as a result of it.'' Not 
what these professors have stated, who have no responsibility 
for that, but people who have the concerns have indicated 
across the board that tuition will have to increase. They have 
warned this rule forced them to raise tuition and reduce 
services.
    This rule will make it harder for young people to pursue 
their education, and adding insult to injury, it will be even 
harder for them to begin their careers. Nonprofit organizations 
with tight budgets faced similar challenges. Every day in each 
of our districts, these organizations are making a difference 
in the countless lives, whether helping underprivileged youth, 
building good homes for low-income families, or serving the 
needs of individuals with disabilities. We should do everything 
we can to support and encourage these crucial services. But as 
one of our witnesses will testify today, this rule will do the 
exact opposite.
    Finally, Mr. Chairman, as is often the case with the 
administration, this rule creates new hurdles for startups and 
small businesses. Many won't be able to afford this mandate 
even if they wanted to. Some will have no choice but to hold 
back on hiring, lay off workers, or cut back hours. To make 
matters worse, they will continue to confront a confusing 
regulatory maze that encourages costly litigation.
    The bottom line is that this rule hurts the very 
individuals the administration claims it will help. That is why 
I introduced legislation earlier this year along with Senator 
Tim Scott to protect workers, students, nonprofits, and small 
businesses from the rule's harmful consequences. Today's 
hearing is the next step in our efforts. I look forward to our 
discussion and yield back to the Chairman.
    [The statement of Chairman Walberg follows:]

 Prepared Statement of Hon. Tim Walberg, a Representative in Congress 
                       from the state of Michigan

    Thank you, Chairman Kline.
    Because of this rule, many Americans will soon realize they have 
fewer jobs prospects, less flexibility in the workplace, and fewer 
opportunities to climb the economic ladder.
    Thousands of salaried workers will be demoted to hourly status. 
These workers will feel as though they've taken a step back in their 
careers when they're forced to clock their hours, and they'll no longer 
have flexible schedules to balance work and family.
    With this shift, workers will have fewer opportunities for on-the-
job-training and career advancement. Last year, we heard from Eric 
Williams, who started his career working on the line at a fast-food 
restaurant and then climbed the ranks to become an industry executive. 
He testified how the department's action will limit the ability of 
hardworking men and women to achieve the same success.
    Younger Americans in particular will be hurt. At a time when rising 
college costs and student debt are a national concern, the 
administration is pushing a rule that will make matters even worse. 
Colleges and universities nationwide--including the University of 
Michigan in my home state--have warned this rule will force them to 
raise tuition or reduce services. This rule will make it harder for 
young people to pursue their education, and adding insult to injury, it 
will be even harder for them to begin their careers.
    Nonprofit organizations with tight budgets face similar challenges. 
Every day, in each of our districts, these organizations are making a 
difference in countless lives, whether helping underprivileged youth, 
building good homes for low-income families, or serving the needs of 
individuals with disabilities. We should do everything we can to 
support and encourage these crucial services, but as one of our 
witnesses will testify today, this rule will do the exact opposite.
    Finally, as is often the case with the administration, this rule 
creates new hurdles for startups and small businesses. Many won't be 
able to afford this mandate, even if they wanted to. Some will have no 
choice but to hold back on hiring, lay off workers, or cut back hours. 
To make matters worse, they'll continue to confront a confusing 
regulatory maze that encourages costly litigation.
    The bottom line is that this rule hurts the very individuals the 
administration claims it will help. That's why I introduced legislation 
earlier this year, along with Senator Tim Scott, to protect workers, 
students, nonprofits, and small businesses from the rule's harmful 
consequences. Today's hearing is the next step in our efforts. I look 
forward to our discussion and yield back to the chairman.
                                 ______
                                 
    Chairman Kline. The gentleman yields back. I am going to be 
recognizing the Ranking Member Scott for his opening comments, 
and by agreement he will yield part of his time to the Ranking 
Member on the subcommittee, Ms. Wilson. I recognize Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. Mr. Chairman, last 
month the Department of Labor took a long overdue step towards 
addressing income inequality by restoring and strengthening 
overtime protections for millions of Americans. Before too 
long, we have let the bedrock worker protections wither, 
leaving millions of Americans working harder than ever with 
very low pay.
    Some of those changes over the years include, in 1965, CEOs 
earned 20 times the pay of the typical worker. Now they earn 
over 300 times. In 1970s, the Federal minimum wage was equal to 
50 percent of the average hourly worker's pay. Today, minimum 
wage is only about 35 percent of the average hourly worker's 
pay. In 1975, the overtime threshold below which most salaried 
workers are automatically eligible for overtime pay recovers 60 
percent of them were covered. Today, it is only 7 percent.
    Overtime protections in the Fair Labor Standards Act of 
1938 were intended to curve overwork and help create jobs by 
encouraging employers to hire more workers rather than 
overworking the few. But the overtime salary threshold has been 
allowed to erode so badly that today a worker earning less than 
the poverty threshold for a family of four still makes too much 
to be automatically eligible for overtime pay. Congress 
intended that the Fair Labor Standards Act would protect and 
expand the middle class. For too long, the overtime regulations 
were consistent. And for a long time, the overtime regulations 
were consistent with that goal. Between 1938 and 1975, the 
salary threshold was updated seven times, and it was set at a 
meaningful level, initially, and kept pace with changing 
economies. But over the past 40 years, the threshold has only 
been updated once, in 2004, and that increase was far below the 
historical average.
    The Department of Labor's job is to implement laws passed 
by Congress. With this rule, the Department has done its job 
making the Fair Labor Standards Act's overtime protections 
meaningful again. The rule restores the 40 hour work week, 
raising the salary threshold to $913 a week, approximately a 
little over $47,000 a year. This update will make 4.2 million 
workers newly eligible for overtime and strengthen overtime 
protections for 8.9 million more workers. Today, too many 
workers are deemed ``salaried'' and then work 50, 60, or even 
70 hours a week, working their last 10, 20, or 30 hours for no 
pay at all. Yeah, that's right. After they have worked the 
first 40 hours, the additional 10, 20, or 30 hours, as it has 
been said, they have the freedom to work those 10, 20, or 30 
hours. Well, I agree.
    Unfortunately, the interpretation is different because the 
10, 20, or 30 hours extra are worked for free, and I am not 
sure that is the freedom that most workers want. Some of these 
workers wind up earning below the minimum wage when all of 
their work hours are taken into account, and that's wrong. When 
you work extra, you should be paid extra. Instead of forcing 
workers to put in extra hours with no pay, the rule will result 
in some employees getting back some precious time with their 
families, which we know is critical to parents' ability to help 
children thrive. It will also create jobs by putting incentives 
in place for employers to spread work hours to new employees, 
and it will result in part-time employees having the 
opportunity to work additional hours that many want and need.
    Critically, the rule ensures that we will not see 
eligibility for overtime erode so badly again by requiring 
automatic updates for the salary threshold every three years. 
Polls show that 79 percent of Americans agree that it is time 
for our Nation's overtime rules to be updated, and Committee 
Democrats stand with our fellow Americans in welcoming that 
increase.
    I look forward to hearing from the witnesses about this 
role so we can reduce income inequality and strengthen the 
middle class, and I commend the Department of Labor for its 
excellent work on this issue. And I now yield to the ranking 
member of the subcommittee, Ms. Wilson.
    [The statement of Ranking Member Scott follows:]

 Prepared Statement of Hon. Robert C. ``Bobby'' Scott, Ranking Member, 
                Committee on Education and the Workforce

    Thank you, Mr. Chairman.
    Last month the Department of Labor took a long overdue step toward 
addressing the income inequality crisis facing our nation by restoring 
and strengthening overtime protections for millions of Americans.
    For far too long, we have let the bedrock worker protections 
wither-- leaving millions of Americans working harder than ever for 
very low pay.
    In 1965, CEOs earned 20 times the pay of the typical worker. Today 
they earn over 300 times more.
    In the 1970s, the federal minimum wage was equal to 50 percent of 
the average hourly worker's pay. Today the minimum wage is equal to 
only 35 percent of the average hourly worker's pay.
    And in 1975, the overtime threshold below which most salaried 
workers are automatically eligible for overtime pay covered over 60 
percent of salaried workers. Today it covers only 7 percent.
    The overtime protections in the Fair Labor Standards Act of 1938 
were intended to curb overwork and help create jobs by encouraging 
employers to hire more workers, rather than overworking a few. But the 
overtime salary threshold has been allowed to erode so badly that today 
a worker earning less than the poverty threshold for a family of four 
still makes too much to automatically qualify for overtime pay.
    Congress intended the FLSA to protect and expand the middle class. 
And for a long time, the overtime regulations were consistent with that 
goal. Between 1938 and 1975, the salary threshold was updated seven
    times--it was set at a meaningful level initially and kept pace 
with a changing economy. But in the past 40 years, the threshold has 
only been updated once (in 2004) --and that increase was far below the 
historical average.
    The Department of Labor's job is to implement the laws passed by 
Congress. With this rule, the Department has done its job - making the 
Fair Labor Standards Act's overtime protections meaningful again.
    The rule restores the 40-hour workweek by raising the salary 
threshold to $913 per week, or roughly $47,476 per year. This update 
will make 4.2 million workers newly eligible for overtime and 
strengthen overtime protections for 8.9 million more workers.
    Today too many workers are deemed `salaried' and then work 50, 60, 
or even 70 plus hours a week--working the last 10, 20 or 30 hours for 
no pay at all. That's right after they've worked the first 40 hours, 
the additional 10, 20 or 30 hours, as it's been said, they have the 
`freedom' to work those 10, 20 or 30 hours. Well I agree. Unfortunately 
the interpretation is different, because 10, 20 or 30 hours extra hour 
are worked for free. I'm not sure that's the freedom that workers want.
    Some of these workers wind up earning below the minimum wage when 
all of their work hours are taken into account. That is wrong. When you 
work extra, you should get paid extra.
    Instead of forcing workers to put in extra hours for no pay, the 
rule will result in some employees getting back precious time with 
their families, which we know is so critical to parents' ability to 
help children thrive. It will also create jobs by putting incentives in 
place for employers to spread work hours to new employees, and it will 
result in part-time employees having the opportunity to work additional 
hours that many want and need. Critically, the rule ensures that we 
will not see eligibility for overtime erode so badly again by requiring 
automatic updates to the salary threshold every three years.
    Seventy-nine percent of Americans agree that it is time for our 
nation's overtime rules to be updated and Committee Democrats stand 
with our fellow Americans in welcoming this increase.
    I look forward to hearing from our witnesses about how this rule 
can reduce income inequality and strengthen the middle class. And I 
commend the Department of Labor for its excellent work on this 
important issue.
    I now yield to the Ranking Member of the Subcommittee, Mrs. Wilson.
                                 ______
                                 
    Ms. Wilson. Thank you, Ranking Member Scott. The Department 
of Labor's final overtime rule will extend overtime protections 
to 4.2 million Americans, including 330,870 workers in my home 
state of Florida and 101,463 workers in my colleague's state of 
Florida. In addition to extending overtime eligibility to 
millions, this update strengthens overtime protections for 8.9 
million workers who are already eligible for, but are unfairly 
denied, overtime pay.
    Salaried workers are entitled to premium overtime unless 
they both earn above the salary threshold and meet a duties 
test. Unfortunately, too many employers fail to perform a 
duties test, focusing only on the salary threshold which since 
2004 is near poverty wages.
    This focus on salary level alone has left far too many 
employees misclassified as exempt, depriving them of the 
overtime pay they deserve. Since its inception, the salary 
level test was designed to prevent this missed classification 
by screening out workers who were obviously not exempt because 
they failed the job's duties test. But as the salary threshold 
becomes outdated, misclassification becomes more abundant as 
more workers are subject to the duties test. The previous 
salary level only screened out 15 percent of workers who failed 
the duties test. The new rule restores the advocacy of the 
salary threshold, simplifies application, and prevents 
misclassification by making clear that 8.9 million Americans 
who were previously subject to, but failed, the duties test are 
still eligible for overtime pay simply by virtue of their 
salaries.
    I urge my colleagues in the majority to rethink their 
stance on this sensible effort to prevent misclassification. I 
urge them, also, to cosponsor my bill, the Payroll Fraud 
Prevention Act, which would prevent another form of 
misclassification: the misclassification of employees as 
independent contractors, which deprives them of vital wage and 
hour protections. I urge the majority to reconsider its 
position on both of these policies designed to protect workers 
from the misclassification that can deny them their hard-earned 
pay. I yield back.
    [The statement of Ranking Member Wilson follows:]

  Prepared Statement of Hon. Frederica S. Wilson, a Representative in 
                   Congress from the state of Florida

    Thank you, Mr. Chair.
    The Department of Labor's final overtime rule will extend overtime 
protections to 4.2 million Americans, including 330,870 workers in my 
home state of Florida and 101,463 workers in my colleague's state of 
Michigan.
    In addition to extending overtime eligibility to millions, this 
update strengthens overtime protections for 8.9 million workers who are 
already eligible for, but are unfairly denied, overtime pay.
    Salaried workers are entitled to premium overtime unless they both 
earn above the salary threshold and meet a duties test. Unfortunately, 
too many employers fail to perform a duties test, focusing only on the 
salary threshold, which, since 2004, has hovered near poverty wages. 
This focus on salary level alone has left far too many employees 
misclassified as exempt, depriving them of the overtime pay they 
deserve.
    Since its inception, the salary level test was designed to prevent 
this misclassification by screening out workers who were obviously non-
exempt because they failed the job duties test. But as the salary 
threshold becomes outdated, misclassification becomes more abundant as 
more workers are subject to the duties test. The previous salary level 
only screened out 15 percent of workers who failed the duties test.
    The new rule restores the efficacy of the salary threshold, 
simplifies application, and prevents misclassification by making clear 
the 8.9 million Americans who were previously subject to, but failed, 
the duties test are eligible for overtime pay simply by virtue of their 
salaries.
    I urge my colleagues in the majority to rethink their stance on 
this sensible effort to prevent misclassification. I urge them to also 
cosponsor my bill, the Payroll Fraud Prevention Act, which would 
prevent another form of misclassification - the misclassification of 
employees as independent contractors, which deprives them of vital wage 
and hour protections. I urge the majority to reconsider its position on 
both of these policies designed to protect workers from the 
misclassification that can deny them of their hard-earned pay.
    I yield back.
                                 ______
                                 
    Chairman Kline. The gentlelady yields back. Pursuant to 
Committee Rule 7(c), all members will be permitted to submit 
written statements to be included in the permanent hearing 
record, and, without objection, the hearing record will remain 
open for 14 days to allow such statements and other extraneous 
material referenced during the hearing to be submitted for the 
official hearing record. We will now turn to the introductions 
of our distinguished witnesses.
    Miss Tina Sharby is the chief human resources officer with 
Easter Seals New Hampshire, Inc., in Manchester, New Hampshire. 
Additionally, she is currently president of the Manchester Area 
Human Resources Association Board of Directors and a board 
member of the New Hampshire Human Resources State Council.
    Dr. Jared Bernstein is a senior fellow with the Center on 
Budget and Policy Priorities here in Washington, D.C. Dr. 
Bernstein previously served as chief economist and economic 
advisor to Vice President Biden, and was a member of President 
Obama's economic team. Between 1995 and 1996, Dr. Bernstein 
held the post of deputy chief economist at the U.S. Department 
of Labor.
    General Michael Rounds is the associate vice provost of 
human resource management at the University of Kansas, in 
Lawrence, Kansas, where he oversees human resource services for 
more than 10,000 faculty, staff, and student employees on the 
K.U. Lawrence and Edwards campuses. Before joining the 
University of Kansas, General Rounds served as deputy 
superintendent in the Office of District Support for the 
Louisiana Department of Education. He retired from the Army in 
2009 at the rank of brigadier general.
    Mr. Alexander Passantino is a partner with Seyfarth Shaw 
LLP here in Washington, D.C., and leads the D.C. office's Wage 
and Hour Litigation Practice Group, focusing in part on FLSA 
compliance issues. Prior to joining Seyfarth Shaw, Mr. 
Passantino started as deputy and acting administrator of the 
U.S. Department of Labor's Wage and Hour Division from 2006 to 
2009. I would like to ask our witnesses to please raise your 
right hand.
    [Witnesses sworn.]
    Chairman Kline. Let the record reflect the witnesses 
answered in the affirmative. Before I recognize each of you to 
provide your testimony, just a brief reminder of our lighting 
system. We allow five minutes for each witness to provide 
testimony. When you begin, the light will turn green. When one 
minute is left, the light will turn yellow. At the five minute 
mark, the light will turn red, and I would ask you to try to 
wrap up your testimony quickly.
    I am very loathe to gavel down a witness in their 
testimony, but we have got a lot of members here who want to be 
engaged in the discussion. And when we get to members, I will 
remind my colleagues that you will have five minutes. That is 
for the question and answer, folks. And I am not loathe to 
gavel down my colleagues.
    We are ready to start, and I would recognize Miss Sharby 
for five minutes.

TESTIMONY OF TINA SHARBY, CHIEF HUMAN RESOURCES OFFICER, EASTER 
 SEALS NEW HAMPSHIRE, MANCHESTER, NH, TESTIFYING ON BEHALF OF 
           THE SOCIETY FOR HUMAN RESOURCE MANAGEMENT

    Ms. Sharby. Good morning, Chairman Kline and Ranking Member 
Scott. I am Tina Sharby, the chief human resources officer for 
Easter Seals New Hampshire, and I am appearing before you today 
on behalf of the Society for Human Resource Management. I 
appreciate the opportunity to share a little bit about what 
this new overtime rule means for not-for-profits like mine, as 
well as SHRM's reaction to the final regulation.
    In short, Mr. Chairman, while SHRM supports an update to 
the salary threshold, the final overtime rule is too much, too 
fast. The rule will have a far-reaching negative impact on 
Easter Seals New Hampshire, on our dedicated employees, and 
most importantly on some of the most vulnerable members of our 
community. Despite overwhelming input from members of the 
regulated community through the rulemaking process, the 
administration unfortunately missed a real opportunity to put 
forth a rule that works for employers and employees. Not-for-
profit organizations in particular will be disproportionately 
impacted by the rule's dramatic 100 percent increase to the 
salary threshold, and this threshold only escalates since the 
final rule indicates an automatic increase every three years. 
Let me briefly explain my organization.
    Easter Seals New Hampshire is the parent organization to 
Easter Seals Rhode Island, Easter Seals Maine, and Vermont. In 
2015 alone, we assisted over 16,000 individuals and provided 
over $6 million in free and subsidized services. As a not-for-
profit with limited flexibility in the budget, I have serious 
concerns on how I will be able to cover potential overtime 
expenses.
    Most of Easter Seals New Hampshire's funding comes through 
Medicare, Medicaid, and other State and Federal funding 
sources, and funding to these programs is not expected to 
receive any increases anytime soon. We are unable to raise 
prices on products or services to clients to cover these added 
overtime costs. Faced with a doubling of the salary threshold, 
we will have no other option but to drastically reduce the 
services in order to continue to operate.
    A program at significant risk is the Military and Veterans 
Service Care Coordination Program, which provides services 24/7 
for our veterans in emergency situations. Since the program's 
inception, we have responded to over 100 incidents, 
significantly reducing the risk of suicide. Because of the 
potential cost for overtime under the final rules, Easter Seals 
New Hampshire will be forced to limit our ability to provide 
this around-the-clock care and lessen these life-saving support 
services.
    Mr. Chairman, we estimate that the final overtime rule will 
cost Easter Seals $427,000 in the first year alone, but the 
consequences of the rule are not just financial. They also 
impact our employees negatively.
    Consider our care coordinators who are salaried 
professional employees. They respond to care needs whenever a 
service member or veteran needs help. These employees make an 
average of $43,000 a year. This is below the rule's new salary 
threshold, but clearly they conduct exempt tasks such as 
supervising services and overseeing the planning of client 
care. If these care coordinators are reclassified as nonexempt, 
not only will they no longer be able to provide these 
critically needed services around the clock, we will view their 
reclassification as a demotion. In fact, we have calculated 
that a total of 280 employees will need to be reclassified from 
salary to nonexempt status.
    Additionally, during times of crisis, these coordinators 
often work well over 40 hours a week to provide emergency 
client care. When the schedule returns to normal, they will 
take time off to attend other life events. Now, with these 
employees being reclassified, they will be forced to closely 
track every minute in a work week, and less likely will they be 
going to a doctor's appointment and child's soccer games.
    Mr. Chairman, the final rule was clearly a missed 
opportunity to update overtime regulations in a way that works 
for both employers and employees. Throughout the rulemaking 
process, SHRM has supported a measured increase in the salary 
threshold. However, doubling the salary threshold in the 40th 
percentile of weekly earnings presents significant challenges 
for employers like mine.
    Tying the increase to the 40th percentile sharply contrasts 
with historical updates through the salary threshold that 
represented a more reasonable increase and acknowledged 
differences across sectors and in certain areas with lower cost 
of living. SHRM and its members are equally concerned about the 
automatic threshold to increase.
    In closing, Easter Seals, other not-for-profits, SHRM, and 
employers across the country have serious concerns with the 
final overtime rule. That is why SHRM strongly supports the 
Protecting Workplace Advancement and Opportunity Act. The bill 
would nullify the final overtime rule in order to have the 
Department of Labor do a better economic impact analysis before 
issuing new changes to the overtime regulations. SHRM and its 
members look forward to working with the Congress to improve 
the overtime rule in a way that works for both employers and 
employees. Thank you and I welcome your comments.
    [The statement of Ms. Sharby follows:]
    
    
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    Chairman Kline. Dr. Bernstein, you are recognized for five 
minutes.

 TESTIMONY OF JARED BERNSTEIN, SENIOR FELLOW, CENTER ON BUDGET 
            AND POLICY PRIORITIES, WASHINGTON, D.C.

    Mr. Bernstein. Chairman Kline, Ranking Member Scott, thank 
you for the opportunity to testify in this extremely welcome 
update to an essential labor standard. My first point is that 
in our age of high levels of income and wealth and equality, it 
is essential that labor standards first established 75 years 
ago in the Fair Labor Standards Act are updated. By adjusting 
the overtime salary threshold, this new rule does exactly that.
    Second, the blue line in the figure you see there shows 
that this adjustment, while welcome and significant, is but a 
partial adjustment, one that reflects the Department of Labor's 
responsiveness to thousands of comments from stakeholders. Were 
we to fully adjust the threshold for the value it has lost 
since 1975, it would be set at well over a thousand dollars per 
week instead of about $900 per week, which is the 40th 
percentile of the lowest wage region, the South. The new 
threshold will also cover 35 percent of full-time salaried 
workers, a large increase from the 7 percent covered today, but 
a far cry from the 60 percent covered in 1975, as Ranking 
Member Scott pointed out. In other words, this new threshold is 
a reasonable but conservative choice. The U.S. economy is twice 
as productive as it was 40 years ago, and the workforce is much 
more highly educated. I know of no plausible economic reason 
why our labor market cannot maintain a standard that approaches 
what we had back then.
    Third, opposition to the new rule is misguided. Given the 
DOL's thoughtful compromises in only partially updating this 
labor standard, and the new rule's negligible impact on the 
national wage bill, many of the attacks on it amount to nothing 
more than knee-jerk responses from business lobbyists doing 
what they are paid to do: fight the rule regardless of the 
substantive arguments that support it. And while concerns about 
compliance cost, and cost to nonprofits and higher educational 
institutions deserve a response, they too miss the mark.
    On compliance cost, the DOL, at the behest of employers, 
did not change the duties test, which is the most complex part 
of the overtime determination. Since firms should already be in 
compliance with this part of the law, no new compliance costs 
are invoked in this area. In fact, at a recent congressional 
hearing, the witness representing the National Restaurant 
Association conceded this point, admitting that compliance with 
the new rule ``would be an easy transition to make from a 
management and bookkeeping standpoint.''
    The higher threshold actually simplifies firms' compliance 
burden as more workers will be automatically covered, the need 
for the duties test on millions of salary workers is now 
obviated. The DOL also worked hard to accommodate the concerns 
of nonprofit and higher educational institutions. For certain 
Medicaid-funded providers of services for individuals with 
intellectual or developmental disabilities, for example, the 
new rule does not take effect for three years, providing time 
for outreach, technical assistance, and budget adjustment. As 
another example, DOL ensured that future National Research 
Service Award Grants from the NIH will be above the new salary 
threshold.
    It is also important to note that the FLSA contains some 
exemptions for teachers, including professors, adjunct 
instructors, certain coaches, and academic administrative 
personnel, as well as many graduate and undergraduate students. 
The DOL's new guidance even highlights that the Department 
generally ``views graduate and undergraduate students who are 
engaged in research under a faculty member supervision as being 
in an educational relationship and not an employment 
relationship with the school, and thus, not entitled to 
overtime.''
    On the whole, the rule is predicted to increase the total 
payroll of nonprofits and higher education institutions by far 
less than one-tenth of 1 percent. I hope members keep that in 
mind when we listen to some of the heated rhetoric we are 
hearing. Most importantly, these organizations should remember 
that the pay and work-family balance of their workers is no 
less important than the pay and work-family balance of workers 
at for-profit institutions. The whole point of this labor 
standard is to guarantee employees fair workplace conditions, a 
point recently amplified by a group of nonprofits in favor of 
the proposed rule, who wrote, ``Our own workers and the 
families they support also deserve fair compensation and 
greater economic security.'' As these nonprofits argued, 
teaching or working for the public good should not require 
working long, unpaid hours.
    While my fellow witness may argue otherwise, I urge you on 
the Committee to remember that we could just as easily have 
found representatives from the education and nonprofit sectors 
who strongly support the new rule, recognizing its role in 
valuing and respecting their workforces. Those of us who 
purport to care about the public good have the responsibility 
to practice the values we preach. This rule gives an excellent 
opportunity to do just that. Thank you. And I yield back my 
time.
    [The statement of Mr. Bernstein follows:]
    
    
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    Chairman Kline. The gentleman yields back and I thank him 
for it. General Rounds, you are recognized.

TESTIMONY OF GENERAL MICHAEL ROUNDS, ASSOCIATE VICE PROVOST OF 
 HUMAN RESOURCE MANAGEMENT, UNIVERSITY OF KANSAS, LAWRENCE, KS

    Mr. Rounds. Good morning, Chairman Kline, Ranking Member 
Scott, and members of the Committee. Thank you for providing me 
the opportunity to testify on the administration's overtime 
rule that will impact our students, families, and hundreds of 
employees at the University of Kansas.
    When fully implemented, the recent changes to the Fair 
Labor Standards Act will have a significant impact on the 
university. K.U. is a major public research university, and it 
is the flagship institution in the State of Kansas. Like many 
public universities across the country, the percentage of 
university resources that come from public funding sources has 
decreased significantly over the past decade. While university 
leaders agree that an increase to the minimum salary threshold 
is due, an increase of 100 percent at one time in 2016 is 
difficult to absorb without significantly impacting university 
services.
    Many employees on college campuses, including K.U., are 
currently exempt from the overtime pay requirements. To comply 
with the pending increase in the exempt threshold from $23,660 
to $47,476, colleges and universities may increase the salaries 
for a few individuals whose current pay is closest to the new 
threshold, but will need to reclassify the majority of impacted 
employees to hourly status. While in some cases these changes 
are appropriate and would keep with the spirit of the 
legislation, in many instances K.U. is being forced to 
reclassify employees who work in jobs that have always been 
exempt and are well suited to exempt status. It is K.U.'s 
position that this widespread reclassification is to the 
detriment of both our employees and students.
    As a nonprofit and public entity, K.U. is reflective of the 
higher education industry in our inability to absorb the 
increased costs that come with higher salaries for exempt 
employees, expanded overtime payments, and other labor and 
administrative costs associated with transitioning 
traditionally exempt employees into nonexempt status. In the 
face of these costs and challenges, K.U. will ultimately be 
forced to adjust or reduce services, eliminate or consolidate 
positions, or at some point raise tuition, all to the detriment 
of our students. The changes will also increase the costs of, 
and thus inhibit, important research done by the university.
    Unfortunately, due to recent cuts in public funding, the 
university does not have the central funding flexibility to 
apply against the financial impacts of the adjusted overtime 
rule as we enter a new State fiscal year on 1 July. With no 
central fiscal flexibility, K.U. is compelled to pass any 
financial responsibilities for addressing the legislation along 
to our school's department and research centers. Working on 
relatively fixed budgets, each unit has limited options 
available to address the mandated changes. In the short-term, 
the primary impact will be felt in the reduction of services or 
the elimination of positions. Ultimately, our most important 
stakeholder, students, will bear the burden of these 
adjustments.
    As of June 6, 2016, the university has 354 currently exempt 
employees impacted by the revised overtime rule. The projected 
cost to raise these employees to the new annual salary 
threshold is around $3 million. The alternative, if chosen, is 
to switch these employees to a nonexempt status and pay them 
overtime. The projected overtime cost to sustain our current 
level of services is roughly equivalent to the cost to raise 
each employee to the new exempt threshold. Since neither of 
these options are currently financially feasible for any of 
K.U.'s units, it is inevitable that there will be a reduction 
in the services currently being provided by K.U. units, the 
students, as we transition employees from their current exempt 
to nonexempt status without the flexibility of working more 
than 40 hours per work regardless of mission demands.
    The one relatively flexible financial lever that the 
university has to increase revenue is to raise tuition. Tuition 
increases need to be approved by the Kansas Board of Regents 
and are justifiably closely scrutinized. For the upcoming 
fiscal year beginning in July, the window to use a tuition 
increase to help mitigate the impact of the new overtime rule 
in 2016 and 2017 has closed. It is probable, however, that 
tuition will ultimately be pushed higher in future years in 
order to address the enduring impacts of the new overtime rule.
    Due to both the near- and long-term fiscal impacts of the 
new overtime rule, K.U. believes that the Protecting Workplace 
Advancement and Opportunity Act is important legislation 
because it would require a more detailed economic analysis, 
including understanding and mitigating the impacts on higher 
education before these dramatic changes to Federal overtime pay 
requirements are fully implemented at K.U. We appreciate the 
administration's ambitious agenda to promote affordable, high-
quality educational opportunities, expanding access to college, 
and providing the support necessary to drive students to on-
time completion and long-term success. However, the new changes 
to the overtime rule represents a major expense for a public 
university and puts our campus in further financial strain as 
we continue to deal with decreased State funding. There is 
simply no way for universities like K.U. to absorb costs of 
this magnitude without an impact on our academic research and 
outreach missions that will be felt by the public and students 
we serve. Thank you.
    [The statement of Mr. Rounds follows:]
    
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    Chairman Kline. Thank you. Mr. Passantino, you are 
recognized.

TESTIMONY OF ALEXANDER PASSANTINO, PARTNER, SEYFARTH SHAW LLP, 
                        WASHINGTON, D.C.

    Mr. Passantino. Thank you. Chairman Kline, Ranking Member 
Scott, members of the Committee, thank you for the opportunity 
to speak with you today regarding the Department of Labor's 
revisions to the white collar overtime regs. As a partner in 
the Washington, D.C. office of Seyfarth Shaw my practice focus 
is on helping employers comply with FLSA. I spend my days 
providing advice and counsel to employers on things like 
independent contractor status, overtime exemptions, and other 
pay practices. Since the Department announced its revised 
regulations three weeks ago, I have been discussing this issue 
pretty much nonstop with employers, with trade associations, 
with colleagues, and I am pretty sure that my family's been 
subjected to it as well.
    Today, I want to focus and spend the time flagging some of 
the compliance challenges that employers will face in the 
coming months as they decide how to proceed with the revised 
regulations.
    Certainly, a few employers, particularly in some industries 
and in some higher-wage regions of the country, may find that 
all they need to do is decide and flip some switch. For the 
vast majority of employers, however, the revisions require a 
thorough analysis of the costs and benefits associated with 
each of the several options for currently exempt employees 
earning an annual salary between $23,000 and $47,000.
    On the one side, you have the increased costs of the 
increased salaries, not just for the affected employees, but 
for supervisors or for more experienced employees to avoid 
salary compression. On the other hand, we have the impacts of 
converting employees to nonexempt status and is explained in 
more detail in my written testimony.
    Those impacts include: harming the ability of employers to 
provide and employees to take advantage of flexible scheduling 
options, including part-time employment; treating employees in 
the same job classification for the same employer differently 
based on regional cost of living differences; limiting career 
advancement opportunities; decreasing morale for those 
employees who are demoted to nonexempt status, particularly 
where peers in other locations remain exempt; reducing employee 
access to a variety of additional benefits, including incentive 
pay; deterring employers from providing newly reclassified 
employees with mobile devices and remote electronic access, 
further limiting employee flexibility; increasing FLSA 
litigation based on off-the-clock and regular rate of pay 
claims; and introducing a host of legal and operational issues, 
such as increased costs for administration.
    It is important to remember that converting an employee to 
nonexempt status means that the employer must treat the 
employee as nonexempt for all purposes. This means accurately 
tracking time; ensuring compliance with the minimum wage and 
overtime provisions; and, properly computing the regular rate 
of pay for overtime. With respect to tracking time, converting 
employees to nonexempt status means throwing them into a 
regulatory scheme developed for the workplace of a different 
century. It would take them from the 2004 white collar 
exemption regulations and place them under regulations where 
the case is cited or from the 1940s and the 1950s.
    Although in fairness, there is at least one case from 1960s 
cited in those regulations. It uses as examples people who are 
working crossword puzzles and playing checkers while they are 
waiting around on the job; telephone operators who have 
switchboards in their homes. In the modern workplace, the old 
understandings of waiting time, travel time, work time, and 
even workplace are pushed beyond the point of breaking. When 
you are talking about email, working on a laptop from a coffee 
shop, taking a call in the school pickup line, and all the time 
in between whether it is travel or waiting, the current rules 
do not work.
    How does an employer determine what time is paid and what 
time is not? Where do the principles of continuous workday 
begin and end? The answers are not clear. The regulations, 
guidance, and cases provide arguments on virtually every side 
of the issue. And every day employers are sued over the 
seemingly minor bits of time that have not been included in 
employees' hours of work. Yet it is the employer's obligation 
to keep adequate records of the employees' time, not just an 
eight written at the end of the day, every day, but the actual 
hours worked. And failure to do so results in severe 
consequences to employers in litigation.
    Under the existing rules, payments, like bonus payments, 
incentive payments, have to be included in the nonexempt 
employees' regular rate of pay. Sometimes that has to go back 
over the course of a year. Faced with that difficult 
calculation, employers often forego those types of incentive 
payments to nonexempt employees. The issues that I am raising 
now do not include issues related to morale, the get-it-done 
mentality, part-time employment, and even how employers are 
going to pay.
    So, once the employers decide they are going to convert 
someone to nonexempt status, they need to determine how they 
are going to pay, the rate they are going to pay, whether it is 
going to be a salary plus overtime, whether it is going to be 
straight hourly. Once those decisions are made, employers have 
to communicate. They have to craft communications to explain 
this to employees and they need to do it in such a way that has 
the employee understanding that they are still a valued member 
of the team and that they are not diminished in any way because 
they are losing their exempt status. And employers also need to 
craft these communications because the plaintiffs' lawyers have 
already announced that they are on the lookout for new cases 
based on the reclassification.
    On top of that, this process will repeat itself every three 
years as the Department increases the salary automatically 
every three years. In exchange for this, the Department's 
revisions do little to promote the President's directive to 
modernize the regulations. Rather, they are going to place 
large numbers of employees under a regulatory scheme that was 
last updated in the 1960s and is fraught with uncertainty.
    The Department itself is going to issue a Request for 
Information on some of these issues related to how the 
regulatory framework applies to the modern workplace. 
Unfortunately, employers do not have the luxury of waiting for 
the Department to modernize the regulatory scheme. They need to 
be in compliance by December 1 and the clock is ticking.
    Thank you for the opportunity to appear before the 
Committee and I look forward to your questions.
    [The statement of Mr. Passantino follows:]
    
    
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    Chairman Kline. Thank you. I thank all the witnesses. Let 
me start questioning with you, Mr. Passantino, because you are 
kind of on a roll here. You know from your time at Wage and 
Hour that it is time-consuming to create regulations in 
accordance with the Administrative Procedure Act and governing 
law. But the reason Congress established this process is 
because it is so important to offer the public, including 
affected stakeholders, the opportunity to provide commentary 
informing the rulemaking process. Your testimony correctly 
notes that the Department's regulations sets a process 
automatically increasing the salary threshold every three years 
without fulfilling all of the procedural requirements designed 
to produce good rules. Can you take a couple of minutes here 
and explain how dangerous that is and possibly illegal that is 
to establish this process?
    Mr. Passantino. Sure. You know, by eliminating the notice 
and comment rulemaking process for all future salary increase, 
the Department has apparently decided that it doesn't need the 
input of the regulated community. So, historically, it has been 
notice and comment, the Department proposes a salary level. The 
regulated community weighs in, says we think it is too high, we 
think it is too low. And they take those comments under 
consideration and then the final rule comes out with a new 
salary level. In 2004, the salary level proposed was lower than 
the salary level in the final rule. In 2016, the salary level 
proposed was higher than what happened in the final rule. So, 
it can fluctuate in both directions depending on what the 
comments say.
    What the Department has done is said, we do not need to 
hear from the regulated community. We do not need to understand 
what the economic conditions are and how this is going to 
impact anyone who is directly affected by this rule. We are 
just going to update this every three years based on a standard 
that we have identified now in 2016, and we are going to do 
this for eternity.
    I do not believe that complies with the Administrative 
Procedure Act. I think it is sort of a super proposal for 
eternity. It is just we are going to propose this standard for 
all time. Congress has never authorized automatic increases and 
I think it is highly problematic that the Department is doing 
that.
    Chairman Kline. Thank you, sir. I yield back. We will 
recognize Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. Ms. Sharby, did you 
indicate the $265,000 will be the cost to raise all the 
salaries up to the exempt level?
    Ms. Sharby. Yes, that is correct.
    Mr. Scott. So that anybody making from about $23,000 could 
get a raise to over $23,000, everybody between 23 and 47 could 
get to 47 and it would cost you $265,000?
    Ms. Sharby. Correct.
    Mr. Scott. And you would be right back to where you are 
today in terms of dealing with the overtime rule. What is your 
total budget?
    Ms. Sharby. We are very close to a hundred million.
    Mr. Scott. One percent of a hundred million is 1 million 
and you are talking about $265,000?
    Ms. Sharby. That is just in the cost to raise the employees 
to the new salary threshold. That does not take into 
consideration--
    Mr. Scott. Which would put you right back where you are 
today.
    Ms. Sharby. Does not take into consideration the overtime 
costs that will definitely dramatically increase.
    Mr. Scott. No, there would be no overtime because they 
would be exempt. Those employees would be in the same situation 
that they are today in terms of overtime.
    Ms. Sharby. Excuse me. When I gave that number, that is not 
to bring all of our employees up to the new exemption. Those 
are the employees that we feel that we have to bring to the new 
exemption given their level of responsibility. Very many of our 
employees would not be going up to the new salary threshold.
    Mr. Scott. What kind of hours are these employees working 
today?
    Ms. Sharby. It depends on the position.
    Mr. Scott. After they work 40 hours and they are not 
considered exempt over $23,000, what is their hourly rate of 
pay after the 40 hours today?
    Ms. Sharby. I could not answer that.
    Mr. Scott. Zero. Is that right, Dr. Bernstein?
    Mr. Bernstein. Yeah, that is right. I mean, these workers 
are not being paid overtime, so any hour worked after 40 hours 
under current conditions before the new rule goes into effect 
is paid zero.
    Mr. Scott. Not time and a half. Not straight time.
    Mr. Bernstein. No, these workers are paid for 40 hours. Any 
overtime they are working is not covered. These are workers who 
are deemed exempt by dent of their salaries or their duties 
and, therefore, they are not paid for overtime. So, any hour of 
overtime work is paid zero.
    Mr. Scott. And so if you have a full-time employee who has 
already worked 40 hours and a part-time hourly worker who has 
worked 20 hours and you got to get 10 more hours of work done, 
if you lay it on the 40-hour full-time worker, how much does it 
cost you?
    Mr. Bernstein. Well, it costs you--
    Mr. Scott. If they are exempt for this.
    Mr. Bernstein. It costs you, under the new rule, it will 
cost you time and a half and I think the--
    Mr. Scott. And under the present law, what would it cost?
    Mr. Bernstein. It would cost you zero under the present 
law.
    Mr. Scott. And if you did it to the part-time worker, you 
would actually have to pay for the 10 hours.
    Mr. Bernstein. Well, that is right, but I think one of the 
points, if I may, Ranking Member Scott, one of the points you 
are getting at here is something that I think is very important 
for my colleagues on the witness stand to consider because I 
don't think they have by dint of their testimony, which is that 
there are various other ways that the increased threshold can 
be absorbed other than taking people up to the top salary cap.
    My colleague from the University of Kansas suggested that 
everyone will have to be taken up to the salary cap, but, of 
course, as you just pointed out, you can take workers who are 
working part-time, increase their hours as long as they remain 
below 40, there is no change to payroll. There is no change to 
payroll based on the overtime change. In other words, they are 
under 40, so they are not getting time and a half. They would 
be working more hours and they would have to be paid more 
straight time.
    There are various other absorption mechanisms. You can 
create more jobs at straight time. That is another way to avoid 
the overtime threshold and I actually think that is a very 
positive development. Various analyses, including, by the way, 
the National Retail Federation, which testified here, suggested 
that the new role would create over a hundred thousand jobs 
through this mechanism. Employers avoid paying the overtime by 
creating straight-time employment.
    Mr. Scott. And Mr. Rounds, did you say in your testimony 
that you could raise everybody from under 47 that's making more 
than 23 up to 47 to get them back to exempt for about $3 
million?
    Mr. Rounds. Ranking Member Scott, we have 354 members as of 
today who are under the new threshold.
    Mr. Scott. And you can get to the 47--
    Mr. Rounds. And that cost us about $3 million.
    Mr. Scott. About 3 million. What's your total budget?
    Mr. Rounds. I don't have the university--
    Mr. Scott. Over a billion?
    Mr. Rounds. It's over a billion dollars.
    Mr. Scott. One percent of a billion is about 10 million?
    Mr. Rounds. Yes.
    Mr. Scott. What does your basketball coach make?
    Mr. Rounds. The basketball coach, which is Mr. Bill South, 
is not a State employer and, therefore, I don't have his 
salary.
    Chairman Kline. And the gentleman's time has expired. Mr. 
Wilson?
    Mr. Wilson. Thank you, Mr. Chairman, and thank each of you 
for being here today. Ms. Sharby, I really appreciate your 
service. Easter Seals makes a difference around our country for 
so many people, so thank you for what you do. I'm also very 
grateful that I have four sons that have participated in the 
Boy Scouts of America and with the extraordinary encouragement 
of my wife, all four of them are Eagle Scouts.
    During a recent discussion with the Indian Wars Council 
Scout Executives, I was informed by the negative impact that 
the regulation will have on the Boy Scouts in South Carolina, 
which makes such an important difference of the lives of the 
young people of our State. Can you expand on the impact this 
regulation will have on the quality and quantity of services 
that nonprofit organizations will be able to provide families?
    Ms. Sharby. Yes, I can. Currently, Easter Seals relies on 
level funding at best. Usually we are forcing cuts in our 
budget and we are going to have to consider how we are going to 
be able to continue these services. As I mentioned earlier, we 
provide free and subsidized services. So that is going to be an 
area where we are going to have to pay particular attention due 
to the lack of funding.
    In addition, it takes a long time to develop a relationship 
between the staff member and the person who is receiving 
services. It is not as simple as saying, okay, we will hire a 
new staff member to come in and pick up the responsibilities. 
In the state of New Hampshire with the 2.6 percent unemployment 
rate, bring them on. I have 150 staff vacancies. If you have 
people that you can send to me that are qualified to work for 
Easter Seals, I would be happy to interview them, but that is 
just simply not the case.
    So, our employees come to work for us because they believe 
in the mission. They do not necessarily come for the salary. 
They want to be paid a fair salary. I totally support that, but 
they come for the mission to make a difference in the lives of 
the individuals that they serve. And now, we are creating a 
situation where they are not going to have the flexibility to 
do the things that they feel are necessary in order to provide 
this quality.
    Mr. Wilson. And indeed, you and your staff are making a 
difference.
    General Rounds, over the past several months, I've had the 
opportunity to speak with many colleges and universities 
throughout the state of South Carolina regarding the impact of 
the Department of Labor's overtime rule. At South Carolina's 
flagship university, the University of South Carolina, this 
rule will affect nearly a thousand employees, cost the 
university over a million dollars a year to comply, which I 
believe could lead to destroying jobs. In a time when 
universities are facing a decrease in State funding and 
students are facing rising tuition costs, can you speak on the 
ultimate impact this burdensome and expensive overtime 
regulation will have on faculty students and programs?
    Mr. Rounds. Thank you, Congressman Wilson. As you 
mentioned, it does have an impact on our ability to provide the 
same type of response for many of the employees who are 
impacted. As you know, universities are not 9:00 to 5:00 
organizations. Their cultures are responsive to our primary 
stakeholders who are students and many of the employees who are 
affected by this are employees who are directly engaged with 
students on a regular basis and if we try and force them into a 
9:00 to 5:00 box, it will make it very difficult for them to 
provide the same services and maintain the same culture we 
currently have at K.U.
    Mr. Wilson. And I have seen it personally. I have a dear 
neighbor who is a tennis coach and she sees this as 
catastrophic to her ability to work with the students at the 
college that she teaches.
    Mr. Passantino, there was recently an article in the Los 
Angeles Times where the millennial generation is most likely 
the generation that would like to change careers, give up 
promotion opportunities, move their family to another place for 
flexibility. What kind of impact will this have on businesses 
that do provide flexible alternatives for persons who use 
laptops and smartphones?
    Mr. Passantino. I think the most significant piece for 
those employees who are reclassified as nonexempt, so who are 
below the threshold and the employer decides not to bring them 
up to the new threshold. It is going to be difficult for the 
employers to continue to provide them with those opportunities. 
Whether a particular time is compensable, paid under the act, 
depends on a lot of facts and circumstances, but there are 
principles that have been in place for a very long time that 
simply do not apply when you have someone starts in the office, 
goes to a coffee shop, heads off to a softball game, works at 
home. They do not apply in the same way as they do in the more 
traditional workplace.
    Chairman Kline. Thank you very much. Speaking of 
basketball, Mr. Courtney, you are recognized.
    Mr. Courtney. Thank you, Mr. Chairman, and thank you to the 
witnesses for being here today. Again, I think I want to follow 
up on a point Mr. Scott was making in terms of trying to, you 
know, step back and look at this from sort of a total global 
standpoint in terms of the impact of this rule.
    Dr. Bernstein, on page five of your testimony, you 
mentioned what the actual impact on the Nation's Wage Bill is 
going to be and, again, I don't know if you have it at your 
fingertips, but I'll let you, again, underscore that point.
    Mr. Bernstein. Thank you because I think it is really 
critically important to scale some of the numbers we are 
hearing by, just as Representative Scott was suggesting, by the 
budgets of the organizations. And when you do so, you find that 
nationally, the costs of the new rule will amount to less than 
one-tenth of 1 percent of the national payroll. Now, national 
payroll is in the trillions.
    So, we are talking about a relatively small group of 
workers who are newly covered and among that group of workers 
that are newly covered, those who are more likely to work 
overtime.
    Now, in the higher educational sector, that payroll share 
also amounts to well under one-tenth of 1 percent and in the 
nonprofit sector, again, less than one-tenth of 1 percent. And 
in fact, if you look at the affected workers who usually work 
overtime in both the higher ed sector and the nonprofit sector, 
it's less than 1 percent of their workforce.
    Now, I still think this is an important rule and not all 
the benefits are monetized. Some of the benefits come from 
being able to balance work and family. Tremendously important, 
but it does not show up in the national accounts as extra 
dollars. But when you go in the monetary side, you see the 
fractions involved here. I would say very much belie the level 
of some of the rhetoric we are hearing.
    Mr. Courtney. Thank you. And again, also, I think that the 
narrative that somehow the Department of Labor stonewalled, you 
know, any input that came in during the rulemaking process, 
again, I also served with Mr. Walberg in the Workforce 
Protection Subcommittee when fair labor standards was 
discussed. And, indeed, I would agree with the Chairman's 
comments that, you know, it was in need of an update and a 
modernization. Again, I kind of came to a different ending 
point in terms of what needs to be updated and that your graph 
certainly showed that, how this rule had just deteriorated to 
the point that it was less than 10 percent of the American 
workforce that was getting any benefit from it.
    And again, during the rulemaking process, nonprofits were 
listened to. Again, as you pointed out, the Medicaid waiver 
programs for people with intellectual disabilities, again, they 
operate under a one revenue system of operation and it is very 
rigid because these Medicaid waivers are under caps. And again, 
the Department gave a three year non-enforcement accommodation 
to those programs. In terms of universities and research, as 
your testimony points out, the National Institute of Health, in 
terms of future research grants is going to, again, align these 
grants to comply with the rules, is that correct?
    Mr. Bernstein. Yes, by aligning the grants to comply with 
the rules what you're saying is that the grants will equal the 
upper bound of the salary threshold and thus not invoke higher 
overtime costs. And I think it is really germane and I have a 
great deal of respect for my colleagues on the panel who are 
providing important services, as was recently mentioned. I 
think it is germane that both of them, and I very much 
underscore their point, have pointed out their problem is less 
with this overtime role and more with their funding streams.
    And I think in the case of Kansas, that is particularly 
striking because in Kansas, we know there has been this 
experiment with tax cuts and these cuts taking effect in 2013 
have blown a $400 million hole in the State budget. State 
spending on higher education for a student in Kansas is down 22 
percent since 2008 and my colleague, Mr. Rounds, made those 
points very clearly.
    But what you can't do in my mind in terms of the labor 
standards is cut taxes on wealthy people so that you cannot pay 
middle class a fair wage for a fair day's work.
    Mr. Courtney. And having talked to Secretary Perez, I 
think, you know, this question of the Medicaid waiver programs, 
I mean, frankly, the Department of Health and Human Services 
has to be brought into this discussion in terms of how they set 
these waivers. Again, it will align with these new fair labor 
standards.
    So, again, I think you are right. This is going to create a 
healthy sort of discussion, both at the State level and the 
Federal level, about trying to get, whether it is research 
grants, UConn or K.U., or whether it affects nonprofit programs 
that provide critical services for vulnerable populations that 
they get the adequate resources to create a living wage. I 
yield back, Mr. Chairman.
    Chairman Kline. The gentleman yields back. Dr. Roe.
    Mr. Roe. Thank you, Mr. Chairman. General Rounds, thank you 
for your service to our great country and all the panelists for 
being here. I was asked to speak about two weeks ago at the 
Tennessee Valley Carter Meeting on entrepreneurship and job 
creation. And I wondered why when you hear the administration 
say that we have 14-1/2 million new jobs, unemployment rate has 
gone down from 9 percent to 5 percent, all are true. Why is it 
when you poll the American people that 70 percent and the 
majority of Democrats are saying the country is headed in the 
wrong direction? It does not make sense. I mean, those two 
things together do not make sense.
    I began to look at in detail and what has happened is 
between 1990 or 1992 and '96 during that recession, 420,000 new 
businesses were formed in this country. Between 2002 and 2006, 
400,000 new businesses were formed. Between 2010 and 2014, 
166,000 businesses were form. And what happened was 20 counties 
in this country made up half the new businesses formed in 
America and 60 percent of the counties actually had a net loss. 
That is why we, as the American people, feel like we are going 
in the wrong direction.
    And in my opinion, the way the other side, Dr. Bernstein, 
you are an advisor to the President, believe that raising the 
minimum wage and doing this salary is actually helping the 
economy. It is not.
    If complying with government regulations were a country, it 
would be the fourth largest country in the world, just 
compliance costs, and this is going to add another compliance 
cost of what we are doing. I am a Boy Scout, an Eagle Scout. I 
worked Scout Camp every summer. There is no way on this Earth 
that not-for-profit--as a matter of fact, I have to write them 
a check when I get home--there is no way in the world that they 
can comply with this. If you are a Scout leader and you go by 
on a Friday morning to set up a jamboree for the weekend for 
Boy Scouts, by Sunday morning you got to leave them because you 
have done your 40 hours and you have not worked all week.
    I worked there 24 hours a day, seven days a week when I was 
a camp counselor. As you were saying, when do we start camp? 
You talk about 10ths of a percent at the University of 
Tennessee. It is going to add $9 million--$9 million--to the 
University of Tennessee which is a 2 percent increase in 
tuition for every student in the system. I talked to one of the 
land grant colleges two weeks ago when I was at the Valley 
Quarter Meeting and it is going to add $2 million costs to that 
one college.
    Tuition costs have skyrocketed. That is the last we need to 
do and at the University of Kansas. That cost has got to be 
passed on.
    And Dr. Bernstein, I will point out in our great State of 
Tennessee, we had cut taxes. We have the lowest per capita debt 
in the nation. We provide free community college for people, so 
it can be done by lowering bureaucratic hurdles and this is 
just one of them.
    General Rounds, this to me is a very personal. I was on the 
foundation board of my college and providing a quality 
education for someone like me who is a first generation 
student, it is another barrier that is out there. And I do not 
know how not-for-profits, like Ms. Sharby, you are talking 
about, are ever going to comply with this. So, General Rounds, 
if you would like to comment on the costs and then, Ms. Sharby, 
if you would.
    Mr. Rounds. Thanks, Congressman Roe, as I pointed out in my 
testimony, if you look at the fact that we are relatively flat 
or decreasing in our budget, it makes the absorption of any 
additional costs very difficult without taking dramatic steps. 
And in this case, the ability to absorb these costs because 
they are not available means that if for the majority of the 
individuals impacted, is they will become nonexempt as opposed 
to exempt and they will not be able to provide the same 
services that they currently do because they have very good 
flexibility in how they execute their job responsibilities. 
They will lose that flexibility.
    Mr. Roe. My good friend, the Ranking Member, brought up the 
basketball coach at the University of Kansas. Well, that is 
fine, but what about these State schools where I went where a 
coach may make $35,000 or $40,000 a year and they are out 
recruiting athletes? How in the world are you ever--they are 
driving eight hours to a game. How in the world are you going 
to comply with that? I have no earthly idea. Not everybody is 
at the University of Kansas, at a major university. Trust me, 
when you are a coach at Austin P. State University where I 
went, you are making small, little teeny bucks, not the mega 
bucks that a great coach like that is making.
    So, my time is about expired. I do want to, Mr. Chairman, I 
want to submit this new map of economic growth and recovery as 
a matter of the record.
    Chairman Kline. Without objection.
    Mr. Roe. I yield back.
    Chairman Kline. The gentleman's time expired. Ms. Fudge, 
you are recognized.
    Ms. Fudge. Thank you very much, Mr. Chairman, and thank you 
all for your testimony today. Mr. Bernstein, in your testimony, 
you note that the FLSA overtime exemptions were designed and 
intended to cover a particular class of worker. These 
exemptions have now been construed to cover assistant managers 
or supervisors that don't necessarily meet the duties test. How 
has the manipulation of this exemption, which, in fact, it has 
been manipulated, negatively and unfairly affected low-level 
management workers, causing them to lose out on overtime that 
they should receive?
    Mr. Bernstein. By misclassifying them as exempt, thus 
prohibiting them from getting time-and-a-half when they work 
beyond 40 hours a week. If you actually look at the intention 
of the FLSA and the duties of the types of workers you are 
mentioning, these are workers who very much should be covered 
by overtime protections, but are not. Therefore, and it is much 
like the conversation I was having with representative Scott a 
minute ago, when they work an hour, two, five, 10 hours of 
overtime, every one of those hours costs $0 to their employer. 
There is a--
    Ms. Fudge. Excuse me, sir. The time is not accurate. Please 
proceed, sir.
    Mr. Bernstein. Okay. Every one of those hours is unpaid. 
One of the most important aspects of the new rule is that it 
does away with this confusion around the duties test by 
updating the salary threshold and setting it at $913 per week, 
these workers will now be automatically covered.
    Ms. Fudge. So, in effect, for many, many years, they have 
actually benefitted by the misclassification and have gained 
significant dollars that they really should have been paying 
people for a very long time.
    Mr. Bernstein. That's correct, and in fact, we were talking 
a little bit, a second ago, about the underlying economy and 
some of the dynamics there in. And one of the problems we have 
had is this increase in economic inequality, whether it is wage 
or wealth or income inequality, it is doubled in terms of share 
of income to the top 1 percent over the past 35 years. One of 
the things you see is that the profit share of national income 
recently reached historic highs. It is coming down a bit as the 
job market has tightened, and that is one of the dynamics that 
we are describing here. Workers are not being fairly 
compensated, and that has helped to boost profit margins. That 
is not a bad thing. Profit margins are good, but profit margins 
should afford you to be able to pay a middle-class wage to 
workers who are working over 40 hours a week.
    Ms. Fudge. And employers have unfairly benefitted from it.
    Mr. Bernstein. Correct.
    Ms. Fudge. Mr. Bernstein, we have repeatedly heard the 
argument that raising wages in any way would stifle job 
creation and economic growth, and today is no different. We 
hear the same thing. Our failure to act has seen the demise of 
the 40-hour work week, and that is what we have seen today, 
really, the demise of the 40-hour work week. Could you 
elaborate on how this salary increase will actually help 
economic growth and not hurt it?
    Mr. Bernstein. Well, a number of ways. One of the things I 
mentioned earlier, I think, is quite important. There are many 
labor economists who believe that one impact of the new rule 
will be the creation of new straight-time jobs, that is, 
employers who don't want to pay overtime to newly covered 
workers can avoid that by hiring other workers and paying them 
straight time. Also, it can increase the hours of their part-
time workers, yet still keep them below 40.
    Now, Goldman Sachs argues that would create about 100,000 
jobs. National Retail Federation argues more. To the extent 
that workers working more than 40 hours newly covered are now 
making time-and-a-half, these are workers who earn middle-class 
incomes, middle-class salaries. The top threshold in an annual 
sense is about $47,000 per year. That is actually below the--
that is about around the median household income. These workers 
tend to spend their paycheck, so that feeds back into the 
economy. We have a 70 percent consumption economy. That's pro-
growth. And, in fact, you talk about a sloggy macro economy, 
one reason for that has to do with this inequality problem, and 
the fact that when the benefits of growth flow to the top of 
the scale, consumption tends to be less robust.
    Ms. Fudge. I have no further questions, but if there is 
something you want to address in my last two minutes that you 
have heard--
    Mr. Bernstein. Well, thank you.
    Ms. Fudge.--please feel free.
    Mr. Bernstein. You know, I think there is a real lack of 
care, and I am glad Mr. Passantino is here because I sense he 
really understands these rules. I think there is a lack of care 
and consideration by many folks who oppose these rules in terms 
of what is actually in there.
    One, we just a heard a member complaining about coaches and 
the need to pay overtime to coaches. Well, athletic coaches, 
assistant coaches who fall under the exemption when their 
primary duty is teaching are exempt. And so, there are a 
variety of exemptions: teachers, academic administration 
personnel, graduate and undergraduate students. I urge my 
colleagues on the witness stand and their institutions to look 
much more carefully at that aspect of the rule.
    I will state, and since we are talking about coaches, I 
will note, that at least it is my understanding that the 
basketball coach at K.U.--and I'm a huge Jayhawks fan, just to 
get that on the record--is paid something in the range of $5- 
to $6 million a year. Now, if Mr. Rounds' numbers are correct, 
that means that you could fully compensate for the overtime 
cost that he designated and still pay their basketball coach 
about $3 million a year, which sounds pretty good deal to me.
    Chairman Kline. So, we agree that the coach is exempt. The 
gentlelady's time has expired. Mr. Walberg.
    Mr. Walberg. Thank you, Mr. Chairman. I guess I have gained 
more understanding of why our economic growth at an anemic 2 
percent or less is what it is with economic advice that is 
coming, like what we are hearing today. It is frustrating to 
think that we have an administration that thinks you can name 
it and claim it, and that businesses, universities, and others 
can simply pick the dollars out of the air to pay, and that 
doesn't happen. And when we get into social welfare agencies, 
and we get into charitable causes, and entities that provide 
real basic help to people, this is not reality. And that is 
what is frustrating and maybe that is why we are that level of 
growth.
    It is interesting, also, that with the Puerto Rican bill 
that is being considered right now, the administration is 
willing to forego overtime regs and a minimum wage for 25 and 
under, indicating that will help grow the economy in Puerto 
Rico. Just want to bring that up, hypocrisy that we hear.
    Mr. Passantino, Department of Labor's final overtime rule 
is going to result in the demotion of salaried exempt employees 
in every corner of the country. By DOL's own estimates, very 
few of the Department's estimated 4.2 million impacted 
employees will actually see any potential benefit from this 
rule because they do not currently work more than 40 hours per 
week.
    However, these employees will be negatively impacted when 
they lose workplace flexibility, opportunities to attend 
training and networking events, and certain performance-based 
bonuses as a result of being reclassified. Do you anticipate, 
Mr. Passantino, significant morale issues amongst employees as 
a result of these changes?
    Mr. Passantino. I think, in talking to clients since the 
rule's been out, that is a very likely probability. As is in my 
testimony and as I said earlier, one of the issues is with 
respect to mobile devices and remote access. As annoying as 
they may be from time to time to be tethered to your job all 
the time, it also allows you to be away from your job for parts 
of the day and to be away from your workplace and to get things 
done when you are not sitting at your desk.
    Mr. Walberg. Workplace of the 21st century, right?
    Mr. Passantino. That is right.
    Mr. Walberg. Flexibility, opportunity.
    Mr. Passantino. Right.
    Mr. Walberg. Choice.
    Mr. Passantino. We have also talked to employers about the 
bonus issue and the fact that--
    Mr. Walberg. Yeah, talk about that. Talk about the bonus 
issue and the impact of this rule.
    Mr. Passantino. So, for nonexempt employees, when there are 
nondiscretionary bonuses, and nondiscretionary bonuses are 
basically all of your incentive types of payments, those get 
included in the regular rate of pay for overtime purposes. So, 
if you have someone who is making $10 an hour, their overtime 
rate would be $15 an hour, but if they got a bonus on top of 
that, you would have to go back and recalculate their rate in 
order to determine what their new overtime rate is.
    Mr. Walberg. Hurting many of the people that appreciate the 
compensation that comes from bonus and opportunity and expanded 
opportunities.
    Mr. Passantino. Well, frankly, when we talk to employers, 
when we explain everything that is necessary to recalculate 
that rate of pay, they just decide to forego the bonus.
    Mr. Walberg. No bonuses.
    Mr. Passantino. Right.
    Mr. Walberg. Yeah. Mr. Passantino, contrary to the 
Department's assertion, changes to expand overtime eligibility 
will not necessarily result in a windfall of overtime income 
for newly classified, nonexempt employees. Will you describe 
some of the adjustments employers will consider making in order 
to keep labor costs under control?
    Mr. Passantino. I mean, one is that they can limit the 
amount of hours that someone works. Another is you can reduce 
the base rate of pay so that if you expect someone to work 45 
hours per week, their previous salary becomes--you divide it by 
45 or your divide it by 45 plus something else. And then their 
hourly rate will get them to what they made anyway. So, they 
make the same, except now they are keeping track of their hours 
and they are getting paid for overtime up to that 45 and then 
they would be paid time-and-a-half over that. You can pay them 
on a salary that reflects their current pay and then they would 
get a little bit extra for the amounts they work over 40. So, 
there are a variety of different ways that it can be 
accommodated.
    I think the other part of the equation, it may change the 
way that employers hire in new individuals to those positions. 
They maybe come in at lower rates to account for that overtime 
premium.
    Mr. Walberg. Generally, going back to the 20th century when 
we are in the 21st and moving rapidly in this 21st century to 
something expanding in the workplace. Thank you, I yield back.
    Chairman Kline. The gentleman yields back. Mr. Polis, 
you're recognized.
    Mr. Polis. Thank you, Mr. Chairman. You know, for stepping 
back for too long, workers across our country have simply been 
putting in more and more hours without receiving the 
compensation they deserve. You know, we have talked about many 
examples, but a manager at a fast food restaurant in my 
district might earn a salary of $26,000 a year, but work 50, 
60, 70 hours. At that salary, a family of four is well below 
the poverty line. But under the new overtime rules, they will 
finally be compensated for their work and receive the pay they 
deserve.
    In fact, my district or my state has 248,000 workers that 
will benefit from the overtime rule. I would also like to note 
that this update would directly benefit 275,000 workers in my 
colleague's, Mr. Walberg's state, who we just heard from. And I 
think that is something that is long overdue and that workers 
deserve.
    There has been some discussion of higher ed workers and I 
wanted to go to Mr. Bernstein on that. I represent a district 
with two institutions of higher education: Colorado State 
University and University of Colorado, Boulder. There has been 
a lot of discussion about the rules affecting higher education. 
And to be clear, I wanted you to talk about what actual impact 
might this have on higher education and what percent of the 
higher education workforce would even be affected by these 
rules.
    Mr. Bernstein. Thank you. According to numbers from the 
Labor Department, 3.4 percent of workers at colleges and 
universities would be affected by the rule change in the sense 
that their salaries are between the current and the new 
threshold. However, it then becomes most workers in that bound, 
between the old and the new threshold, most workers don't work 
overtime. So, the next thing you have to do is ask how many of 
the workers in the affected range work overtime, and that gets 
you to .5 percent in the higher ed sector and, by the way, .8 
percent in the non-profit sector. So, less than 1 percent of 
workers affected in that regard and as a share of their 
payroll, as I have been stressing throughout the discussion, 
under one-tenth of 1 percent in both cases, whether we're 
talking national, higher ed, or non-prof.
    Mr. Polis. And in addition, with the particular carve out 
around instructors that under the guidance from the Department 
of Labor generally covers assistant athletic instructors and 
others, so some of those, even some of .5 percent out of the 
3.4 percent that make in that range that might work more than 
40 hours a week, are some of them not even in the teacher 
exemption categories, some of those workers?
    Mr. Bernstein. Right, so this is again, it is critical to 
go back and understand the nature of the exemptions. Bona fide 
teachers, coaches, graduate and undergraduate students, 
academic administrative personnel are often exempt, meaning 
that the new rule will not affect their pay. In postdoctoral 
cases, which is an important area for my friend here from 
higher ed, again, I want to underscore that the Department of 
Labor's working closely with the NIH and the National Science 
Foundation to ensure that grants are now at the level of the 
upper bound of the salary threshold.
    Mr. Polis. And if there are workers that are affected, then 
I think you are down to whatever, .1 percent or .4 percent, let 
us say it is janitorial manager or something like that. You 
know what? The universities need to maintain a competitive pay 
scale in the private section anyway. I mean, if the private 
sector is paying overtime and somehow the university were 
exempt from it, would they even be able to engage or hire 
somebody for these positions?
    Mr. Bernstein. Well, if the job market is soft enough, they 
might, but in a tighter job market, they would not. But I think 
the key point here is that it is really hard to understand why 
someone who chooses to work in the public sector should be 
treated differently than someone who works in the for-profit 
sector when it comes to fair pay for overtime work. I think, as 
my colleague Ms. Sharby said, that these workers want to be 
paid a fair salary. And I think that is a great point. There is 
no reason, especially when we are talking about an impact that 
is less than one- tenth of 1 percent on payroll, that workers 
in one sector should be treated so unfairly relative to workers 
in a different sector.
    Mr. Polis. Well, even this again, economically, if we want 
the nonprofit or public sector to attract talented workers, 
they have to have overall compensation packages. They are 
competitive. Obviously, overtime is part of that; vacations are 
part of that; pay is part of that; benefits are part of that. 
But overall, you need to be competitive or you are going to 
wind up with the least talented people in these positions 
simply because the more talented ones are taken up by the 
private sector. So, we have to be competitive across all 
sectors. I think consistency of rules is very important to do 
that and I yield back.
    Chairman Kline. The gentleman yields back. Mr. Guthrie.
    Mr. Guthrie. Thank you very much. And I want to continue 
talking to Mr. Rounds on this idea of colleges, and I 
understand you worked at the University of Kentucky; K.U. are 
large, large enterprises. Well, Kentucky has a lot of small 
colleges, a lot of small colleges that were brought into being 
100, 150 years ago from mission-oriented--and I have a written 
statement addressed to the Committee from Dr. William Luckey. 
He's the president of Lindsay Wilson College in Columbia, in 
Derek County, Kentucky. And his statement raises very serious 
concerns with the overtime rule and I will ask it to be entered 
into the record.
    Chairman Kline. Without objection.
    Mr. Guthrie. Lindsay Wilson College is a small, private, 
nonprofit college serving one of the poor areas in Kentucky and 
actually one of the poorer areas in our country. Sixty-two 
percent of the college undergraduates are Pell eligible. Fifty 
percent of the Pell eligible have an expected family 
contribution of zero. Lindsay Wilson students receive more in 
state-based grants than any other private college in Kentucky 
and I would like to read from Dr. Luckey's statement 
summarizing Lindsay Wilson' College's concerns with the 
overtime rule.
    It says, ``The DOL website states, the ruling will transfer 
income from employers to employees. I can tell you that in our 
case and in the case of hundreds of private colleges that 
submit a comment to OMB with this rule was under review, just 
the opposite is going to happen. Employees will lose their jobs 
and many other salaried professionals will be relegated to a 
lower profile, nonexempt status because for nonprofits, like 
Lindsay Wilson, there is no extra employer money to transfer. 
But our students that are among the Nation's most needy will 
suffer most. When the changes from Federal overtime rule take 
place at the current amount and in the current timeframe of 
implementation, it would be devastating to Lindsay Wilson 
College and I dare say it will hurt, not help, small colleges 
all across America.''
    So, Mr. Rounds, that is the end of the quote from that. Mr. 
Rounds, many small, private colleges face strict budget 
constraints. Ninety-five percent of Lindsay Wilson's revenues 
come from student enrollment. When costs go up, tuition must 
rise or services must be cut. In this regard, is Lindsay 
Wilson's predicament similar to K.U.'s as it faces the overtime 
rule?
    Mr. Rounds. Thank you for the question. It is similar to 
K.U.'s. And what I would like to point out is with the 354 
individuals who are currently considered exempt, 92 of those 
are postdocs. And I had put into my testimony that we plan on 
bringing them up to the new threshold because to not do so 
would make us noncompetitive. Obviously, it has a huge impact 
on us because there is a fixed budget. Granted, NIH is going to 
raise grant levels. We are working under current grant levels 
and so, under fixed budget, you--
    Mr. Guthrie. But Lindsay Wilson is not a grant-based--you 
know, it does not do a lot of its--it is 95 percent student 
tuition, not NIH research. But, so, I know it is a separate--
maybe it is a little different from the University of Colorado, 
but please continue.
    Mr. Rounds. Yes, sir, but the remainder of the individuals 
are not in that position where they are tied to grants and we 
can do the adjustment in order to bring their salary levels up. 
So, in those cases, we are going to have to make them nonexempt 
employees and as we make them nonexempt employees, it has been 
pointed out on several occasions is that they will lose their 
workplace flexibility. I think the portrayal that we are not 
concerned about the making them competitive with the rest of 
the workforce--our employees competitive with the rest of the 
workforce is not accurate, at least at K.U.
    Over the last two years, we went through an extensive 
market study and within that market study, the intent was to 
ensure that we are paying our employees comparable to the 
industry and comparable to the region and as we finish that, we 
brought 33 percent of our workforce wages up in order to make 
sure that we were balanced. Naturally, difficult to do in a 
tight fiscal environment, but the right thing to do. As part of 
that process, I would point out that even employees that we 
raise their salary as we did a review, if they went from an 
exempt to a nonexempt status, that was more important to them 
losing their exempt status then the fact that they had their 
salary raised. And so, as Mr. Passantino has pointed out, we 
have found as we look at this particular issue that there are 
morale issues associated with it. The scope of those morale 
issues were not even sure of at this point.
    One last thing, and I appreciate the opportunity, is we 
have talked a lot about our basketball coach and his salary. 
Mr. Self is not paid with State funds and, therefore, I think a 
lot of the comparisons of what reducing his salary would do for 
us is not necessarily germane. So--
    Mr. Guthrie. University of Kentucky chose this year to take 
athletic funds and build an academic building with it as well, 
so.
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    Chairman Kline. The gentleman's time has expired. Mr. 
Hinojosa.
    Mr. Hinojosa. Thank you, Chairman Kline and Ranking Member 
Scott. Today's hearing on the updated overtime rule by the 
Department of Labor is long overdue. According to the Economic 
Policy Institute, an estimated four million workers would 
benefit from the proposed overtime rule. And it would help more 
than 1.5 million working people in my own home State of Texas.
    Critics of this much-needed final rule also argue that 
colleges and universities cannot afford the increased costs. 
These educational institutions, like all other entities, will 
have a number of ways to come into compliance with the rule, 
including raising employee pay, limiting employees to 40 hours 
per week, paying overtime on top of an employee's salary as 
needed, or any combination of the above. Additionally, many 
employees at these colleges are exempted from coverage under 
the FLSA.
    It seems to me that we must be realistic about the number 
of people affected here. I think back to 20 years ago when I 
was elected to come to Congress, I was looking back on the 
computer, and saw that 1996, when I was elected, the minimum 
wage was $4.75 an hour. Under Bill Clinton, his second term, 
ending his second term, we were able to pass an increase of the 
minimum wage and it went in several steps. It reached $7.25 in 
2009. That is nine years ago--no, seven years ago. But it was 
interesting to me that the same arguments that I hear my 
friends on the other side of the aisle that businesses will 
close and things will go to hell just didn't pan out. That is 
not what happened.
    What happened is in the second term of Bill Clinton, we had 
a surplus of $600 billion. We balanced our budget. It was a 
period of prosperity because we raised the interest--I am 
sorry, the minimum wage, plus many other things that occurred 
under Clinton's second term. So, what we are being told now, 
same excuses for not changing the minimum wage in about 12 
years to me is hollow. It is not true. It seems to me that we 
have got to be realistic and that we have got to do something.
    I request unanimous consent, Mr. Chairman, to submit a 
letter from over 250 professors at colleges and universities 
across the United States and they strongly support the 
Department of Labor's new rule governing overtime.
    Chairman Kline. Without objection.
    Mr. Hinojosa. Thank you, Mr. Chairman. Mr. Rounds, I have a 
couple of minutes and I want to ask you, according to your cost 
estimates, assuming they are correct, your costs of this 
proposed rule will represent seven-tenths of 1 percent of 
payroll costs in 2015. It would represent three-tenths of a 
percent of total operating expenses and about 50 percent of 
what USA Today reports is the annual pay of Kansas University's 
head basketball coach. Why do you think these small percentages 
will require such a drastic reductions in student services?
    Mr. Rounds. Thank you. I appreciate the question. I am 
answering the question as what I am looking at is the 
individuals' who are primarily affected. And as you look across 
the individuals who are impacted, a large percentage are 
individuals who work directly with our students and as you look 
at the different numbers, what I am aware of is the fact that 
we are on a very fixed and tight budget. And it would be 
difficult or impossible in order to--those individuals that are 
directly associated with providing services to our students in 
order to be able to adjust their salaries to make them--
    Mr. Hinojosa. Thank you, Mr. Rounds, my time is almost up 
and I want to say that I respectfully disagree with you. 
Goldman Sachs says this morning, ``New Obama rule on overtime 
likely to add 100,000 jobs to the economy.'' I think that is 
more likely to happen--
    Chairman Kline. And the gentleman's time has expired. Dr. 
Foxx.
    Dr. Foxx. Thank you, Mr. Chairman. I want to thank our 
panel, all of them, for being here today. I do want to say that 
I think some of the information being presented here comes from 
folks that live in an alternate universe where they have never 
worked in the private sector, recommendations coming in from 
folks who never worked in the private sector and have no idea 
what it cost in addition to direct costs to comply with such 
government rules and regulations.
    And I want to say that--and Dr. Bernstein said everybody 
should be paid fairly, and I agree with that. But there are 
many people in this country, Dr. Bernstein, who work in 
nonprofits that do not do it for the money. As Ms. Sharby has 
said, they do it out of a sense of mission, and they make that 
choice when they go there. Just like we do not pay our teachers 
enough in this country, in my opinion, but they know when they 
go to those jobs what the pay is going to be. And they do it 
out of a sense of mission.
    And I think that is perfectly fine. We need to continue our 
civil society, organizations outside the control of government 
that have that sense of mission. It's part of what makes us 
such a great country.
    Mr. Passantino, I think that General Rounds was getting to 
this point, but I would like to ask you if you would talk a 
little bit about the areas where the Department of Labor may 
have underestimated the costs of compliance with this because 
we know historically, these government agencies, again, live in 
an alternate universe and have no idea what it costs to 
implement the rules and regulations. Would you say a little 
more about the costs of compliance for these rules?
    Mr. Passantino. Sure and I think a lot of the costs of 
compliance is not simply complying with this rule. It is what 
this rule forces employers to do in the context of other 
regulations. So, it is not simply do we look at the increased 
salary and what that increased salary level does to a 
particular employee and whether that's an added cost and 
whether, as a result of that employee getting a raise, that 
employee's supervisor then has to get a raise and that's an 
additional cost.
    You also have to look at the overtime payments that are 
going to be made to the employees that are reclassified as 
nonexempt. You need to look at the cost of implementing 
timekeeping systems. You need to look at the costs of 
additional, frankly, legal advice and H.R. work to determine 
what is compensable; what is paid time for employees who are 
not used to keeping track of time, who are not used to punching 
a clock, who have the freedom to use their computers at home 
and mobile devices. And now, for the first time, these 
employers are going to have to make decisions on whether that 
is paid time and where the particular time begins and ends.
    Dr. Foxx. Right, and I want to follow up a little bit on 
the adequacy of keeping records. The Labor Department's 
guidance accompanying the final rule says, ``There's no 
requirement that employees punch in and punch out.'' You talked 
about the challenges of sitting in the school pickup line, for 
example, and sending out emails or answering a telephone call 
before work, after work, miscellaneous things that all of us 
do. But to that point, the guidance specifies for an employee 
who works a fixed schedule, an employer need not track the 
employee's exact hours worked each day. But considering the 
ever-increasing threat of litigation on the wage and hour 
front, is it ever advisable for employers to forego tracking 
hours for overtime-eligible employees?
    Mr. Passantino. I mean, it is a huge mistake to say we are 
not going to track those hours. Sure, if somebody is always 
going to work 9:00 to 5:00 every day, the rule says you can 
keep track of time that way and they can mark a box that says, 
yes, that is what I worked today. Given the nature of the 
employees that are going to fall in this reclassification, 
given the nature of the workplace and the reliance on 
electronic devices, given the fact that there are lawsuits 
filed each and every day over six minutes here and six minutes 
there, it is a mistake not to keep track of those hours 
religiously for employers to make sure that they are capturing, 
you know, whether somebody works eight hours or whether they 
work eight hours and six minutes.
    Dr. Foxx. Thank you very much. And in my last 13 seconds, I 
want to say to Ms. Sharby's comments, she points in here, 
``Easter Seals cannot afford to pay overtime and the children 
with disabilities that we serve are the ones that will suffer 
the most.'' And I think it is really important that we 
understand the most vulnerable in our country are going to be 
punished by these rules. Thank you, Mr. Chairman.
    Chairman Kline. The gentlelady yields back. Ms. Bonamici.
    Ms. Bonamici. Thanks so much Mr. Chairman. I see the 
Department of Labor's overtime rule as a long overdue update 
and I think, Dr. Bernstein, you made clear in your testimony 
with your chart that it is long overdue. According to your 
testimony, back in 1975, more than 60 percent full-time 
salaried employees earned salary levels that qualified them for 
overtime pay. Today, it is only 7 percent, and with this 
increase it will only go up to 35 percent.
    According to the Economic Policy Institute, in my home 
State of Oregon, about 124,000 people will benefit. Talking 
about this rule, Nicolai from Oregon said, ``I have worked an 
average of 55 hours each week for the past year, but since I 
have been salaried during that time, I have not been eligible 
for overtime pay. This new regulation would mean a raise of 
about $10,000 a year for me, which would allow me to invest in 
education and build my life and my family.'' You know, across 
my state of Oregon, there are many businesses that are 
recognizing that they can offer workplace fairness and balance 
for their employees and still continue to prosper.
    In fact, I just attended a few days ago an event called 
When Work Works that was sponsored by Family Forward Oregon and 
the Center for Parental Leave Leadership. And at that event, 
they recognized many of our forward-thinking employers that 
have really been leading the way and providing their employees 
with a fair pay, flexible and positive workplace policies, and 
they reported that these policies have helped them 
tremendously, not only with their bottom line, but with 
recruitment and retention.
    Now, some have said that complying with this overtime rule 
is going to reduce flexibility for employees. I am going to ask 
you about that, Dr. Bernstein, but I do not find that argument 
persuasive. The Economic Policy Institute report noted that 
both the hourly workers now and salary workers making less than 
the new threshold say they have little control of their 
schedules now anyway. In fact, you know, working people, they 
can't have their kids or their parents schedule their illness 
around their employer's convenience. It does not work that way 
and these are people who cannot afford to forfeit their hard-
earned pay.
    So, under the Fair Labor Standards Act, employers can allow 
workers to alter their start and end times. They can give 
advance notice of schedules to take time off. And the overtime 
rule does not change that. And, in fact, to provide 
flexibility, we should be working on in this Committee the 
Schedules That Work Act, for example, and the Family and 
Medical Insurance Leave Act. These would truly provide workers 
with the flexible and predictable schedules, as well as joining 
the rest of the world in offering paid time off.
    So, Dr. Bernstein, I mentioned the flexibility argument 
that we have heard here today. Can employers still offer as 
much flexibility and predictability under the new rule as they 
could under the old rule and can you describe what this 
flexibility would look like from the perspective of both the 
employer and the employees?
    Mr. Bernstein. Yes, I can and I appreciate the question 
because I think that, once again, there has been a great deal 
of misleading comments made today suggesting that some of the 
nuances in the rule are not well understood. One of my 
colleagues mentioned that the rule forced employers to move 
workers, I quote, ``from salary to nonexempt status.'' That's 
simply not the case. Workers can absolutely remain salaried 
workers under the rule. I'm sure Mr. Passantino will back me up 
on that.
    It does mean, of course, that those workers will have to be 
paid overtime per hour if they are within the threshold, but 
there is nothing that says a worker has to be moved from his or 
her salary status.
    There has also been a tremendous amount of assertion here 
about morale and flexibility. I think we would be well advised 
to stick to the research on that and maybe tone down some of 
the assertions. I am not sure how it helps morale to pay people 
zero per hour for overtime, especially when we are talking 
about considerable numbers of hours as we have heard from some 
of the members today.
    But if we look at the research by Dr. Lonnie Golden, an 
economist that looked at this question, he found that contrary 
to a common assumption, salary workers, the affected pay levels 
appear to have no more ability to take time off for personal or 
family matters and that hourly workers at that same annual 
earnings level, salaried workers at the affected pay levels, so 
at the levels affected by the new rule, either report greater 
work family conflict and work stress or report greater 
incidence of the conditions associated with conflict and stress 
as do hourly workers. Unfortunately, when it comes to 
flexibility and morale, there is not a lot of difference 
between somebody who is hourly or salaried if you are barely 
getting by.
    If you are a middle-class family earning the current 
threshold, $24- or $25,000 a year, as has been said, you are 
near poverty. If you are at the new threshold, you are below 
the median earning. So, whether you are salaried or hourly, 
morale and stress is a huge issue for you that is resolved when 
you no longer get paid zero per hour for working overtime.
    Ms. Bonamici. Thank you, Dr. Bernstein. My time is expired. 
I yield back. Thank you, Mr. Chairman.
    Chairman Kline. The gentlelady yields back. Mr. Carter, you 
are recognized.
    Mr. Carter. Thank you, Mr. Chairman, and thank all of you 
for being here today. I am going to start with General Rounds. 
General, first of all, thank you for your service to our 
country. I had the privilege of serving as chair of Higher 
Education, Senator to Georgia when I was in the State 
legislature. So, higher education is very important to me. And 
I want to know the impact that this if going to have on higher 
education. In fact, I think it is only appropriate that this 
Committee know the impact. After all, we are Education and the 
Workforce.
    And after all, we have dealt and continue to deal with 
increased student debt. We have continued to deal with all of 
the things to do with student loans and those are things that 
are very important to us. I want to know because the American 
Council on Education released a statement on May 17 talking 
about the effects that this could have on higher education, and 
I quote, ``It could have a combination of tuition increases, 
service reductions, and possibly layoffs.'' Do you find that to 
be true, General Rounds?
    Mr. Rounds. I do find all of those assertions to be 
possible. And one of the things that I would like to read that 
I have available is a statement from our vice provost, who is 
responsible for providing student services. And I think this is 
very compelling, what he says is, ``What the new rule really 
does is impede our ability to customize and personalize the 
educational process beginning from the time a student initiates 
an inquiry to the time they depart or graduate. The level of 
personalization or customization has been a source of 
sustainable, competitive advantage for us in a highly 
competitive environment as we have emphasized and benefitted 
from focusing on the relational versus the transaction aspects 
of the work. This rule directly impedes our ability to build 
these relationships.''
    ``In addition, I think it is a direct contradiction to the 
national completion agenda as a student's access to and 
availability of academic support personnel and services will be 
reduced. K.U. needs to highlight decreasing services is more 
than reducing operating hours. It will have a profound impact 
and an ability to attract, retain, and graduate students.''
    Mr. Carter. Right.
    Mr. Rounds. And that is tied to the individuals who work 
with students on a recurring basis. Many of them were impacted 
by this legislation.
    Mr. Carter. Absolutely, and we understand that and that is 
one of the things we are most concerned with.
    Ms. Sharby, I want to ask you, you are an H.R. specialist. 
You are an expert at this, years of experience and much 
expertise. How is this going to impact you as an H.R. person? 
Now, I want to know, you have only until December 1 to comply 
with this. I mean, obviously, it is going to have a big impact.
    Ms. Sharby. Well, the biggest impact that we have right now 
is trying to develop a communication to our employees that we 
are going to have to change from exempt to nonexempt status and 
how to do that in a way that they don't feel diminished.
    They have already spoken to me saying, ``What does this 
mean to me? How am I going to do what I want to do in order to 
meet the needs of the clients that we serve.'' So, that is one 
of our big struggles.
    The other thing that we have to do is we are going to look 
at alternative ways to pay our employees. Offering overtime 
simply is not an option.
    Mr. Carter. Okay, very quickly, I have a minute and a half 
left. There is one thing that we are missing on this panel 
today is small business. I am a small businessman. November 21, 
1988, I opened my first retail pharmacy. Dream come true for 
me. Went to three banks, not to compare interest rates, but 
instead, the first two turned me down. The third one finally 
went along with it and loaned me the money. And I want to ask 
you, Dr. Bernstein, how many businesses have you run in your 
career?
    Mr. Bernstein. Actually, I am running one now. I have a--
    Mr. Carter. Are you?
    Mr. Bernstein. Yeah, yeah.
    Mr. Carter. Is it a small business? Is this going to impact 
you?
    Mr. Bernstein. I have a self-employed business and I 
believe--
    Mr. Carter. Self-employed business?
    Mr. Bernstein. Correct. I have a self-employed business--
    Mr. Carter. So, do you have any employees?
    Mr. Bernstein.--along--let me finish, please. Along with--
    Mr. Carter. I will reclaim my time. Are you the only 
employee?
    Mr. Bernstein. I'm trying to answer your question, sir. 
Yes, I have my--
    Mr. Carter. You are the only employee?
    Mr. Bernstein. I work for a private employer in the 
nonprofit sector. I also have a self-employed business where I 
am the only employee and believe me, I hear a lot of the kinds 
of--
    Mr. Carter. So, you are not going to have to comply with 
the overtime rule. You do not have employees.
    Mr. Bernstein. I would be exempt from the overtime rule.
    Mr. Carter. You would be exempt. As I was--
    Mr. Bernstein. I have been--
    Mr. Carter. Sir--
    Mr. Bernstein.--part of small businesses where I did work 
was an exempt employee.
    Mr. Carter.--as I was exempt from the overtime rule when I 
opened my business and when I was working, not 40 hours a week, 
not 60 hours a week. I was working 80 hours a week. I did that 
for at least five or six years. The first year, I made nothing. 
The second, the third, the fourth year, I made half of what I 
had been making before. Now, where were those overtime rules 
then? There were no overtime rules then. Mr. Bernstein--Dr. 
Bernstein--
    Mr. Bernstein. I suspect you were exempt.
    Mr. Carter.--have you ever signed the front of a paycheck? 
You sign the back of a paycheck. You don't sign the front of a 
paycheck.
    Mr. Bernstein. No, that is not true.
    Mr. Carter. There is a big difference.
    Mr. Bernstein. That is not true. I have--
    Mr. Carter. That is true, sir.
    Mr. Bernstein.--various business endeavors where I--
    Mr. Carter. And I doubt that anyone who has had an impact 
on these rules--
    Mr. Bernstein.--have had to sign the front of the 
paychecks.
    Mr. Carter.--signs the front of the paycheck. They sign the 
back of--
    Chairman Kline. The gentleman's time has expired. Mr. 
Pocan.
    Mr. Pocan. Thank you, Mr. Chairman. Well, I guess I am a 
little surprised that we are having this hearing with the name 
it has rather than something like Overtime Rule Long Overdue. 
Instead, we are having one to question exactly what it is 
about. And I do have to agree with Mr. Carter on one thing. You 
know, there are about 187,000 people in my district who will 
get a raise out of this. I think your state, you are going to 
get about 493,000, but when you said it would be good to have a 
small person up here, I say that all the time. So often we get 
attorneys and this time we do not have all attorneys, but 
often, we do not get people actually impacted.
    And I think that is one of the questions I lead off with 
right away with Mr. Bernstein. If I understood you correctly, 
of the rule, are you saying in answer to Mr. Polis' question 
that it is about one-half of a percent of people affected are 
in the university arena and under 1 percent in nonprofit and 
the rest are small businesses?
    Mr. Bernstein. Well, what I said was--
    Mr. Pocan. Well, not small business, but other traditional 
business models.
    Mr. Bernstein. I was not saying anything about the size of 
business. I was saying that the affected workers within those 
industries amount to less than 1 percent.
    Mr. Pocan. So, do you know if the nonprofit and the 
university sector of employees versus other private sectors, do 
you know what percent of that is affected by this?
    Mr. Bernstein. So, in the total economy, including all 
sectors, less than 1 percent of the workforce is affected in 
that, they are between the new and old threshold and they tend 
to work--they are current exempt and they tend to work 
overtime. That is less than 1 percent.
    Mr. Pocan. Sure, the question, though, is how many of that 
are in businesses--
    Mr. Bernstein. In small businesses?
    Mr. Pocan.--other than the U.W.--other than universities 
and nonprofits?
    Mr. Bernstein. Oh, the vast majority.
    Mr. Pocan. See, that was the question because I think that 
is the problem is by not having small businesses here, it is 
almost like a Trojan horse, right? We are bringing in some more 
sympathetic industries, you know, nonprofit universities with a 
part of the rule, but we are not talking about the people that 
think it is okay to offer someone with a family of four a sub-
poverty wage to work overtime. And that is exactly what that 
current level is set at. It is a sub-poverty wage for a family 
of four. So, four million people immediately and millions of 
others will benefit by this rule and yet the folks we brought 
in, quite honestly, there are other issues around.
    I heard you, Ms. Sharby, and I heard you loud and clear. 
You said Medicare and Medicaid funding, there is no increase 
expected in the near future. Would you like to have an increase 
in those funds that come to your organization? It is a simple 
yes or no.
    Ms. Sharby. Yes, I think it would be helpful.
    Mr. Pocan. Thank you. And I think the other thing we heard 
was from Mr. Rounds, you were talking specifically about it was 
going to cost $3 million to do it, but I understood right from 
some other previous comments since 2008, there has been, is 
that correct, a 22 percent cut to K.U. from your State budget?
    Mr. Rounds. That is correct. I do not remember the exact 
percentage, but that is about right.
    Mr. Pocan. So, you know, Mr. Chairman, I guess what I am 
getting at is when we look at the macro level of, you know, at 
first, I think it was 354 people then you just told us 92 were 
going to get the increase anyway because they are postdocs, 
they will be getting it through NIH, et cetera. So, we are 
talking about 262 people left, but you got a 22 percent cut to 
your budget from your State. I have a state that is doing the 
same thing. They just cut $250 million from the university.
    Let's look at the big picture here. And the big picture is 
we should have a hearing, quite honestly, on all these state 
institutions that have not lived up to their obligation to 
their students in publicly funded universities. I have seen 
articles on this. That is a much bigger dynamic than the 262 
people that are going to be affected there.
    And, Ms. Sharby, just a quick question on the one-quarter 
of 1 percent of your budget that you are going to need to 
comply with this. Does that affect people in all four states or 
just New Hampshire?
    Ms. Sharby. All four states.
    Mr. Pocan. So, at four states we have the opportunity to 
give people a wage increase who work for your organization for 
a really small amount of money. So, I think the whole 
contention around who we have here before us does not really 
address the fact that there are a lot of small businesses out 
there and not even small, it is big businesses, who-- fast 
food, et cetera, who are paying people again at sub-poverty 
wages that would have to work and not get paid for overtime for 
a family of four. That is a real issue and having this 
increase, Mr. Bernstein, if I remember right, for decades, 
wasn't it adjusted for inflation, wasn't the rate about a 
thousand a week that was previously offered?
    Mr. Bernstein. Yeah, if you go back to 1975 and you put it 
into today's dollar, the threshold was $1,100 per week, about 
$57-, $58,000 per year.
    And if I may make one quick other comment, I think it would 
be a mistake to assume that the general perspective of 
nonprofits and higher ed is represented on this panel today. 
There are two statements out today, one from a representative 
of higher ed, one representative of nonprofits, very much in 
support of this rule. So, our draw today was very much tilted 
to our tired and nonprofits that are against the rule, but do 
not be misled because there are many of those institutions that 
are very supportive.
    Mr. Pocan. And thank you for saying that because there is a 
list of, I think, a few hundred folks, organizations that are 
supporting the rule as well. I yield back my time.
    Chairman Kline. The gentleman yields back. Mr. Allen.
    Mr. Allen. Yes, thank you, Mr. Chairman, and, of course, I 
come from the small business world as well and what my 
understanding was as far as salaried employees was that was 
something that you did to reward them for their achievement. In 
other words, you guaranteed them basically 40 hours a week of 
work and they could count on that salary. And then, of course, 
we also had incentive pay if they performed beyond their 
expectations. They received compensation as well and many 
times, in our business the compensation exceed the actual 
salary. And, of course, there was no--they didn't punch a 
clock. I mean, you know, their time was their time. And so now 
I am assuming that what we are going to do is we are going to 
have this compliance issue as far as these people are 
concerned.
    My biggest concern is the growth of this economy and, you 
know, the economy, it's not growing. As part of Economy Study 
Incorporated, this rule has discovered that many employees will 
potentially decrease and employers will potentially decrease 
employees eligible for overtime protections, base salary and 
decrease overtime hours work to compensate. In a time of slow 
economic growth, when the government should be promoting policy 
that creates jobs and grows the economy, why is DOL encouraging 
further regulation that will decrease economic output and 
overall GDP growth?
    Mr. Passantino, you want to answer that question?
    Mr. Passantino. The question as to why DOL is doing this?
    Mr. Allen. I mean, at a time when our economy is basically 
stagnant. We are growing less than 2 percent sometimes we have 
quarters with 1 percent, some quarters less than 1 percent. I 
mean, how do we get this economy to a 4 to 5 percent growth? I 
mean, I don't see how this rule is going to help.
    Mr. Passantino. I am not an economist and on a 
macroeconomic level, I do not have any real insight into that. 
What I can say is that employers who I have had discussions 
with recently, really are struggling with how they are going to 
implement this and the decisions that they are going to have to 
make, whether they are going to be able to afford to raise 
someone's pay; whether they are going to have to reduce salary 
on the front end so that they can accomplish the goal of 
getting to the same total compensation at the end of someone's 
work week.
    I would also like to say that the concept that a salaried 
exempt employee earns $0 after 40 hours in a week is a fallacy. 
And the simple fact of the matter is that employee earns the 
salary when they work hour one. So, by that logic, they also 
get paid $0 for hour two and hour three and hour four, all the 
way up to however many hours they work in that work week. That 
is the point of the salary. It covers work from when you start 
to when you end in any particular work week.
    Mr. Allen. Mr. Rounds, as far as your university, I mean, 
again, you know, you are trying to educate people to go get a 
good job. How is this going to affect your ability to do that? 
I mean, are you going to have to cut back on the number of 
students, or are you--what are you going to do to deal with 
this?
    Mr. Rounds. Sir, as I mentioned, we will likely change the 
status of many of the employees that are impacted by the law.
    Mr. Allen. Many of those hourly, to an hourly rate?
    Mr. Rounds. Move them to a nonexempt status, so they 
would--for anything over 40 hours that we have to pay them 
overtime. As Dr. Bernstein has pointed out, there are multiple 
options that we have, but the bottom line is anything over 40 
hours we have to pay them. And if that is true, many of these 
employees right now have very flexible approaches to doing 
their jobs. And those flexible approaches are tied to meeting 
the needs of students and our concern is that they will lose 
that flexibility and, therefore, they will not meet the needs 
of the students in the same way, which obviously reduce the 
services and impacts the quality of the education that we can 
provide.
    Mr. Allen. Well, I am just about out of time. Ms. Sharby, I 
want to tell you how much I appreciate what the Easter Seals 
does. I am a former president of the Augusta Easter Seals Board 
and great work. We are actually making folks who basically 
cannot do a job. We are teaching them how to do jobs and 
putting them to work. And I think that is what America is all 
about and I appreciate your service. I yield back.
    Chairman Kline. The gentleman yields back. Mr. Takano.
    Mr. Takano. Thank you, Mr. Chairman. The Department of 
Labor's update to the overtime rule is long overdue and, 
according to the Economic Policy Institute, would benefit 
1,076,000 working people in my home state of California. I 
would like to point out that this update will directly benefit 
my colleague, Mr. Allen's state, by 493,000. Nearly half a 
million people of Mr. Allen's state would benefit from this 
rule.
    The overtime rule is one of the most significant actions 
the administration has taken to support working families and 
fight income inequality. While we can get bogged down in 
details, it is important not to lose sight of the millions of 
workers and their families the rule will help, workers such as 
Soledad, a member of Mom's Rising and a mother of four from 
California. Soledad wrote in support of the rule saying, ``I 
work as a salaried employee and always work more than my 
regular 40 hours a week. My usual weekly hours can amount to 50 
or 60 hours a week and I do not get paid for the extra time. 
Sometimes I work 12 hour days without compensation due to being 
salaried. This has got to stop for people that work more than 
40 hours a week. Overtime takes away the quality of life with 
our families. We are too tired to do anything with our families 
and are still not being compensated.''
    According to the Economic Policy Institute, 12.5 million 
salaried workers such as Soledad will directly benefit from the 
rule. It helped 6.2 million women, 4.2 million parents, and 5.5 
million workers between the ages of 35 and 54.
    Well, changing gears, as we have heard this morning, the 
FLSA does not contain a specific exemption for nonprofit 
organizations, but that does not mean that there is no nuance 
in how the rule will apply to nonprofits. Dr. Bernstein, can 
you provide some examples of nonprofit institutions? Are all 
nonprofits small entities that are engaged in charitable work?
    Mr. Bernstein. Some nonprofits, and this is something I 
speak to in my testimony, including social welfare and some 
educational institutions are exempt based on characteristics of 
the institutions themselves and the workers within them. 
Although typically, somebody in there is probably going to be 
nonexempt. The DOL has worked hard, however, to both provide 
guidance and accommodate some of these concerns, as is 
mentioned for the Medicaid funded providers is a service for 
intellectual development disabilities, the new rule does not 
take effect for three years and, in addition, higher education 
institutions worry about the effect of their postdocs are 
comforted by this national research award point I have been 
making where NIH will raise the grant level to the new higher 
cap.
    Mr. Takano. Okay, as a follow-up, can you talk about 
enterprise coverage and the types of nonprofits that are exempt 
under the provision?
    Mr. Bernstein. Sure. Based on the nature of their 
activities and whether they involve revenue-generating sales of 
above half a million dollars. Some nonprofits or individual 
workers at those nonprofits may be exempt from the new rule. 
This has a lot to do with the extent to which you are operating 
something that looks a lot like a business within a nonprofit. 
So, to the extent that you are generating revenues by making 
sales that go over a half a million dollars, you would be 
covered, but if you are doing volunteer activities, you are not 
engaged in the type of work that looks like a business that 
would be covered, then your institution, your establishment may 
be exempt.
    Mr. Takano. So, plenty of nonprofits are exempt and it is 
just that, that $500,000 level. Thank you. It is important that 
we look at the numbers here. According to the Department of 
Labor analysis, only 1 percent of employees at nonprofits who 
will be affected by the rule regularly work overtime. Is that 
correct, Dr. Bernstein?
    Mr. Bernstein. That is right.
    Mr. Takano. Well, it is an adjustment, but it is not a 
burden nonprofits cannot handle. In fact, I would like to ask 
unanimous consent to insert in the record a letter from nearly 
140 nonprofits that write in support of the final rule and who 
are committed to complying with the new regulations.
    Chairman Kline. Without objection.
    Mr. Takano. Thank you. Dr. Bernstein, would you like to add 
a little more to just the idea of the number of nonprofits that 
can comply?
    Mr. Bernstein. Well, I think that the points that we have 
heard from both Ms. Sharby and Mr. Rounds are very important in 
the following sense. Their problem is not with the rule, it is 
with the fact that their funding has often been cut. So, if you 
are talking about an education system that is taking a 20 
percent cut in its support, they are going to have all kinds of 
problems of which this rule is the least of them. What we are 
trying to do here is establish fair pay for fair work and that 
is a separate problem from the fact that, in many ways, 
Congress and State legislatures, especially in Kansas where 
they have aggressively cut taxes, are underfunding their 
university system.
    Chairman Kline. And the gentleman's time has expired. Mr. 
Thompson.
    Mr. Thompson. Mr. Chairman, thank you so much for this 
hearing. You know, to me, I have heard the word ``poverty'' 
mentioned a lot and I would be hard pressed--I do not think 
there is anyone on either side of the aisle is not concerned 
about that issue, is not concerned about providing 
opportunities for--a greater opportunity for success, for 
realizing the American dream, which really is greater 
opportunity. But the pathway to greater opportunity and out of 
poverty is not an arbitrary executive branch dictate. I am 
sorry. It just does not work. Those cookie cutters rarely work. 
They usually wind up with unintended consequences and make 
matters worse for people and that is what we are trying to 
defend and push back on here.
    To me, rather it is really looking at a pathway out of 
those situations, a pathway for Soledad, a mother of four that 
I just heard about, and I have met lots of those folks just 
like that. You know, around my congressional district, they 
need a pathway. They need something like, quite frankly, I 
shamelessly plug it, a career in technical education training. 
And with the Chairman's support, I think everybody on this 
Committee is going to have an opportunity to talk more about 
that in the days to come here, hopefully, before we leave, you 
know, before that third week in July.
    And so, you know, my first question is for Ms. Sharby. 
Tina, I have just this past weekend, I had the privilege of 
speaking at the closing ceremony at the Pennsylvania Special 
Olympics Games, 2016 Games, which I love organizations like 
yours, like Special Olympics. I am a long-time Scouter, so I 
look at the hours, the evening hours, the weekends I have been 
involved doing my part as a volunteer. I know how important it 
is to fund the mission, you know. And I look at the good that 
it has done, which is amazing with those resources, and I 
looked at the quality of individuals.
    Last week, I was at a Goodwill facility up in Erie County 
and I look at the job training that goes on there. So, my 
question for you is, first of all, thank you for your 
tremendous work you do as a part of the nonprofit community. 
And organizations like yours, I have mentioned some of those, 
Easter Seals, Special Olympics, Goodwill, the Boy Scouts of 
America, the Girl Scouts, they help boost the quality of life 
for so many people and families every year. And as legislators, 
we should be working tirelessly to support your mission, not 
making it harder for you to succeed.
    Given the widespread presence of Easter Seals across the 
United States, and as a former rehab professional, I work very 
closely with the Easter Seals, when I had a real job is the way 
I like to describe it. How will the final overtime rule affect 
the ability of individuals to access crucial services, 
specifically in rural and underserved areas?
    Ms. Sharby. Thank you for the question. It is a really good 
question. I can give you the example of our care coordinators 
and our military and veteran services programs. The individuals 
that we serve work very closely with the care coordinators and 
they develop a relationship where trust does not come very 
easily amongst that population that we serve. So, we are 
looking at potentially having to develop an on-call system 
where only one of eight of our coordinators would be on call 
for the week because we cannot afford to pay the overtime. It 
is a non-funded program that we run.
    The concern that we have about that is now the person that 
needs the emergency help maybe in the middle of the night, 
losing their home or thinking about suicide, they are going to 
that on-call person who might not be their care coordinator, 
they are not going to want to talk to them. They want to talk 
to their care coordinator. That is where we think that the 
services are really going to impact the individuals that we 
serve.
    Mr. Thompson. How important is that at a time of crisis, 
because that is what you have described? And you cross that 
over to agencies, nonprofits are facing manning suicide 
hotlines and services, children in youth, how important is it 
to have the right person available at time of crisis when 
people actually reach out?
    Ms. Sharby. It is literally the difference between life and 
death.
    Mr. Thompson. I do not think an arbitrary executive--it 
would be a shame to see the loss of lives as the result of some 
executive branch action.
    Mr. Passantino, the Department of Labor's final overtime 
rule includes an extremely narrow, non-enforcement provision 
for entities which provide Medicaid services for disabled 
individuals and facilities of 15 or fewer beds. Given your 
expertise, can you speculate on how many employers or employees 
this provision would actually help? And additionally, would 
these employers be protected from legal action during this non-
enforcement period?
    Mr. Passantino. I am not sure to your first part of the 
question about how many will be impacted, but I suspect it is 
very small. The more consequential pieces, a non-enforcement 
policy does not mean the regulation is not in effect. It means 
that the Department of Labor is not going to take any 
enforcement action against someone based on those regulations. 
The private rights of action continue to exist and that non-
enforcement policy does nothing to the private right of action.
    Mr. Thompson. So, the bull's eye would be put on the backs 
of those agencies for frivolous litigation. Thank you.
    Chairman Kline. And the gentleman's time has expired. Ms. 
Clark.
    Ms. Clark. Thank you, Mr. Chairman, and thank you to all 
the panelists for joining us today. I have to say, I want to go 
back to the comments of my colleague, Mr. Pocan, and say I feel 
like we are missing in this discussion some of the macro 
issues.
    Of course, it is critically important that our veterans, 
that the clients you serve, Ms. Sharby, are able to talk to 
their case manager when they are in crisis and that the 
students--and that we are lucky enough just yesterday to join 
K.U. in a discussion of the critical importance of funding 
scientific research at our incredible universities across the 
country, including Kansas. But it is not the overtime 
regulations that are going to cause a loss of life, as my 
colleague just stated. It is so many other economic pressures. 
And if we want to create a robust economy one of the best ways 
to do it is to help address income disparity, to help address 
stagnant wages, the overwhelming cost for many families of 
child care and of housing and transportation.
    These are the big macro factors that are coming to play, 
and really causing a hard time for many nonprofits to deliver 
their critical services, of which Easter Seals, certainly in 
New Hampshire and around the country, delivers critical 
services as do our institutions of higher education, and those 
issues are the ones that we need to offer this critical relief.
    In Massachusetts, with the overtime, new regulations are 
going to mean for working people in my State are 262,000 people 
are going to get a raise. That is a real benefit. That is a 
real help to all of you at the table. In Mr. Thompson's state 
of Pennsylvania, 459,000 people will be able to have a raise 
due to these regulations.
    So, I think that we have to remember to look at the overall 
economic picture and what are those levers that we need to move 
to bring that relief. Because I don't believe that it is the 
overtime rules that are going to cause your ultimate staffing 
and your ultimate woes at K.U.
    Dr. Bernstein, I wanted to start large and then go to 
detail. But I do believe that this is a critical piece of 
addressing income inequality as you mentioned in your 
testimony. What are some other factors and policies that we 
should be looking at to address that?
    Mr. Bernstein. The minimum wage has been stuck at $7.25, 
this was mentioned earlier, at a Federal level since 2009. 
Raising that would certainly help lift the fortunes of low-
income workers. There is some bipartisan support for another 
idea that would help low-income workers, which is expanding 
their earned income tax credit to reach childless adults who 
now get very little from that.
    In terms of tightening up the job market, we really could 
use a deep dive into infrastructure investment. The erosion of 
unions has really hurt the bargaining power of lots of middle 
class workers. But I very much take your point about the 
connection to the overtime rule as well. You remember the chart 
from my testimony shows that when inequality was a lot lower 
than it was today the threshold was a lot higher, and vice 
versa.
    Ms. Clark. And specifically, I also think that one of the 
pieces that we are going to help address is the pay equity gap 
for women. What do you see the role of these new rules in 
helping with that as well?
    Mr. Bernstein. Well, a slight majority of those affected by 
the new rule are women. By the way, a much more significant 
majority affected by a higher minimum wage are women, because 
women are disproportionally low wage workers as well. So I do 
think that this is a help in terms of gender pay equity.
    I would also note, not on the gender side, but Mr. Rounds 
might appreciate this, according to DOL numbers, 80 percent of 
the workers, of the affected workers, helped by this increase 
have at least some college education. So it is actually a real 
boon to the people that K.U. and other institutes are training 
and sending out into the workforce, where they will be 
compensated for their overtime by dint of the new rule.
    Ms. Clark. And I have certainly heard--I appreciate you 
mentioning the minimum wage. It is something I certainly 
support, but we also have to look beyond that and look at our 
higher and mid-income earners.
    Mr. Bernstein. Absolutely.
    Ms. Clark. And I think this gets to that point.
    Thank you very much and I yield back.
    Chairman Kline. The gentlelady yields back. Mr. Grothman, 
you are recognized.
    Mr. Grothman. Okay, I am sorry. I am updating my notes 
here. I am just finishing up on the questions of Congressman 
Takano. I got to talk to him later about how many men are going 
to be helped by this new rule. Maybe I missed it.
    Okay, questions. I am trying to think how this rule would 
impact--I look at past jobs I have had. I have heard from the 
golfing industry, but there could be a variety of jobs that you 
have it is a lot busier one time of year than another time of 
year. Maybe it gets busy at the end of the year. Maybe it gets 
busy during tax season, whatever.
    And, you know, when you go into the job there is sometimes 
you are going working 50 hours a week and other times you might 
just be hanging around the office and not getting a lot done. 
Well, that is because of the expert on the bill.
    Dr. Bernstein, how do you think this affects how those sort 
of jobs work if I hire somebody knowing that some days are 
going to be super busy, other days not so busy? I think it is 
kind of going to mess up those businesses and hurt those 
employees. What do you think about that there?
    Mr. Bernstein. Well, I disagree. I mean, I think you have 
to look at the record. Certainly, the last time we increased 
the threshold, the slight increase in 2004, you can see that on 
my chart, we didn't see those kinds of impacts. I do think that 
when it comes to people with variable schedules, as you 
suggested before, remember the rule does not get invoked until 
they cross 40 hours. So there are ways to work around that for 
employers.
    Mr. Grothman. Right, well, not to cut you off, I think 
there are jobs in which you are expected sometimes to work 55 
hours a week and other times you can take off and work 28 hours 
a week. And that is the nature of the real world. You know, 
there are times that are busy, times not so busy. You know 
getting involved, you are a salaried employee. There are 
sometimes you are going to work and get it done and sometimes 
they don't. It seems it is going to make it very difficult for 
those sort of workers.
    Mr. Bernstein. Again, I mean, I think you make great points 
and I agree with your points--
    Mr. Grothman. I think so, too.
    Mr. Bernstein.--and I agree with the way you characterize 
this, but if you go back to the 1960s, 1970s, remember the 
threshold was $1,100 in today's dollars and the unemployment 
rate was lower than it was today. Productivity growth was 
faster. So there is no evidence of the kinds of disruptions 
that you are suggesting.
    Mr. Grothman. Okay, I will give you another thing that 
concerns me when I think of people in these jobs. What it is 
going to do is it is going to put pressure on to get out the 
door at 4:30 or 5:00, or whatever. There are times when you are 
working on a project where you might say, jeez, in another 
half-hour, hour I might get this right. I just want to make 
sure I get it done right.
    Instead, you are going to get pressure from your employer 
to get out the door. Are you afraid it is going to result in a 
worse work product because this is what is going to happen?
    Mr. Bernstein. Well, again, if we are talking about--the 
kind of workers you are talking about sound a lot to me like 
people like myself and maybe yourself as well. You know, we are 
exempt, so that is not really relevant.
    Mr. Grothman. No, no, no. All sorts of people under $52-, 
whatever it is, $51,000 want to get their job done right.
    Mr. Bernstein. Forty-seven.
    Mr. Grothman. Want to get their job done right. Okay, if I 
am making 46 grand a year and I am hired to do something and I 
feel things are not getting done right and I want to hang 
around another hour to make sure that report is right--
    Mr. Bernstein. So I guess I don't see anything inconsistent 
with what you are saying. And again, I think you are raising 
great points. And the idea that worker has to be paid time and 
a half for that extra hour because there is something called 
the 40-hour work week that was enshrined in the Fair Labor 
Standards Act of 1938, and is more relevant today than it was 
then in my view, given the issues around bargaining power and 
the extent to which middle-wage workers have been hurt.
    Mr. Grothman. Look, if I have a job I want to make sure I 
get those things done right, Okay?
    Mr. Bernstein. Mm-hmm.
    Mr. Grothman. In part because of the customers, in part 
because of my boss. Okay, what you are doing here, or the 
people who put together this rule, are you creating an 
environment in which the boss feels you better get out the door 
at 4:30 p.m.
    So, put your employee in a position in which either I 
submit the report on a so-so, not sure it is right basis or get 
my boss mad by hanging around until 5:30 p.m. to go over it 
again to get it right? I mean, there are certain jobs that are 
salaried by nature, in which you work until you get it done. 
Are you not afraid you are putting those employees in a bad 
situation?
    If I am an employee like that, I want to hang around that 
business as long as I can, I want to grow with the business. I 
don't want to be in a position in which I have to choose 
between turning in a lousy report at 4:30 or getting my boss 
mad at me because I had to hang around until 5:00.
    Mr. Bernstein. Well, with respect, I think we have to 
distinguish between the kind of compelling story you are 
telling me and the actual numbers about who is going to be 
affected here. We are talking about 3/100 of a percent of the 
national payroll.
    Now, you may just believe that we should not have a 40-hour 
work rule for covered workers under the FLSA and that is just a 
fundamental disagreement between us, but in fact the economy 
has performed perfectly well with thresholds far above today's 
levels.
    Mr. Grothman. I will give you another question. It occurs 
to me that what is going to happen here is you are going to 
make the workplace less friendly. Okay. Right now, I think 
sometimes people may hang around past 4:30, maybe it is a more 
easy going workplace. Maybe at the end of the day employees are 
talking with each other about who knows and they know they can 
hang around until 5:30 p.m. and 6:00 p.m. and get the job done, 
if they have to work to 5:15 they can talk about, I don't know 
where you are from here, the Redskins or whatever.
    Instead it is going to be, we have to get out the door by 
4:30 pm. Do you not think it is going to make for a less 
friendly, more intense work environment?
    Chairman Kline. All right, the gentlemen's time has 
expired. Ms. Davis.
    Ms. Davis. Thank you, Mr. Chairman, and sticking with some 
of the flexibility issues there, because I think that we have 
the notion that somehow because we are in the 21st century and 
that we do use electronics and we do provide different ways of 
flexibility that this would all stop. And, you know, Dr. 
Bernstein, you were starting to comment on that.
    Mr. Bernstein. Yeah.
    Ms. Davis. Can you tell us why is that not going to be the 
case?
    Mr. Bernstein. Well, I mean, I guess I would say first of 
all, following up on the discussion we were just having, it 
does not really create a flexible or high morale or welcoming 
workplace when somebody is misclassified as an exempt worker 
because they are called an assistant manager and they work 5, 
10, 20 hours for zero extra pay when they should be getting 
time and a half overtime. In fact, as I discussed earlier in my 
testimony, instead of assertions about these flexibility 
issues, research done by Professor Lonnie Golden has found that 
if you actually look from survey research at the kinds of 
flexibility, the sort of work-family balance flexibility that 
hourly and salaried workers have at around the cap, around 
$50,000, it is about the same. So there is no evidence that 
moving someone from nonexempt to exempt coverage would reduce 
their flexibility. What it would increase is their pay when 
they work overtime and that is critically important.
    Ms. Davis. Yeah, I think one of the points made also with 
the NIH is that many of our young scientists are going to be 
affected in a more positive way with this new rule rather than 
negatively.
    Mr. Bernstein. Well, that is a good point. I have talked to 
at least one postdoc who said he likes the rule a lot, in no 
small part because the NSF, as I have mentioned, is raising the 
grant level to meet the higher cap.
    Ms. Davis. Right. One of the articles--The New York Times 
had an article, just the other day. You all may be familiar 
with it without talking about the Prada Economy or the Prada 
Industry, and the fact that we do have a lot of low-wage but 
high-potential jobs that young 20-somethings, for example, 
might be willing to take. They are obviously engaging with 
people in a way that pushes them.
    They want to show their aggression. They want to show that 
they are ambitious and they are going to stay on the job just 
as long as they can in the hopes of looking good, quite 
frankly. That is what people do, and that is perfectly 
acceptable. But we also have to know that those kinds of jobs 
may possibly affect demographics differently by those who can 
afford to do that more than those who cannot. Maybe young 
people can do it more, especially if they have a lot of support 
at home, versus people who have a family at home and trying to 
work in that fashion does not suit them. Do you think that, in 
fact, as we are looking at these issues that some of these new 
overtime rules could possibly change the socioeconomic 
diversity of the workforce in this so-called Prada Industry?
    Mr. Bernstein. Well, I certainly think it is possible. I 
think it is important. I don't know that we have quite gotten 
to this in the hearing so far, to note the rule will 
disproportionally help some of the types of workers you are 
talking about; black and Hispanic workers are disproportionally 
affected. They are 21 percent of the salaried workers, but 28 
percent of those who would directly benefit from the new 
threshold, and millennials between the ages of 16 and 34 will 
also disproportionally benefit. They are 36 percent of the 
affected group and 28 percent of the workforce. More than a 
third of all workers with less than a college degree will be 
directly affected and that will also help over seven million 
children. And as I mentioned there is a slight majority of 
workers who are helped who are women.
    Ms. Davis. Right. What is the benefit of that? Of 
diversifying?
    Mr. Bernstein. Well, I think there is a tremendous benefit 
to that diversity. If I may wax philosophical for a slight 
second here, I am struck by the fact that we are now in a 
country that has twice elected an African-American President 
and now has nominated to a major party for the first time a 
woman. I think this type of diversity is extremely healthy and 
I also think the extent to which minority workers have been 
hurt through the erosion of labor standards, whether it is 
minimum wages or the overtime threshold, cannot be over-
exaggerated either. And this rule is an important correction to 
that.
    Ms. Davis. Thank you. I appreciate that and I know others 
have talked a little bit about the work-life balance and 
whether there is something to be said for having people be more 
productive when that work-life balance does come into 
consideration. Would you all agree that there is something to 
be said for that?
    Mr. Bernstein. I would.
    Ms. Davis. I see some nods, but, okay, all right, thank 
you. We do need to, I think, realize that in some ways this 
really is forcing people to manage the productivity in 
businesses and I think that is very positive for all of us.
    Chairman Kline. The gentlelady's time has expired.
    Ms. Davis. Thank you, Mr. Chairman.
    Chairman Kline. Mr. Rokita.
    Mr. Rokita. I thank the Chairman. Mr. Passantino, what do 
you think the best way is to manage productivity in a business?
    Mr. Passantino. To let people work.
    Mr. Rokita. Manage to a profit motive perhaps?
    Mr. Passantino. Sure. I mean they want to be profitable. 
That is the point of the business.
    Mr. Rokita. Efficiency, manage to effectiveness, those 
kinds of things.
    Mr. Passantino. Sure.
    Mr. Rokita. Those principles apply to urban areas as well 
as rural areas, I grasp, correct?
    Mr. Passantino. True.
    Mr. Rokita. I represent a lot of rural areas, a lot of 
suburban areas, a lot of small towns I am very proud of and 
they are great places. What is the effect of this rule on 
places like that?
    Mr. Passantino. I think it disproportionally affects those 
rural, nonurban areas. We have already seen clients who have--
it is the same position, people are performing the same work. 
So, there is no question the duties qualify for the exemption. 
Right? So the duties tests have not changed. They are exempt 
now; they will be exempt under the revised salary test.
    But some of their workers work in urban areas and earn an 
excess of $47,000, and some work less--I am sorry, earn less 
because they live in rural areas. So what you have is the same 
exact position and people earn above and below the new 
threshold, which fundamentally indicates that not everybody 
earning under $47,000 is not performing exempt work. There are 
plenty of people under 47,000 who are performing exempt work, 
which is sort of the point of the salary test.
    The salary test is supposed to screen out all of the 
clearly nonexempt people and then you go to the duties test to 
see whether they meet the rest of it.
    So, what you have is a situation where you are including 
people who clearly meet the duties test and now employers have 
to decide what is, frankly, not a great decision. They have to 
raise everybody up to that $47,000, which means that they are 
going to have to raise the people over $47,000 as well. They 
can convert the entire workforce to nonexempt in that position, 
which is not the best solution for them, or they can have a 
split position and they can have some people being nonexempt 
and some being exempt and that is a recipe for disaster.
    Mr. Rokita. Yeah, because in your experience inside that 
workforce, folks that you represent, what would that do?
    Mr. Passantino. Well, you are going to run into situations 
where the exempt person can stay until 5:30 or 6:00 p.m. and 
get the job done. The nonexempt person is going to be limited 
in their overtime hours.
    Mr. Rokita. To Mr. Grothman's earlier point, that cannot be 
good for morale. I mean, that cannot be good for running a 
business or working at one like that.
    Ms. Sharby you are nodding your head. I will indicate that 
for the record. Do you want to add something?
    Ms. Sharby. Well, I struggle because I am honestly not sure 
how Easter Sales is going to be able to absorb these changes. 
We run with maybe a 1 percent budget margin. The difference 
between in the black and being in the red, so--
    Mr. Rokita. And just to be clear in my opening comments you 
are a nonprofit.
    Ms. Sharby. Nonprofit.
    Mr. Rokita. So the ``profit motive'' is the ability to stay 
in business, right?
    Ms. Sharby. Correct.
    Mr. Rokita. If you are not making positive revenue--if you 
are nonprofit you cannot be there. Correct?
    Ms. Sharby. Correct. And currently in the State of New 
Hampshire we have a 2.6 percent unemployment rate. So it is not 
a matter of saying that I will bring in more employees and not 
pay the overtime. I just do not have employees to bring in, 
into the State. So the moral issue with our staff is 
significant. We have people who feel that, just yesterday, 
said, what does that mean to me? I am used to going and helping 
out at certain events. I like to go to some of the kids' 
birthday parties or graduations.
    Mr. Rokita. Nope. Nope, cannot do that.
    Ms. Sharby. I cannot pay you to do that now. And that is 
really very tough to be--and it impacts the quality of the 
services we are able to provide.
    Mr. Rokita. And so my question about the rule nature of my 
district, I think, correct me if I am wrong, either the two of 
you that spoke already, applies regionally?
    Ms. Sharby. Right.
    Mr. Rokita. I mean, there are differences in regions of 
this country that rule or not that would--what you are 
testifying to would have the same effect. Is that correct, Ms. 
Sharby?
    Ms. Sharby. That is correct. So if an average salary in New 
Hampshire is $35,000 and we used to have business in New York 
that same salary would equate out to a little over $50,000 in 
New York. But yet, New Hampshire is forced to comply with the 
higher salary.
    Mr. Rokita. Unbelievable. Mr. Passantino, last word.
    Mr. Passantino. I think that is exactly right. You are 
going to see differences in how people are treated based on 
where they are or employers are going to have to make some very 
difficult decisions.
    Mr. Rokita. Central planning at its worst. I yield, Mr. 
Chairman.
    Chairman Kline. The gentleman yields back, Ms. Adams.
    Ms. Adams. Thank you, Mr. Chairman, and thank you for your 
testimony. The Department of Labor's update to the overtime 
rule is long overdue. And according to the Economic Policy 
Institute, it would benefit 425,000 working people in my home 
State of North Carolina. I want to begin by asking Mr. 
Passantino, you served in the Labor Department under President 
Bush. How much time were employers given to comply with the 
2004 change to the rule?
    Mr. Passantino. I believe the effective day on the 2004 
rule was 120 days. But that rule was really catching up, fixing 
some issues that had existed in the salary test. There were two 
tests at that time. One of them was basically nonfunctioning. 
No one used it. So it really was a catch-up whereas this is 
clearly jumping over a large number of people who perform 
exempt duties. And so it is going to be far more difficult 
under the current rule for employers to come into compliance.
    Ms. Adams. But the current rule, though, does provide an 
additional two months to come up with compliance, which was 
beyond what the Bush Administration provided for, is that not 
correct?
    Mr. Passantino. The current rule provides approximately six 
months, I believe, for employers to get into compliance.
    Ms. Adams. Okay, so that is more. Mr. Bernstein, we talk 
about a better outcome for employees. You have made some 
comments about that. Can we, with the better outcomes for 
employees, can we expect that this will lead to better outcomes 
for employers?
    Mr. Bernstein. Well, certainly in the past, as I have 
mentioned, in fact, I would take issue with one of the things 
my co-witness Mr. Passantino just said. The new rule simply 
partially replaces the extent to which inflation has eroded its 
value since the mid-1970s. If you look at the value in today's 
dollars of the overtime threshold, the level, it would have 
been about $1,100, $57-, $58,000 per year. Now we are talking 
about $913 per week or about $47,000 per year. So it is a 
partial adjustment. And, in fact, to speak to your question, 
when the rule was in effect unemployment was low, GDP growth 
was faster than it is today. Productivity growth was faster 
than it was today. I don't know that worker morale was 
negatively impacted at all.
    In fact, one of the things that numerous analysts predicted 
from looking at the rule based on past history-- not based on 
assertion, not based on what you think might happen, but based 
on research driven by what has happened in the past when we 
have changed thresholds-- the expectation is that there will be 
some number of new jobs created at straight-time pay. Maybe 
100,000 according to Goldman Sachs, maybe 150 or so according 
to the National Retail Federation. I think this is positive for 
the economy and positive for the workplace.
    Ms. Davis. Thank you, Mr. Rounds, and thank you for your 
service, sir. You mentioned that workers cared more about their 
exempt status than getting paid for the time they work. Well, I 
find all the discussion around higher education fascinating 
because I served 30 years, 40 years in academia. But, you know, 
the people that I talk to really find it demeaning and 
demoralizing to be asked to put in extra hours at work for no 
pay. What would your response be to that?
    Mr. Rounds. First, I would like to say thanks for your 
service in academia. Obviously it is essential to the country 
and we appreciate your willingness to work in the academic 
sector. I would say that as I look at the employees at the 
University of Kansas and I look at the ones that we are talking 
about who are primarily responsible for providing services to 
students, the ones that would be impacted by this legislation 
is that their passion is for positive outcomes for students. 
They will lose some of their workplace flexibility and their 
lack of ability to meet the needs of students will be of great 
concern to them. I have talked in my testimony that is most 
important, the culture of higher education and being able to 
serve our primary customer, our students. That will be eroded.
    Ms. Adams. Thank you, Mr. Chairman. I believe I am out of 
time. I yield.
    Chairman Kline. The gentlelady yields. Mr. Jeffries.
    Mr. Jeffries. Thank you, Mr. Chair. Mr. Passantino, would 
you agree that the 40-hour work week has become a classic part 
of the American Dream?
    Mr. Passantino. I do not know that I would describe it as 
that.
    Mr. Jeffries. So it was enacted into law in the late 1930s 
as part of the New Deal, which was part of the effort to make 
sure that we have a more even playing field in terms of working 
class, middle class Americans. Correct?
    Mr. Passantino. It was enacted in the late 1930s, I think, 
to make it more expensive for people to work more than 40 
hours.
    Mr. Jeffries. You think the objective of President Franklin 
Delano Roosevelt was to make it more expensive for people to 
work more than 40 hours a week? That was his objective, part of 
the New Deal?
    Mr. Passantino. Well, the second part of that is that makes 
more people work for the same amount. So you can pay at a 
straight time.
    Mr. Jeffries. Now, you were part of the Bush 
administration, correct?
    Mr. Passantino. That is correct.
    Mr. Jeffries. And do you think that President Obama and his 
administration, his policies-- whether that the Affordable Care 
Act, whether that is the Dodd-Frank legislation that was passed 
into law, whether that is the overtime rule -have been job 
killing?
    Mr. Passantino. Have they been job killing?
    Mr. Jeffries. Right.
    Mr. Passantino. I think that they have.
    Mr. Jeffries. They have?
    Mr. Passantino. Yes.
    Mr. Jeffries. So, you spent time in the Bush 
administration, which brought us two unfortunate wars and tax 
cuts to benefit the wealthy and the well-off. But also, 
presumably, you made your best efforts to be part of an 
administration that was going to improve the employment 
situation in this country. Correct?
    Mr. Passantino. Correct.
    Mr. Jeffries. But the eight years under President Bush we 
lost 650,000 jobs, correct?
    Mr. Passantino. I do not know the figures.
    Mr. Jeffries. Okay. Under President Obama's seven and a 
half years we have actually gained 14 plus million jobs in the 
private sector, correct?
    Mr. Passantino. I do not know the numbers on that either.
    Mr. Jeffries. But you are here as an expert to talk to us 
about employment and the impact of this rule and you do not 
know these basic numbers, including the ones that relate to 
your time being spent in the Bush administration. Is that your 
testimony?
    Mr. Passantino. My testimony and my expertise is on 
advising clients how to deal with these issues and so on, on a 
very micro level. I have a very good understanding of how that 
works. On a macro level I don't have that data.
    Mr. Jeffries. So on a micro level, you think that the 40-
hour work week, which is working five days a week, presumably 
Monday through Friday, 9:00 to 5:00, is not part of the basic 
American Dream in terms of being able to work hard, earn a good 
living, but also be there as a father, as a mother, as a son or 
daughter to a parent or grandparent that may be ailing to have 
a good work-- life balance? You have a problem with that?
    Mr. Passantino. I believe that I am living the American 
Dream and I am not subject to a 40-hour work week, so, yeah, I 
think it's possible that the 40-hour work week is not an 
inherent part of that.
    Mr. Jeffries. Okay. Mr. Rounds, thank you for service in 
terms of working in the academic realm. Higher education is 
incredibly important. A few things you talked about that in the 
limited time I have I would like to touch on, you said that the 
University of Kansas is a not-for-profit public university. Is 
that correct?
    Mr. Rounds. That is correct.
    Mr. Jeffries. And so presumably, what you ultimately strive 
to do is provide some form of public benefit to your students, 
but also in the context of being part of the State government 
out in Kansas. Is that correct?
    Mr. Rounds. Correct.
    Mr. Jeffries. And you said 262 employees of Kansas 
University would be impacted by the overtime rule, is that 
right?
    Mr. Rounds. Actually 354, 92 of those are postdoctoral 
employees who we have made the determination to raise their 
salaries to the new threshold.
    Mr. Jeffries. Okay, so that means that they are actually 
going to put more money in their pocket at the end of the day. 
That will either go into the economy or go to the benefit of 
their families. Is that right?
    Mr. Rounds. That is correct. But at the same time, as we 
looked at the fixed grants that their principal investigators 
are responsible for managing is the concern. This has also been 
expressed by the Postdoctoral Association as we are not going 
to be able to maintain the same number that we have had in the 
past, which you can argue will have an impact on research.
    Mr. Jeffries. Okay. I mean, I would simply say I think K.U. 
is a great university, great basketball program. I mean, it 
does interest me that, I believe, Bill Self earns about 
$230,000 directly from the university and as I understand it $3 
million in total salary, and that the chancellor of the 
university earns approximately $510,000 per year. So I think 
maybe there needs to be a reassessment of priorities before the 
complaint is directed at the effort of the Obama administration 
just to make life better for working families.
    Chairman Kline. And the gentleman's time has expired. All 
time for questions has expired. I want to thank the witnesses 
and turn to Mr. Scott for any closing remarks he might have.
    Mr. Scott. Thank you, Mr. Chairman. As the gentleman from 
New York just indicated, in 1938,-- 1938-- Congress established 
40 hours as a normal work week. And if you make more than that, 
you are supposed to get time and a half. After 40 hours, if you 
work more, you are supposed to get more. The law covered about 
60 percent of salaried employees back then, but because we have 
not updated the laws we should have, now only 7 percent of 
salaried workers are covered. This new regulation will increase 
it to 33 percent.
    We've heard a lot from colleges. We have not heard enough 
about all the exemptions in colleges: teachers, grad students, 
many coaches, many academic administrators, all hourly 
employees not affected by this law. In fact, Department of 
Labor estimates that only 3.4 percent of college workers will 
be affected. In 0.5-- one-half of 1 percent would be both 
affected and usually work overtime. One-half of 1 percent of 
college workers. To honor the 40-hour work week you are only 
talking about one-half of 1 percent-- of workers that will get 
a little extra when they work over 40 hours.
    We also heard from Easter Seals honoring the 40-hour work 
week, rather than working people without pay after 40 hours 
would cost less than 1 percent of the budget. Suggesting that 
people are going to die because you cannot work people more 
than 40 hours is obviously absurd. And also you could be more 
honest; if you expect them to work 60 hours a week, you can 
restate their salary, expect them to make the overtime and they 
would get the eventual salary that they are expecting to get. 
But it would be more honest to say what it is for the 40 hours 
and more than that after that.
    Now, some of this Committee think that we should honor the 
40-hour work week, and if people work more than 40 hours they 
should get paid for additional hours. The rule means, as I 
said, one-third of salaried employees will benefit from the 40-
hour work week: up from 7 percent, but way under the 60 percent 
who were covered in the 1970s. And incidentally, businesses, 
colleges, and nonprofits complied with those regulations 
without complaint.
    So, Mr. Chairman, I hope that we will honor the 40-hour 
work week. We actually ought to get above the 33 percent I 
would have hoped they would have done more, but they've done 
what they've done.
    Chairman Kline. And the gentleman yields back. I thank him 
for his comments. It has been a good discussion today. I am 
always fascinated how we hear statistics here. We've had a 
number of my colleagues on this side of the aisle have been 
citing how many more people are going to be getting raises and 
work from a far left-leaning think tank. But that is just the 
world we live in here.
    I very much appreciate the expertise of the witnesses. You 
are all very, very fine witnesses. We, and most of my 
colleagues on this side, are entirely for people getting fair 
pay for their work, but we have great concerns, as we heard 
from some of my colleagues today, that this rule is going to 
have a negative impact.
    And I appreciate Mr. Passantino talking about the 
differences in response to Mr. Rokita's question. Ms. Sharby as 
well addressed it. We have a very different pay scale in 
Manhattan than you do, for example, in the center of Minnesota, 
as so $47,000 means one thing in one part of the country and 
something else in another. This rule does not recognize 
demographic differences. Anyway, thank you all very much for 
the witnesses being--yes? Mr. Scott.
    Mr. Scott. I was just going to ask to submit to the record 
a fact sheet from the Economic Policy Institute that shows the 
effect on jobs, hours, and salaries.
    Chairman Kline. The aforementioned left-leaning think tank 
and, without objection, it will be entered. I thank the 
witnesses. We are adjourned.
  
  
  
  
  
  
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