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








                THE 21ST CENTURY WORKFORCE: HOW CURRENT
                RULES AND REGULATIONS AFFECT INNOVATION
                AND FLEXIBILITY IN MICHIGAN'S WORKPLACES

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

              HEARING HELD IN LANSING, MI, MARCH 29, 2016

                               __________

                           Serial No. 114-44

                               __________

  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
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                    TIM WALBERG, Michigan, Chairman

Duncan Hunter, California            Frederica S. Wilson, Florida,
Glenn Thompson, Pennsylvania           Ranking Member
Todd Rokita, Indiana                 Mark Pocan, Wisconsin
Dave Brat, Virginia                  Katherine M. Clark, Massachusetts
Michael D. Bishop, Michigan          Alma S. Adams, North Carolina
Steve Russell, Oklahoma              Mark DeSaulnier, California
Elise Stefanik, New York             Marcia L. Fudge, Ohio




















                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 29, 2016...................................     1

Statement of Members:
    Bishop, Hon. Michael D., a Representative in Congress from 
      the State of Michigan......................................     3
        Prepared statement of....................................     5
    Walberg, Hon. Tim, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Belman, Dr. Dale, Professor, School of Human Resources and 
      Labor Relations, Michigan State University, East Lansing, 
      MI.........................................................    31
        Prepared statement of....................................    34
    McKeague, Ms. Nancy, Senior Vice President and Chief of 
      Staff, Michigan Health and Hospital Association, Okemos, MI     7
        Prepared statement of....................................     9
    Meyer, Mr. Jared, Fellow, Economics21, Manhattan Institute 
      for Policy Research, Washington, D.C.......................    19
        Prepared statement of....................................    21
    Thomas, Ms. Laurita, Associate Vice President for Human 
      Resources, University of Michigan, Ann Arbor, MI...........    38
        Prepared statement of....................................    40
    Wilson, Mr. D. Mark, Vice President, Health and Employment 
      Policy, H.R. Policy Association, Washington, D.C...........    43
        Prepared statement of....................................    45

Additional Submissions:
    Wilson, Hon. Frederica S., Ranking Member, Subcommittee on 
      Workforce Protections:
        Questions submitted for the record.......................    71
    Ms. Thomas:
        Response to questions submitted for the record...........    73
 
                       THE 21ST CENTURY WORKFORCE:
                   HOW CURRENT RULES AND REGULATIONS
                   AFFECT INNOVATION AND FLEXIBILITY
                        IN MICHIGAN'S WORKPLACES

                              ----------                              


                        Tuesday, March 29, 2016

                     U.S. House of Representatives

                 Subcommittee on Workforce Protections

                Committee on Education and the Workforce

                              Lansing, MI

                              ----------                              

    The subcommittee met, pursuant to call, at 9:59 a.m., in 
Rooms M119-M120, Lansing Community College West Campus, 5708 
Cornerstone Dr., Lansing, Michigan, Hon. Tim Walberg [Chairman 
of the subcommittee] presiding.
    Present: Representatives Walberg and Bishop.
    Staff Present: Jessica Goodman, Legislative Assistant; 
Tyler Hernandez, Deputy Communications Director; John Martin, 
Professional Staff Member; and Eunice Ikene, Minority Labor 
Policy Associate.
    Chairman Walberg. Good morning. A quorum being present, the 
subcommittee will come to order.
    We welcome you today. This is a real live subcommittee 
hearing, but it sure feels much better in a way, being back in 
my district for the field hearing.
    I would like to thank our witnesses for joining us. I would 
also like to thank the staff here at the Lansing Community 
College for their hospitality. This is a great facility. It 
kind of evidences what the Education and the Workforce 
Committee is all about in addressing real-world needs for real-
world working environment, as well as people trained and 
prepared for real-world jobs. And living around Washington, at 
times, real world is not the expression we all know all that 
much about, so it is good to be here.
    It is good to be here and have the opportunity to learn 
more about how policies and proposals coming out of Washington 
are affecting workers and employers both in Michigan and across 
the country. Discussions like this, one, are important because 
they inform the work we do as lawmakers. They help us, as your 
representatives in our nation's capital, better understand your 
concerns, your struggles, and your successes. And they help us 
ensure your priorities remain our priorities.
    I don't have to tell you that in this economy, which is 
still struggling to recover, a lot of Americans continue to 
face significant challenges. Millions of men and women are 
struggling to find jobs. Millions of others are working part-
time jobs when what they really need and want is full-time 
work. Family incomes across the country remain flat. People are 
hurting, and as policymakers, we have a responsibility to do 
everything we can to help. One important way we can do that is 
by taking a close look at the rules and regulations governing 
our workplaces.
    For almost 80 years, the Fair Labor Standards Act has been 
the foundation of our wage and hour standards, 80 years. The 
law plays an important role in the lives of millions of working 
Americans. The problem is that a lot has changed in our 
workplace over the 80 years. We have even gone beyond bag 
phones, and the Federal wage and hour rules have not kept up.
    Today, the regulations guiding the law's implementation are 
rigid, outdated, and simply are not working for the twenty-
first century workforce. Millennials are now the majority of 
the workforce, and they, like most in the workforce, do not 
want a flawed regulatory structure that constrains flexibility 
and innovation by creating confusion and uncertainty in today's 
workplaces. Unfortunately, the current law raises more 
questions than it provides answers.
    That is why Republicans have long supported improving and 
updating the rules surrounding Federal wage and hour standards, 
modernizing them to account for advances in technology and to 
better reflect the innovative, flexible economy we have today. 
We remain willing and ready to work toward that goal.
    However, we also remain insistent that we do so 
responsibly. It is not enough to simply change the rules. We 
have to improve them. And we have to do so in a way that does 
not place additional burdensome requirements on small business 
owners, does not stifle job creation and wages, and does not 
limit opportunity and flexibility for workers.
    Unfortunately, the administration is taking a different 
approach to updating workplace rules and regulations. In fact, 
the Department of Labor is in the process of finalizing an 
overtime rule that is anything but responsible. Instead of 
making changes to address the complexity of current 
regulations, the proposal will impose significant burdens on 
employers, limit workplace flexibility, and make it harder for 
workers to advance in their careers. The administration's 
regulatory proposal will ultimately hurt the very people who 
need help.
    There are better ways to update and modernize current rules 
and regulations, and we owe it to the American people to 
explore them. That is the purpose of today's hearing. We want 
to hear about your experiences and understand your concerns. 
What is working? What is not working? What changes need to be 
made to ensure Federal policies support rather than discourage 
the economic growth our nation desperately needs? How can we 
help you and others in our communities pursue the personal 
opportunity you are working to achieve?
    [The information follows:]

   Prepared Statement of Hon. Tim Walberg, Subcommittee on Workforce 
                              Protections

    It's good to have the opportunity to learn more about how policies 
and proposals coming out of Washington are affecting workers and 
employers both in Michigan and across the country. Discussions like 
this one are important because they inform the work we do as lawmakers. 
They help us as your representatives in our nation's capital better 
understand your concerns, your struggles, and your successes; and they 
help us ensure your priorities remain our priorities.
    I don't have to tell you, that in this economy which is still 
struggling to recover a lot of Americans continue to face significant 
challenges. Millions of men and women are struggling to find jobs. 
Millions of others are working part-time jobs when what they really 
need and want is full-time work. Family incomes across the country 
remain flat. People are hurting, and as policymakers, we have a 
responsibility to do everything we can to help. One important way we 
can do that is by taking a close look at the rules and regulations 
governing our workplaces.
    For almost 80 years, the Fair Labor Standards Act has been the 
foundation of our wage and hour standards. The law plays an important 
role in the lives of millions of working
    Americans. The problem is that a lot has changed in our workplaces 
over the 80 years, and federal wage and hour rules have not kept up.
    Today, the regulations guiding the law's implementation are rigid, 
outdated, and simply not working for the 21st century workforce. 
Millennials are now the majority of the workforce, and they like most 
in the workforce do not want a flawed regulatory structure that 
constrains flexibility and innovation by creating confusion and 
uncertainty in today's workplaces. Unfortunately, the current law 
raises more questions than it provides answers.
    That's why Republicans have long supported improving and updating 
the rules surrounding federal wage and hour standards modernizing them 
to account for advances in technology and to better reflect the 
innovative, flexible economy we have today. We remain willing and ready 
to work toward that goal. However, we also remain insistent that we do 
so
    responsibly. It's not enough to simply change the rules. We have to 
improve them. And we have to do so in a way that does not place 
additional burdensome requirements on small business owners, does not 
stifle job creation and wages, and does not limit opportunity and 
flexibility for workers.
    Unfortunately, the administration is taking a different approach to 
updating workplace rules and regulations. In fact, the Department of 
Labor is in the process of finalizing an overtime rule that is anything 
but responsible. Instead of making changes to address the complexity of 
current regulations, the proposal will impose significant burdens on 
employers, limit workplace flexibility, and make it harder for workers 
to advance in their careers. The administration's regulatory proposal 
will ultimately hurt the very people who need help.
    There are better ways to update and modernize current rules and 
regulations, and we owe it to the American people to explore them. 
That's the purpose of today's hearing. We want to hear about your 
experiences and better understand your concerns. What's working? What's 
not working? What changes need to be made to ensure federal policies 
support rather than discourage the economic growth our nation 
desperately needs? How can we help you and others in our communities 
pursue the personal opportunity you're working to achieve?
                                 ______
                                 
    Chairman Walberg. I look forward to hearing from each of 
you on the panel, so I am going to yield to my distinguished 
college from Michigan, Congressman Mike Bishop, for his opening 
remarks as well.
    Mr. Bishop. Thank you, Chairman Walberg, and thank you to 
our panel for being here today.
    I want to make a special acknowledgement to Chairman 
Walberg for his dedication to this cause and for his steadfast 
leadership on this Committee to address this issue.
    I want to thank you for being here, everybody, for 
participating in this hearing. These discussions are very 
helpful to all of us, very valuable. They help us deliver 
meaningful solutions to the many challenges facing Americans 
right now, including those facing our workers and job creators.
    In fact, when it comes to updating rules and regulations 
related to workforce protections and wage and hour standards, 
having the opportunity to hear your perspectives and 
experiences are particularly important. Because when we are 
talking about these issues, it is not about public policy; it 
is very personal. It is personal for the workers who need the 
flexibility to care for their loved one. It is personal for the 
parent who wants to make it to their child's school or game. 
And I can relate completely with that. It is personal for the 
working mom or dad who is helping an aging relative. Workplace 
flexibility is incredibly personal and important to a lot of 
people.
    It is also personal for the low-wage worker trying to seize 
opportunities to move up the economic ladder. At a Committee 
hearing last year, we heard from a witness, Eric Williams, who 
worked his way up from crew member at a fast-food restaurant to 
become the chief operating officer of a major U.S. corporation. 
On top of that, he also owns and operates several restaurants 
of his own. This is the American dream. It is also what is at 
stake if we miss the mark when it comes to updating regulations 
related to wage and hour standards.
    As Chairman Walberg did say, the rules and regulations 
guiding the implementation of the Fair Labor Standards Act are 
too complex. They are burdensome, and they are outdated. They 
no longer provide the kind of protections and opportunities 
that they could and should for workers and employers. I think 
that is something Republicans and Democrats can clearly agree 
upon. Where we disagree, seemingly, is the best way to update 
them.
    During the same hearing in which Eric Williams shared his 
inspiring success story, he also raised some troubling concerns 
with the consequences one of the administration's recent 
regulatory proposals had, and that was the Department of 
Labor's overtime rule, which the good Chairman shared a little 
bit of his concern about earlier. It will create for workers 
and small businesses significant concerns, despite the fact it 
was intended to help.
    Mr. Williams explained that the rule will be detrimental to 
workplace flexibility, how it will negatively impact pay and 
bonuses, and how it will severely limit hardworking, talented 
Americans from recognizing and realizing their dreams.
    Workers and small businesses are not the only ones 
concerned about the administration's proposal. Those in higher 
education worry the rule could have unintended consequences for 
them as well, leading to higher costs and forcing schools to 
restrict hours for certain employees.
    Here in Michigan, we are very fortunate to have an 
abundance of incredible universities that serve students from 
our State and from States across the country. Two of our 
witnesses are joining us from some of them: the University of 
Michigan and Michigan State University. Under no circumstances 
should we be making it harder and more costly for students at 
these universities, or any university, to receive a quality 
education.
    Americans deserve better than the changes that led to these 
kinds of consequences. That is why we will continue our efforts 
to promote and encourage reforms that clarify current rules and 
regulations, modernize them, and make them better - reforms 
that won't stifle innovation, flexibility, and opportunity. 
These things are essential in allowing our workforce to grow 
and change to better meet the needs of workers, job creators, 
and consumers; and they will continue to help us push the 
limits of what we are able to accomplish.
    I look forward to hearing from all of you, all your 
comments, and look forward to working with all of you along the 
way as we accomplish our goals. Thank you. I yield back.
    [The information follows:]

   Prepared Statement of Hon. Michael D. Bishop, a Representative in 
                  Congress from the State of Michigan

    These discussions really are valuable to us. They help us deliver 
meaningful solutions to the many challenges facing Americans right now, 
including those facing our workers and job creators.
    In fact, when it comes to updating rules and regulations related to 
workforce protections and wage and hour standards, having the 
opportunity to hear your perspectives and experiences are particularly 
important. Because when we're talking about these issues, it's not just 
public policy it's personal.
    It's personal for the worker who needs the flexibility to care for 
a loved one. It's personal for the parent who wants to make it to their 
child's school play or little league game. It's personal for the 
working mom or dad who is also helping an aging relative. Workplace 
flexibility is incredibly personal and important to a lot of people.
    It's also personal for the low-wage worker trying to seize 
opportunities to move up the economic ladder. At a committee hearing 
last year, we heard from one witness, Eric Williams, who worked his way 
up from a crew member at a fast-food restaurant to become the chief 
operating officer of a major U.S. corporation. On top of that, he also 
owns and operates several restaurants of his own. That is the American 
Dream. It's also what's at stake if we miss the mark when it comes to 
updating regulations related to wage and hour standards.
    As Chairman Walberg said, the rules and regulations guiding the 
implementation of the Fair Labor Standards Act are too complex, 
burdensome, and outdated. They no longer provide the kind of 
protections and opportunities they could and should for workers and 
employers. I think that's something Republicans and Democrats can agree 
on. Where we seem to disagree is the best way to update them.
    During the same hearing in which Eric Williams shared his inspiring 
success story, he also raised some troubling concerns with the 
consequences one of the administration's recent regulatory proposals 
the Department of Labor's overtime rule will create for workers and 
small businesses. He explained how the rule will be detrimental to 
workplace flexibility, how it will negatively impact pay and bonuses, 
and how it will ``severely limit hardworking, talented Americans from 
realizing their dreams.''
    Workers and small businesses are not the only ones concerned about 
the administration's proposal. Those in higher education worry the rule 
could have unintended consequences for them as well, leading to higher 
costs and forcing schools to restrict hours for certain employees. Here 
in Michigan, we're very fortunate to have an abundance of incredible 
universities that serve students from our state and from states across 
the country. Two of our witnesses are joining us from some of them: the 
University of Michigan and Michigan State University. Under no 
circumstances should we be making it harder and more costly for 
students at these universities or any university to receive a quality 
education.
    Americans deserve better than changes that lead these kinds of 
consequences. That's why we will continue our efforts to promote and 
encourage reforms that clarify current rules and regulations, modernize 
them, and make them better reforms that won't stifle innovation, 
flexibility, and opportunity. These things are essential in allowing 
our workforce to grow and change to better meet the needs of workers, 
job creators, and consumers; and they will continue to help us push the 
limits of what we are able to accomplish.
    I look forward to hearing from all of you about how we can best 
accomplish those goals.
                                 ______
                                 
    Chairman Walberg. I thank the gentleman.
    Pursuant to Committee rule 7(c), all Committee 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 statements, 
questions for the record, and other extraneous material 
referenced during the hearing to be submitted in the official 
hearing record.
    It is now my pleasure to introduce today's witnesses. Ms. 
Nancy McKeague is senior vice president of employer and 
community strategies and chief human resources officer for the 
Michigan Health and Hospital Association and is testifying on 
behalf of the Society for Human Resource Management. She is 
responsible for internal human resources and is a staff lead 
for the Michigan Health and Hospital Association's Business 
Advisory Council and not a stranger to this subcommittee and 
hearing process. Welcome.
    Ms. McKeague. Thank you.
    Chairman Walberg. Mr. Jared Meyer is a fellow with 
Economics21 at the Manhattan Institute. He conducts research in 
microeconomic theory and the effects of government regulation, 
and is kept busy doing that. Welcome.
    Dr. Dale Belman is a professor with the School of Labor and 
Industrial Relations and adjunct professor with the Department 
of Economics at Michigan State University. Much of his work has 
focused on collective bargaining, labor relations, and 
compensation in the public sector and government regulation of 
labor markets. Welcome.
    Ms. Laurita Thomas is the associate vice president for 
human resources at the University of Michigan. And we have no 
wall in between these two schools right here. It is not 
football game day. Ah, the handshake.
    Chairman Walberg. In this capacity she is responsible for 
human resource policy for all University of Michigan campuses 
and a full range of comprehensive, integrated human resource 
services, products, and operations- a full plate. Welcome.
    Mr. Mark Wilson is vice president and chief economist for 
H.R. Policy Association. He previously served as deputy 
assistant secretary for the Employment Standards Administration 
at the Department of Labor. His work is focused on providing 
research and analysis of employment impacts and cost of 
workplace-related litigation and regulations, and is no 
stranger to this Committee as well and also to this area since 
this is your home area.
    Mr. Wilson. Yes.
    Chairman Walberg. He grew up in East Lansing. Welcome back.
    I will now ask our witnesses to stand and raise your right 
hand, as is the process in this Committee.
    [Witnesses sworn.]
    Chairman Walberg. Thank you. You may be seated. Let the 
record reflect the witnesses answered in the affirmative.
    Before I recognize you to provide your testimony, let me 
briefly explain our lighting system. And I am looking for oh, 
there it is. There is our lighting system. It is fairly self-
explanatory. If you know the stoplights on the roadway, it is 
pretty much the same. With the green light on, you have five 
minutes of testimony. When you see the yellow light come on, 
that means there is a minute left in those five minutes. And 
then when red, finish up your sentence or short paragraph to 
the best of your ability.
    In a field hearing like this with the amount of time that 
we do have and the limited number of members of the Committee 
here, we are not going to hold with great strictness to that, 
but we would appreciate it because we will have opportunity to 
ask questions relative to your testimony.
    And so let me recognize our witnesses now, beginning with 
Ms. McKeague for your five minutes of testimony.

TESTIMONY OF NANCY MCKEAGUE, SENIOR VICE PRESIDENT AND CHIEF OF 
 STAFF, MICHIGAN HEALTH AND HOSPITAL ASSOCIATION, OKEMOS, MI, 
    TESTIFYING ON BEHALF OF THE SOCIETY FOR HUMAN RESOURCE 
                           MANAGEMENT

    Ms. McKeague. Thank you. I am Nancy McKeague. I'm senior 
vice president and chief of staff for the Michigan Health and 
Hospital Association, and I am appearing before you today on 
behalf of the Society for Human Resource Management.
    Thank you for the opportunity to testify before the 
subcommittee again at this time in our home state on how 
federal regulations affect innovation and flexibility in the 
workplace.
    As you mentioned, Mr. Chairman, few regulations impact the 
workplace more than those that implement the Fair Labor 
Standards Act. While employers of all sizes work diligently to 
classify employees correctly and remain in compliance with the 
FLSA, classification decisions are particularly challenging 
because they're based on both objective and subjective 
criteria. Therefore, on occasion, an employer acting in good 
faith could mistakenly misclassify employees as exempt who, in 
reality, should be nonexempt or vice versa.
    Let me tell you a little bit about the MHA. We're a 
nonprofit association, and we advocate for hospitals and the 
patients and communities they serve. We're an employer of 
choice, having received workplace awards which are referenced 
in my written statement. Yet even some of the best employers 
face practical challenges with the FLSA.
    It's not uncommon for employers to face high legal costs 
for complying with the statute, costs that are particularly 
difficult for an organization like the MHA with a tight budget. 
Unfortunately, increased litigation related to alleged FLSA 
violations leads to less funding for the nonprofit's core 
mission, whether that's providing patient treatment, caring for 
children, or conducting research.
    Nonprofits like MHA must make challenging employee 
classification determinations, as our employees are often 
performing a mix of duties which includes both exempt and 
nonexempt functions. For example, sometimes we'll find that one 
of our employees will fit all of the executive employee 
exemptions under the FLSA with the exception of supervision of 
two or more employees. Take the instance of our MHA Foundation. 
The executive director for the foundation supervises only one 
employee, so that made our determination of her status a little 
bit more challenging. But in the end, we determined that she 
should be classified as exempt because of her autonomy, her 
experience, and our confidence in her judgment.
    Given those sorts of ambiguity, the stakes in improperly 
classifying employees are high. Planning for an increase in 
litigation can be particularly difficult for the nonprofit 
sector and small employers. When the 2004 changes to the Fair 
Labor Standards Act overtime regulations were enacted, the MHA 
had to allocate additional funding to retain counsel in order 
to assure our practices were compliant. In the end, a nonprofit 
hospital's decision to direct limited funding to defending 
against lawsuits means less money for patient care and 
treatment.
    As an employer in the health care sector, our member 
hospitals are working 24 hours a day, seven days a week, 
providing critical treatment and care to patients. Because of 
the nature of our work, we must have the ability to respond as 
quickly as possible and utilize flexible hours, especially for 
clinicians.
    The FLSA makes this difficult for certain employees. While 
nonexempt employees can receive time-and-a-half pay, they can't 
be afforded the same workplace flexibility benefits as exempt 
employees. The FLSA actually impedes workplace flexibility by 
prohibiting private sector employers from offering nonexempt 
employees the option of paid time off rather than overtime pay 
for hours worked over 40 per week even though all public sector 
employees are offered this type of flexibility, which is 
commonly referred to as comp time.
    SHRM has long supported the Working Families Flexibility 
Act to provide employees with the option of comp time to 
businesses and their hourly employees. Mr. Chairman, today's 
examination of the FLSA is particularly timely given the 
administration's overtime proposal is under final review after 
they received more than 290,000 comment letters in response to 
the proposal.
    SHRM has repeatedly stated that an increase to the salary 
threshold for overtime pay is warranted but the DOL's proposed 
113 percent increase is too much, too fast. Using a salary 
threshold at the 40th percentile of average weekly earnings, 
which is estimated to be more than $50,000 for 2016, presents 
significant challenges for small employers, nonprofits, and 
employees in lower cost-of-living areas. If the salary 
threshold is doubled, many employees will lose their exempt 
status and the workplace flexibility it affords, not to mention 
the professional status and autonomy that go with it.
    Mr. Chairman, thank you for protecting for introducing the 
Protecting Workplace Advancement and Opportunity Act, which 
would nullify the DOL's overtime proposal. SHRM strongly 
supports this legislation to require the department to conduct 
an economic analysis of how changes to the overtime rules will 
impact nonprofits, small businesses, and others before they 
issue a new rule. This is a reasonable response to the current 
overtime proposal, and SHRM encourages all members of Congress 
to support it.
    In closing, SHRM and its members are committed to working 
with the members of this Committee to address the FLSA in a 
manner that balances the needs of both employees and employers 
and does not produce requirements that could limit workplace 
flexibility. Thank you, Mr. Chairman.
    [The statement of Ms. McKeague follows:]
    
    
  
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  
    
   
    Chairman Walberg. Thank you.
    I now recognize Mr. Meyer. And it is good to have a 
millennial--
    Mr. Meyer. Yes.
    Chairman Walberg.--on our witness panel here to hear 
perspective. You have five minutes.

   TESTIMONY OF JARED MEYER, FELLOW, ECONOMICS21, MANHATTAN 
        INSTITUTE FOR POLICY RESEARCH, WASHINGTON, D.C.

    Mr. Meyer. Well, Chairman Walberg and Representative 
Bishop, thank you for the opportunity to give testimony on how 
new administrative interpretations of the Fair Labor Standards 
Act of 1938 fail to reflect the realities of today's workforce.
    I'm a fellow at the Manhattan Institute and I'm the co-
author with Diana Furchtgott-Roth of Disinherited: How 
Washington Is Betraying America's Young. I'm also the author of 
the forthcoming Uber Positive: Why Americans Love the Sharing 
Economy.
    The American economy is changing, and millennials' 
attitudes about work and their careers are changing with it. 
The rapid rise of the so-called sharing economy embodies many 
young Americans' new economic ideal, one driven by technology, 
convenience, and flexibility.
    Companies such as Uber and Airbnb offer the technical 
platform and support to allow transactions between buyers and 
sellers to easily take place. For this reason, these types of 
companies are often referred to as ``intermediaries.'' Those 
who partner with intermediaries are classified as independent 
contractors, not employees.
    The flexibility that independent contractor status offers 
workers is vital to the success of the sharing economy. While 
some workers use these platforms full-time, the vast majority 
use them for part-time work and supplemental income. About 
eight in 10 Lyft drivers work under 15 hours a week, and over 
half of Uber drivers use the platform for less than 10 hours a 
week. Furthermore, half of Lyft drivers work another job while 
partnering with the company, and two-thirds of Uber drivers 
work another job as well.
    Independent contractor status allows the decision of when 
or for how long to work to be controlled by workers, not 
companies. And this opportunity to smooth out earnings to do 
everything from meeting rent to paying down student loans or 
funding a new business venture is a benefit of the sharing 
economy that must be protected. This is especially critical for 
the 70 percent of Americans ages 18 to 24 who experience an 
average monthly change of over 30 percent in their monthly 
incomes.
    But the sharing economy's rise obscures a troubling 
economic trend. Once dynamic, the American economy is growing 
slowly and entrepreneurship is actually falling. Even though 
two-thirds of millennials want to work for themselves at some 
point, less than 4 percent of private businesses are even 
partially owned by someone under the age of 30.
    One reason for this is government policy, particularly in 
regards to labor regulation, ignores the realities of a twenty-
first century economy and continues to hold back millennials' 
economic opportunity. For example, the Labor Department 
recently issued an Administrator's Interpretation, effective 
immediately, to clarify the definition of independent 
contractors. It states, ``most workers are employees,'' not 
independent contractors. Because it was termed ``guidance,'' it 
didn't have to go before the public for comment, even though it 
has the potential to upend the sharing economy.
    Currently, workers are either classified as employees or 
independent contractors. Employees are given many protections 
and benefits under the Fair Labor Standards Act that are not 
available to contractors. In exchange, employers are able to 
set the terms of workers' employment. On the other hand, the 
independent contractor status provides workers with more 
control and flexibility.
    The Labor Department's new interpretation formally accepts 
the six-part ``economic realities'' test for determining 
whether workers are employees or independent contractors. At 
the same time, it downplays one of these six criteria a lack of 
control over workers' hours as a determinant in employment 
status. This could be devastating for sharing economy companies 
as they do not control their workers' hours.
    Unlike employees, independent contractors are not entitled 
to minimum wage, overtime pay, unemployment insurance, or 
workers' compensation, but extending these employment 
protections to independent contractors makes no sense. When 
debating the future of worker classification, lawmakers should 
resist calls to extend employee wage and hour protection to 
independent contractors.
    Since intermediaries, again referring to sharing economy 
companies, do not control workers' hours, and determining how 
much someone is actually working only for that intermediary is 
very difficult, if not impossible. Minimum wage and overtime 
pay requirements are inapplicable to these companies' business 
models.
    Additionally, one of the benefits of the sharing economy is 
that supply can easily fluctuate to meet an ever-changing 
demand. Because of the option of flexibility, independent 
contractor work for intermediaries is often transient or done 
in addition to other work. Think back to the statistics I used 
earlier. This is why there is little reason to compel employers 
to fund unemployment insurance benefits.
    Intermediary workers are also usually completing jobs 
offsite and using their own materials. For these reasons, 
workers' compensation systems should remain optional, not made 
mandatory for intermediaries.
    But most importantly, the worker classification question 
needs to be sorted out by federal legislators, not by courts or 
unaccountable executive agencies. The alternative is the 
crippling of the sharing economy by executive agencies that are 
set on incorrectly classifying the vast majority of new economy 
workers as employees.
    Millennials want to be entrepreneurs and they desire 
employment that is flexible, mobile, and individualized. The 
Department of Labor's attempts to stifle the rise of the 
promising new business models seen in the sharing economy 
through regulation is no way to help millennials achieve their 
vision of the American dream. In order to promote an 
entrepreneurial workforce, Congress needs to use its power to 
rein in the Department of Labor.
    Thank you again for the opportunity, and I look forward to 
continuing the discussion.
    [The statement of Mr. Meyer follows:]
    
    
  
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    Chairman Walberg. Thank you.
    Dr. Belman--
    Dr. Belman. Thank you.
    Chairman Walberg.--I recognize you for your five minutes.

   TESTIMONY OF DR. DALE BELMAN, PROFESSOR, SCHOOL OF HUMAN 
RESOURCES AND LABOR RELATIONS, MICHIGAN STATE UNIVERSITY, EAST 
                          LANSING, MI

    Dr. Belman. Fifty, 40, maybe as close as 30 years ago, 
there was broad agreement that the U.S. economy was based on 
shared prosperity. Firms prospered. Employees and employers 
worked together, learned how to do work better, increased 
productivity. They shared those gains not equally but they 
shared in the gains from doing things better, from improved 
prosperity. This resulted in better pay, better benefits, 
improved economic security, investments in employees and in 
employee training.
    For example, George Romney, president of American Motors in 
the late '50s and early '60s both limited the pay to top 
managers and instituted profit-sharing, the first of the auto 
companies to do that. Even major retailers such as Sears prided 
themselves on good salaries and benefits and a career path for 
diligent employees. Sears, of course, was nonunion.
    A belief in shared prosperity was also expressed in the 
implementation of protective labor legislation. The Fair Labor 
Standards Act was extended to cover wholesale and retail trade, 
to cover hospitals and the public sector. We improved the 
security of private pension plans through ERISA. Under the 
Nixon administration, we created OSHA to create a safe and more 
healthful workplace.
    This path to shared prosperity has significantly been 
abandoned for much more of a winner-take-all economy, one that 
too often pits employers against employees. We can see this in 
stagnant real wages over the last 35 years, only slow 
improvement in family incomes, and that only because families 
are working more hours largely by moving women into the labor 
force. Likewise, levels of income and wealth and equality have 
risen to levels that rival the 1920s and the Gilded Age.
    Abandoning the path to shared prosperity appears not only 
in outsourcing, offshoring, tax inversions, and other headline-
grabbing changes, but also in the details of protective labor 
law. Under the rubric of economic necessity, several States 
have reduced U.I. coverage to 12 to 20 weeks from 26 weeks. 
This comes on top of a long failure to modernize the U.I. 
system to address issues of working women and reduced careers. 
Currently, only one in three of the unemployed worker receives 
U.I. benefits. Two States have allowed for worker compensation 
opt-outs which deprive injured employers of many of the 
protections they had under State systems. A number of other 
States are currently considering this.
    The Supreme Court in emphasizing the use of private 
arbitration of employee rights, under terms established by the 
employer, has substantially reduced employees' ability to 
pursue their legal rights with their employers.
    Recent steps by the Department of Labor to update the 
salary standard for an employee to be considered exempt is long 
overdue. Since 1938, DOL and the courts have recognized the 
single best test of exempt status is a salary high enough to 
demonstrate that the employee is highly valued.
    In 1975, an individual who was exempt from the overtime had 
an annual earning of 110 percent of U.S. median family 
earnings. In contrast, at the current level of $455 per week or 
$23,660, individuals earning 45 percent of U.S. median income 
are exempt. If we had a family, one earner, four members, this 
amount, $23,660, would place them below the U.S. poverty 
threshold, they would be eligible for Medicare, for food 
stamps, and other income maintenance programs.
    The current threshold also provides strong incentives for 
employers to classify low-wage workers as salaried managers and 
essentially obtain uncompensated work by having them work 
unpaid overtime.
    The DOL proposal would just raise the overtime threshold to 
just below 100 percent of U.S. median family income. So it 
would basically not quite restore where it was in 1975. In 1975 
companies dealt with it successfully, small businesses and 
large businesses. So I'm not sure that there are going to be 
disastrous effects. In fact, I'd argue that there would not be 
disastrous effects.
    Some brief observations on the gig economy. This is new, 
this is exciting, this is different. It's not particularly new. 
Most of my research is on construction, and construction looks 
a lot like the gig economy. Employees not tied to a single 
employer, they regularly move between employers and projects. 
Because of that gig structure and the lack of a strong 
relationship between employer and employee, wages fluctuate 
greatly with immediate demand.
    There's a lot of economic uncertainty. Benefits such as 
medical coverage and pensions and 401(k)s are rare to 
nonexistent. Employer-provided training is also rare to 
nonexistent outside the union sector. Owners and employers 
regularly complain about a lack of sufficiently skilled craft 
workers. Southern Power and Curt have been arguing about this 
for years and trying to find a way to have more trained 
workers.
    There is rampant misclassification of employees as 
independent contractors. As a result, employees are deprived of 
workers' compensation, unemployment insurance coverage, as well 
as the employers' share of FICA. State and Federal Governments 
lose tax revenues. Employers who play by the rules, classify 
their employees correctly, are substantially disadvantaged in 
bidding on construction projects.
    What this suggests is that creating some sort of new 
structure, independent worker or something, which has reduced 
benefits is a problem because it's hard enough to get 
enforcement of current relatively clear concepts of independent 
contractor versus employer/employee. You add another status, it 
becomes virtually impossible. The U.I. system isn't going to be 
able to cope with it, and they do most of the misclassification 
of work.
    To summarize, the proposed provisions of the overtime 
threshold aren't keeping with the history of the Fair Labor 
Standards Act. It restores that threshold to a reasonable 
income level. It provides businesses flexibility and employment 
of highly valuable employees, while protecting lower-paid 
employees from being required to work extended hours without 
compensation.
    Thank you.
    [The statement of Dr. Belman follows:]
    

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    Chairman Walberg. Thank you.
    Ms. Thomas, we now recognize you for your five minutes of 
testimony.

TESTIMONY OF LAURITA THOMAS, ASSOCIATE VICE PRESIDENT FOR HUMAN 
        RESOURCES, UNIVERSITY OF MICHIGAN, ANN ARBOR, MI

    Ms. Thomas. Good morning. Thank you, Mr. Chairman, and 
members of the House Education and the Workforce Subcommittee 
on Workforce Protections for the opportunity to talk about the 
proposed changes to the Fair Labor Standards Act.
    In addition to my role at the University of Michigan, I am 
also a member of the National Board and the Public Policy 
Committee of the College and University Professionals 
Association for Human Resources. It represents human resource 
leaders at 1,900 U.S. colleges and universities.
    I know I'm joined by many of my human resource colleagues 
when I say that I appreciate your willingness to hear and 
consider the unique impact of these proposed changes on higher 
education.
    The University of Michigan supports an increase to the wage 
threshold, which has not been adjusted since 2004. However, we 
believe that closing that gap without adequate time for 
implementation could be counterproductive. Specifically, the 
new rules call for an increase from the current wage threshold 
of $23,660 a year to $50,440 a year with a very short 
implementation timeline and outside of the annual budget 
planning process through which we plan for new expenses.
    There are limited ways to raise revenue outside of tuition, 
so adequate time for planning and implementation is very 
important. If this change were to occur abruptly, it would be 
cost-prohibitive for schools like Michigan to raise the 
salaries of those affected to the proposed new minimum in order 
to maintain the Fair Labor Standards Act exemption status for 
that the workers have today.
    The University of Michigan is the largest higher-ed 
employer in the State, and these changes would affect more than 
3,100 people in roles critical to our missions.
    The proposed implementation cost at the University of 
Michigan is as high as $34 million. Early statewide estimates 
from the Michigan Association of State Universities total more 
than $60 million for 11 of the 15 member institutions 
reporting. If salaries were raised just for those employees 
close to the threshold, most of the remaining affected 
employees would need reclassification to nonexempt status.
    Since many jobs in higher education, health care, and 
research are not well suited for hourly compensation, the 
change would result in reduced autonomy, fewer flexible work 
arrangements, and diminished opportunities for needed business 
travel for these employees.
    Benefits could also be affected when tied to the exemption 
status. In some institutions, differentials in professional 
development funding, tuition assistance are also in play. 
Reclassifying them to nonexempt Fair Labor Standards Act status 
could represent a loss of total compensation for some employees 
with greater complexity for their employers.
    Additional consequences include reducing opportunities for 
part-time employment, including roles that involve business 
event planning and onsite administration in which staff work 
longer hours for a limited number of days or weeks in exchange 
for reduced work hours in subsequent weeks. This serves a 
business need for our university but would no longer be 
possible.
    University research activities could also be inhibited. 
Agencies providing research grants like the National Institutes 
of Health often set stipends for postdoctoral researchers well 
below this new threshold. Since research often requires 
extended attention to experiments at various times and outside 
of regular hours, postdocs are not compatible their roles are 
not compatible with the new rule.
    I want to reiterate that we do support an increase to the 
wage threshold. What we suggest are changes in the way in which 
an increase is implemented. First, consider lowering the 
threshold so that the immediate goal is reduced. Or 
differentiate that for economic sectors by establishing a 
separate threshold for organizations in the nonprofit and 
public sectors. In either case, the University of Michigan 
advocates for a phased implementation over years to allow for 
proper planning.
    Second, if a more measured approach to increasing the 
threshold is not adopted, we believe the Department of Labor 
should consider broadening the existing teaching exemption to 
include additional positions that are unique to higher 
education. That means recognizing exemption status in the 
regulations for not only those who teach and tutor but those 
for those who advise students, conduct scientific or 
professional research, provide student counseling, and offer 
services for residential life.
    Third, we support a periodic review tied to the cost of 
living and to occur not more frequently than every five years 
with at least a one-year notice period to employers of pending 
increases for planning purposes outlined previously.
    Finally, unrelated to the wage threshold itself, we believe 
that any changes to the duties test for exemption should be 
made available to the community of employers for review and 
comment before enactment.
    Thank you.
    [The statement of Ms. Thomas follows:]
    
    
   
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    Chairman Walberg. Thank you, Ms. Thomas.
    Mr. Wilson, I recognize you for your testimony.

    TESTIMONY OF D. MARK WILSON, VICE PRESIDENT, HEALTH AND 
  EMPLOYMENT POLICY, H.R. POLICY ASSOCIATION, WASHINGTON, D.C.

    Mr. Wilson. Chairman Walberg, Congressman Bishop, thank you 
for the opportunity to discuss the twenty-first century 
workforce and how current rules and regulations affect 
innovation and flexibility in today's workplaces.
    Perhaps the best illustration of how the FLSA has failed to 
keep up with the rapidly evolving workplace is its computer 
professional provision. Much like the discussion we're seeing 
now with the gig economy and the sharing economy, in 1990, 
Congress directed the Department of Labor to publish 
regulations to treat computer employees as exempt under the 
FLSA. But then in 1996 Congress froze the regulatory definition 
of computer professionals in place when less than 40 percent of 
Americans owned a cell phone, less than 3 percent of U.S. homes 
had broadband access, and Facebook didn't even exist.
    Today, over 90 percent of Americans own smartphones, over 
70 percent of households have broadband. Needless to say, the 
FLSA rules for computer professionals are woefully outdated.
    Even the most traditional industries have undergone 
dramatic transformations in how and where work is done. For 
example, workers in old coal power plants were typically 
divided into several different job categories with many 
performing largely physical tasks throughout the plant. Today, 
newer power plants are run almost entirely by a small group of 
employees working primarily in one single room filled with 
computers. The employees are multi-skilled, technically 
educated, highly paid professionals who take on a variety of 
duties ranging from operating equipment to handling purchasing, 
documentation, scheduling, and working with vendors.
    Yet, despite all these changes within the American 
workplace, during the last half-century, the basic structure of 
the FLSA has never been fundamentally re-examined. It is 
increasingly having a negative impact on workplace flexibility 
and innovation.
    The preference of today's workforce for greater flexibility 
as to when and where they perform their work is universally 
acknowledged. And it goes without saying that the desire is 
often possible only through the digital technology that was 
unavailable when the FLSA was enacted. In fact, the 
overwhelming majority of today's employees embrace the digital 
workplace.
    A recent Gallup poll showed that full-time employees are 
upbeat about using their computers and mobile devices to stay 
connected to the workplace outside their normal work hours. 
Nearly eight in 10 workers view this as somewhat or strongly 
positive development. According to Gallup, nearly all workers 
say they have access to the internet based on at least one 
device, and they appreciate the freedom this technology offers 
them to meet their family needs, knowing they can monitor their 
email while out of the office, or log in later to catch up with 
work if needed.
    Yet, the FLSA deters and often prevents an employer from 
providing this flexibility to nonexempt employees by requiring 
employers to track all hours worked, which poses a challenge if 
the employees wish to perform some or all of their duties away 
from the workplace.
    Even when nonexempt employees confine their work activities 
to within normal working hours, they may occasionally check 
their smartphones outside of those hours at work for work-
related emails and meeting invitations. When they do, it raises 
questions as to whether the time is counted towards hours 
worked. And some attorneys have argued that it could such 
activity could also mark the beginning and ending of the 
workday, requiring time spent commuting to be also counted as 
time worked.
    Because of these challenges and the potential threat of 
litigation, many employers have taken steps to prevent their 
nonexempt employees from doing any work outside the workplace 
by denying them employer-provided smartphones and denying 
access to their email accounts and other parts of the company's 
information systems.
    Regrettably, this inability to take advantage of the 
virtual workplace inconveniences employees, reduces workplace 
flexibility, and makes it more difficult for employees to 
manage their work-life balance.
    But large employers simply cannot risk exposing themselves 
to potentially multimillion-dollar class-action lawsuits. And 
the number of lawsuits has exploded over the past 15 years, 
increasing almost 450 percent from 2000 to 2015.
    FLSA also restricts training opportunities. At the time 
when upgrading the skills of the American workers is a 
priority, the FLSA's regulations discourage employers from 
offering training to their employees. Since many training 
opportunities are considered compensable time under the FLSA 
and where training could put a nonexempt employee into an 
overtime situation, their access to that training may be 
limited. Nonexempt employees may also be routinely excluded 
from offsite meetings and trips that could be both beneficial 
to them and their employer.
    Because of the administrative difficulty of determining 
what time is compensable and the actual cost of that time, this 
inability to participate in off-hours or offsite events can 
stunt the growth of the career growth of nonexempt employees 
who lose the benefit of those activities.
    In conclusion, the disconnect between the FLSA and the 
modern workplace will continue to grow if the law is left 
unchanged. It will increase tensions among employers, 
employees, and regulators with the only true beneficiary being 
the plaintiff's bar. Congressional attempts at incremental 
reforms stalled in the 1990s, and many policymakers are 
reluctant to make another attempt for political reasons. Yet 
the pressure to update the FLSA will steadily increase, and it 
will become a problem that is increasingly more difficult to 
ignore.
    Thank you for the time, and I'd be happy to answer any 
questions you might have.
    [The statement of Mr. Wilson follows:]
    
    
   
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    Chairman Walberg. Thank you, Mr. Wilson, and thanks to the 
panel. You have laid the foundations here for our discussions, 
and now I recognize Mr. Bishop for his five minutes of 
questioning.
    Mr. Bishop. Thank you, Mr. Chairman. So many questions, so 
little time. Mr. Wilson, since you just finished, I would like 
to ask you a follow-up question on your statement. Can you give 
us some indication as to how your members are preparing for 
this rule change now? How is it impacting that environment now?
    Mr. Wilson. They are looking at their workforces. They are 
trying to determine what impacts a salary level threshold of 
around $50,000 would have on their employees in terms of which 
employees would have to be reclassified as nonexempt. They're 
looking at the hours that those employees typically are 
performing or the duties that they're performing to see if they 
that they're reviewing their duties more carefully, concurrent 
duties.
    There's a number of things that they're doing to make sure 
that they're complying as best that they can with the vague and 
somewhat ambiguous duties test that surrounds the executive and 
professional and managerial administrative duties exemptions. 
And they're trying to get a gauge as to what impact it's going 
to have on their company and the training that they can 
provide, the types of benefits that they can provide. As was 
mentioned, some of the benefits and bonuses are structured, 
their compensation systems are structured in such a way that 
some of the bonuses are much easier to provide to salaried 
employees as opposed to paid hourly.
    Mr. Bishop. So employers are bracing for impact right now?
    Mr. Wilson. Correct.
    Mr. Bishop. And the impact is potential but they still have 
to prepare for it. What kind of impact does that have on their 
behavior as an employer? Do they freeze their hiring process? 
Do they freeze any kind of movement within their company such 
as maybe even promotions or any movement within their salaried 
employees?
    Mr. Wilson. That's a great question. I haven't seen that 
amongst our members yet. They're hiring where hiring is needed 
and necessary.
    To the degree that it is having an impact on hiring, I 
would say that it's pulling resources devoted to reviewing and 
analyzing how they may implement this rule when it becomes 
final, given the short time frame that they're expected to have 
between when the final rule comes out and when they have to 
actually comply with it. The amount of time and effort that's 
being put into that is actually reducing their ability to hire 
and extend hours for current employees.
    Mr. Bishop. There is so much to ask there. I would like to 
spend more time with you, but I have a very small amount of 
time and I would like to move on to Ms. Thomas if I could, 
please.
    You indicated in your testimony that it would cost the 
University of Michigan $34 million to comply with this rule. 
That is what you suggested the cost is going to be. In fact, 
$60 million for all the other universities together, the cost 
to implement this rule. I can't imagine I know it is difficult 
for the University of Michigan and Michigan State University to 
absorb that kind of cost, but I can't imagine how a smaller 
university, and Olivet or an Albion or some of these other 
universities will absorb that cost.
    My question to you is we already see skyrocketing costs of 
tuition in this country. Is this going to impact the tuition? 
Will this be passed on to the student?
    Ms. Thomas. It's inconceivable to me that it would not 
impact tuition.
    Mr. Bishop. So we can see this rule this is to me the 
ultimate in the law of unintended consequences. This proposed 
rule has put into place something that is inconceivable to me, 
that we would change public policy that would actually have 
that kind of impact on students who already see skyrocketing 
costs of tuition, and on top of that, skyrocketing costs with 
their financing and their debt ratio, and these are the very 
people that are least likely to be employed right now, which 
leads me to Mr. Meyer.
    Your testimony to me is most impactful because you 
represent the future of our country. And this whole discussion 
about the gig economy and the sharing economy and talking about 
Airbnb and Uber and Lyft was never even contemplated back in 
the '60s and '70s when Governor Romney was around or Richard 
Nixon. So we have got to somehow fashion the law to comply with 
today's world. And technology has taken us in a different 
direction.
    There are too many things for you to talk about here, I 
know, because your head is about to explode about how this 
could impact the people in your world, your millennials. Could 
you share with us a little bit about this economy, what folks 
you are age are doing? I know that they are engaged with all 
kinds of online activity, part-time activity. Does this deter 
them from their future, from gainful employment, from making a 
future for themselves?
    Mr. Meyer. Well, just to speak on the overtime rule, which 
I didn't touch on in my testimony but I've looked at, I know 
for me personally when I started working at the Manhattan 
Institute, I was making under what the threshold would be, but 
I was able to put in many hours, I was able to travel to 
conferences and do all of this to work up from a research 
assistant to fellow. If this rule was in place, I would not be 
a fellow at the Manhattan Institute right now.
    Mr. Bishop. Is it possible that the law ever contemplated 
the idea that we would have smartphones one day or internet 
connections where we can work from anywhere? I sit in an 
airport all the time, I am working my smartphone, responding. I 
am typing emails. It clearly is work. But did the law ever 
contemplate that? And do you think that the intent of Congress 
was to somehow grab all of these different things that we do as 
part of our job?
    Mr. Meyer. You can definitively say that the law did not 
foresee all the changes we've had in the workplace. So what I 
would like to see is, moving forward, realize that these new 
opportunities, in addition to the sharing economy, it's working 
on your own, it's working on extra hours, it's working on your 
smartphone at the airport, that the law doesn't constrain this. 
Workers are choosing to do this to advance their careers or to 
work part-time. We need to get rid of the antiquated notion 
that it's a master-servant relationship, which was the language 
used in the 1930s to describe employer-employees. It's not how 
it is anymore.
    Chairman Walberg. The gentleman's time is expired but we 
will have other opportunities. You and I control this process 
right now but we are going to try to keep some semblance, I 
guess, here of our normalcy.
    Dr. Belman, going back to the issue of exempt status and 
the system by which or the formula that was put in place back 
in 1975, 2004, using that formula, would that bring us to the 
$50,000?
    Dr. Belman. That would actually put us up above the 
$50,000. In 1975, the threshold was at 110 percent of the U.S. 
family median income. The reset has left it slightly below 100 
percent. So the answer is it would be higher.
    Chairman Walberg. Would the 2004 standard?
    Dr. Belman. No, the 2004 standard was at around 53 percent 
of U.S. median family income.
    Chairman Walberg. Mr. Wilson, coming from your background 
in dealing with that, give me some background on the reason and 
rationality for the 2004 standard in placing it at the $23,000 
level, which I think arguably we could say is too low for now?
    Mr. Wilson. Yes, I think--
    Chairman Walberg. But where would it be now if you used 
that standard and formula?
    Mr. Wilson. Well, the history of the Department of Labor in 
setting the salary level threshold from 1938 to 1975 was 
typically set at 10 percent of the salaried employees, the 10th 
percentile of the salaried employees in the United States, 
roughly in that--
    Chairman Walberg. Of the total--
    Mr. Wilson.--at that level. Of all salaried employees, it 
came in at about the 10 percent level. In 1975, the decision 
was made to preliminarily and it was supposed to be only on an 
interim basis adjusted for inflation, which is hasn't been done 
since, and it was raised. In 2004, we took a look at the number 
of salaried employees in the United States and took, by 
industry and region, and determined that the best place to set 
it at was the 20th percentile. We were going a little bit 
higher than it had traditionally been done. We didn't adjust it 
for inflation, but we set it at the 20th percentile, taking 
into account the impact it would have on small businesses, on 
retail industries, particularly in rural areas, which is 
critically important in terms of the impact it would have 
because it was a relatively large increase at that point in 
time.
    Chairman Walberg. Different than New York or San Francisco?
    Mr. Wilson. Exactly. Right. And so that's the methodology 
we used in 2004. Using that methodology today would, off top of 
my head, set it at around $35-$40,000 a year in terms of the 
salary level threshold instead of the $50,000 that's currently 
being proposed.
    Chairman Walberg. Significantly less impact but still would 
you say in a lot--
    Mr. Wilson. Substantial but significantly less impact, 
yes--
    Chairman Walberg. Okay.
    Mr. Wilson.--in terms of the unintended consequences it 
would have.
    And also want to add, Congressman Bishop, that our members 
are large members, and so they have the ability to adapt to 
this regulation much easier than a lot of the smaller 
businesses do. They're for-profit companies as opposed to 
universities that have much tighter budgets, and they're more 
easier can more easily increase the prices of their goods, 
which, to the extent there's an impact and a cost of the bottom 
lines for our employers and our HR policies, association 
members, it'll just be passed on to consumers.
    Chairman Walberg. Okay. Ms. McKeague, you discussed in your 
testimony the overtime regulation proposed by the Obama 
administration and its potential impact on employee morale, 
which is an important issue, especially from the testimony you 
heard from Mr. Meyer about the millennials as well. The 
proposed regulation would convert many current management 
employees into hourly employees even though many employees 
prefer to be in the exempt classification. What do you see as 
the biggest concern for employees who are exempt now but would 
likely be reclassified as nonexempt?
    Ms. McKeague. Their largest concern as articulated to me is 
the loss of flexibility in setting their work hours and 
accommodating a work-life balance. We use very minimal overtime 
at MHA, and I've been proud to be able to work with new 
generations of employees in order to put together schedules 
that allow them to meet their priorities. And I have eight 
employees on our association side who I will have to demote and 
reclassify if this law goes through the way it is. I--
    Chairman Walberg. Demote is the appropriate term?
    Ms. McKeague. Obviously, Dr. Belman disagrees with me, but 
if you ask my eight employees whether moving from exempt status 
to nonexempt status was a demotion, they would tell you yes, 
and they would be in different bonus pools and they would be in 
different benefit programs than they were as exempt employees.
    I don't have employees coming to me and asking to work more 
overtime. I have employees coming to me to ask for help in 
putting together a flexible schedule that accommodates their 
life balance needs.
    Chairman Walberg. Okay. My time is expired. I now recognize 
for a second round Representative Bishop.
    Mr. Bishop. Thank you, Mr. Chairman.
    And just to follow up, Ms. McKeague, so this rule on 
overtime and expanded overtime eligibility will not necessarily 
result in a windfall of overtime income for newly classified 
nonexempt employees, is that correct?
    Ms. McKeague. That is correct.
    Mr. Bishop. You see demotions and changes in the 
characterization of their work, maybe what they do. What other 
impact does it have other than I think the idea is that again, 
I am trying to get to the reason for the rule. Mr. Meyer said 
it makes no sense. I grab that quote and I think that best 
illustrates how I feel about what I am hearing. But what is the 
reasoning behind it? We are not going to see an increase in 
pay. I know that is what the intent, I think, is to try to 
increase pay and to grab whatever time employees spend working. 
But the overall net effect is not that at all?
    Ms. McKeague. I would agree with you that is not the 
overall net effect. You asked an interesting question I thought 
earlier also, and I'm in the position of having so much to say 
with so little time. But you asked what we were doing to get 
ready for this rule because we anticipate, of course, a very 
quick turnaround on that.
    SHRM established a six-step process that they recommended 
all of us follow to become prepared for this, and that ranges 
from identifying which jobs right now would fall under these 
thresholds, whether we have a zone within those thresholds, 
whether people who are close to the threshold will receive 
increases or whether it will actually move some people down, 
what we do with their training opportunities. And this is 
without discussing the changes that will occur due to wage 
compression when we move these employees up as well. So 
there'll be changes to job duties and to schedules and perhaps 
to staffing levels.
    You also asked a question about the percentiles, and we did 
take a look at that because past administrations, both 
Republican and Democratic, have taken a look at this. And they 
were the proposals were between 10 and 20 percent. At the 30th 
percentile, this the wage would move to $40,196. At the 35th 
percentile, it would be $44,304. And this proposed threshold, 
of course, is $50,440. I have eight employees at this threshold 
who would be impacted by that.
    And I love working with my millennial employees. I realize 
that might sound odd to other HR professionals, but, I mean, 
the whole concept of a gig economy is something that's on my 
mind. I have people like Mr. Meyer on my staff I want to keep, 
working in jobs that didn't exist when I came to work for the 
hospital association 12 years ago. And this is the kind of 
give-and-take I need in order to keep them.
    Mr. Bishop. I agree. Mr. Meyer, that was directed at you, 
and I would agree that much of this is about you and your 
millennial generation. The unemployment rate is high for your 
area of the workforce, and we ought to be doing everything we 
can to encourage growth in employment in that sector of the 
economy. And while in this case we live in a world where I am 
looking at a statistic here where only 3.6 percent of private 
businesses are at least partially owned by some under the age 
of 30, the lowest proportion in the last 25 years.
    Mr. Meyer. Ever since the data began being collected, it's 
at its lowest level.
    Mr. Bishop. So is this a direct reflection of how we are 
interpreting the law and how we have failed to accommodate this 
generation into our workforce?
    Mr. Meyer. I think to stay with the focus of this hearing, 
I'll look at the overtime rule, but imagine a startup. No one, 
even experienced people in startups are making $50,000 a year. 
And anyone who's worked there I know I worked at a startup in 
college you are working much more than 40 hours a week. So 
you're doing it for equity or you're doing it because it's 
something you really love and your investing in this company. 
So you're not doing it for the salary and you want to put in 
those extra hours to make your product work so it can come to 
market.
    Putting in this threshold, which really would be 
prohibitive for startups, again, telecommuting, all these 
things that now you would need to keep track of workers' hours 
when most young people I'd say the vast majority want to work 
from home at least some days a week, work while they're on the 
road, do all that. It's again, some large businesses, it's 
going to create a lot of confusion and some shakeups in their 
pay, but this is going to really negatively affect startups.
    Mr. Bishop. Thank you.
    Chairman Walberg. I recognize myself for five minutes. It 
is getting to be a pattern.
    [Laughter.]
    Ms. Thomas, you mentioned employees who advised students 
who provide counseling and offer services in residential life. 
How would the services provided to students be affected by the 
proposed to change in the overtime rule?
    Ms. Thomas. There are a number of ways where that effect 
would be realized. Under our current application of the duties 
test, we have employees that make above and below the proposed 
threshold providing services to students. When you want to 
serve students well, you want to be available when students are 
available, and so you have flexibility in your workforce 
regarding being available for counseling and supporting 
students when they're likely to come to you for services.
    Chairman Walberg. It could be around the clock, couldn't 
it?
    Ms. Thomas. It could be around the clock, but we don't 
expect anyone to work around the clock. We want them to be 
flexible, to be available to their students and to be available 
when the student is most likely to seek that assistance. Some 
is going to be during the day, some is going to be at the end 
of the day, some is going to be well into the evening as it 
relates to residential life.
    Chairman Walberg. When you take into consideration, 
especially in the counseling area, whether it is guidance 
counseling for careers or whether it be mental health guidance 
counseling--
    Ms. Thomas. Absolutely.
    Chairman Walberg.--that goes on a major university campus 
like your own, relationships mean a lot. And so while you can 
program certain hours to be effective in working, generally 
speaking, with student body, there are times when you can't. 
Have you costed out or considered the impact financially to 
institution to care for those types of needs where the student 
wants to have that relationship and that is important for 
carrying on the counseling aspect by the employee to the 
student?
    Ms. Thomas. I believe that would be very difficult to cost 
out because across the University of Michigan as well as the 
other universities in our country, we are driven to serve 
students to the very best of our ability. They're part of the 
reason why we exist, if not the major reason why we exist. And 
so individuals have the flexibility to be responsive in 
creating that relationship and sustaining that relationship, 
and not only student life but in the academic affairs 
counseling that our students need to receive.
    Chairman Walberg. Well, going away from the purpose and the 
function just to the hard-core facts of dollars, you indicated 
in your testimony there could be reductions, significant 
reductions in pay level, salary level, and wages. Could you 
elaborate further on that?
    Ms. Thomas. I think in order to ensure that we have the 
resources because of our federal grants process and the various 
stipulations for that, we would not be able to employ as many 
individuals as we currently do and meet the requirements of the 
regulations as proposed. So the instance of we have a number of 
postdoctoral researchers, we have a number of individuals that 
work part-time in order to serve the needs of our experiments 
in our research arena with less funds available to pay them 
because of the requirement to maintain their exempt status. In 
order to do their work, we will employ less people in those 
areas.
    Chairman Walberg. Our postdoctoral, they are considered 
professionals?
    Ms. Thomas. They are considered professionals today.
    Chairman Walberg. Okay.
    Ms. Thomas. Yes. And not all of them make above the 
proposed threshold.
    Chairman Walberg. Okay.
    Ms. Thomas. In fact, most don't.
    Chairman Walberg. Dr. Belman, it seems to me that 
reclassifying from exempt salaried status to nonexempt hourly 
status as proposed in the overtime rule would cause a number of 
problems. As Ms. Thomas notes, this would result in reduced 
autonomy, fewer flexible work arrangements that employees 
prefer, and fewer opportunities for business travel. The 
subcommittee has also received testimony that reclassified 
employees from salaried to hourly would cause significant 
morale problems for employees who would see this as a demotion. 
Do you agree that more than doubling the salary threshold would 
have some negative impacts on employees?
    Dr. Belman. I'm sure there will be employees who believe 
they've been negatively impacted. However--
    Chairman Walberg. If you could pull yourself closer to the 
microphone.
    Dr. Belman. Oh, I'm sorry. I'm sure there are some 
employees who will feel themselves been negatively impacted. 
However, under this requirement, you although they legally move 
from exempt to nonexempt status, that doesn't mean they have to 
move from salaried to hourly. They can retain that it they can 
retain all the benefits which they currently have. They can get 
the same travel and so on.
    Our problem is this: Essentially, once someone is moved 
into exempt status, and they can be in exempt status at low 
incomes oh, by the way, this is quite different when you use a 
10 percent or 20 percent or whatever the salary and say, well, 
this is way too high, of course, we have many more salaried 
workers today in a sense and much than we did, let's say, in 
1975 in the following sense. In 1975, there were very few 
people at fast food restaurants who were considered managerial 
and therefore exempt. Now, this is a way of evading--
    Chairman Walberg. But that is all changing.
    Dr. Belman. What?
    Chairman Walberg. That is all changing since the 1938, 
almost 80 years ago--
    Dr. Belman. Right, but I'm saying that while your witnesses 
are claiming there have been huge changes in the economy, they 
go back and act as if who is considered salary is identical to 
what it was in 1975, and that's changed. People at much lower 
levels of education, at much lower pay levels get classified as 
salary in part to avoid paying overtime.
    So what I'd say is there will no doubt be problems in 
adjusting to this, as there are with all these rules. We hear 
the same thing. Minimum wage, it's going to be disastrous if 
you raise it. It turns out for lots of research in my most 
recent book from Upjohn What Does the Minimum Wage Do? suggests 
that employment effects are de minimis.
    Chairman Walberg. Well--
    Dr. Belman. So what I would say is that--
    Chairman Walberg. I look forward to taking my time is it--
    Dr. Belman. We tend to--
    Chairman Walberg. My time is expired here, and we will have 
further opportunity to discuss this.
    Dr. Belman. Oh, good.
    Chairman Walberg. I know this is the key issue we are 
facing here dealing with a 1938 law trying to be applied and 
upgraded in ways that are challenging to say the least and 
difference of opinion on that.
    Dr. Belman. We deal with the Constitution--
    Chairman Walberg. How you make it work today--
    Dr. Belman.--which is over 200 years old, we seem to do 
okay.
    Chairman Walberg. I will hold myself back on that one. We 
will have a chance to talk about that later on after the 
hearing. I yield now to my colleague, Mr. Bishop.
    Mr. Bishop. No, I won't. I want to engage that one. To me, 
the world out there reacts to laws and the changes in laws. It 
does not react well when you have a bunch of unaccountable, 
unelected boards and departments and agencies promulgating 
rules that have dramatic impact, they may even impact long-
existing law and precedent.
    This is the concern that we have, and we do have 
opportunity to address issues that impact current law and the 
Constitution, but we do so through Article I of the 
Constitution, which has to do with Congress and the right of 
Congress, which has exclusive jurisdiction over the passage of 
laws.
    Are you concerned at all, Dr. Belman, that departments and 
these unelected boards have so much authority to make such a 
dramatic change in the way we operate in our daily workplace?
    Dr. Belman. I first have to admit I was born inside the 
Beltway before there was a Beltway, so I may be biased on that.
    Mr. Bishop. Well, that explains that.
    Dr. Belman. Yes, absolutely. I would say that there are 
actually fairly substantial procedures to make sure that 
administrative rulemaking is reasonable, and if it appears not 
to be reasonable, parties who are concerned can sue to have 
those procedures overturned. So we have a pretty elaborate 
system of due process to address these things. I do not see in 
my own view that the most of the regulation I see are terribly 
unreasonable. There are parties who are negatively affected by 
them, just as there are parties who are positively affected, 
and in the hurly--
    Mr. Bishop. Can I ask you a question right there?
    Dr. Belman. What?
    Mr. Bishop. Can I ask you a question right there because I 
don't have a lot of time.
    Dr. Belman. Okay. Go ahead.
    Mr. Bishop. I want to capture that thought because you have 
got four people around you that have raised some really serious 
concerns. And I have heard, we have heard dramatic stories of 
impact. And this is not coming from Congress, this is coming 
from these agencies and departments and Department of Labor 
specifically here changing law overnight, overnight that has 
dramatic impact.
    So our concern is how we change that, that we can collect 
this information before the and the back to the old way, the 
way the Constitution intended it to be where we actually 
publicly discussed this, we debated, and we vote on it, and 
that is the process that we once knew. But now we have a 
different process, and it is creating havoc at every level of 
government, every level of business. And that is the problem 
that we have and that is what has created this and that is why 
the good Chairman is walking the earth here taking us with him 
to address this issue. So--
    Dr. Belman. I would have to say that I respectfully 
disagree about the process. First of all, this isn't overnight. 
We have a fairly long, slow procedure for making rules.
    Mr. Bishop. But you heard from Dr. Wilson that it--
    Dr. Belman. And secondly, I would say--
    Mr. Bishop.--immediately impacts people because of--
    Dr. Belman.--these are--
    Mr. Bishop.--the suggestion that it could go into effect. 
As a business owner--
    Dr. Belman. Would you agree that you have hand-chosen 
witnesses here--
    Mr. Bishop. As--
    Dr. Belman.--20 percent of whom are speaking in favor of 
the rule. If we did--if we had a representative group--because 
the squeaky wheel gets the grease, you want testimony which is 
favorable to your point of view, you've got testimony which is 
dependably favorable--
    Mr. Bishop. I am engaging you right now. That is why. And 
if you--
    Dr. Belman. What?
    Mr. Bishop. I am engaging you right now.
    Chairman Walberg. Mr. Belman, this is the normal process--
    Dr. Belman. I agree with that.
    Chairman Walberg.--regardless of who is in the majority. 
And so it is what we deal with. We are delighted to have you 
here. You were invited here and you are holding your end--
    Dr. Belman. And I'm delighted to be here.
    Chairman Walberg.--of the bargain.
    Mr. Bishop. I just want the record to reflect--
    Dr. Belman. If I--
    Chairman Walberg. Mr. Bishop?
    Mr. Bishop.--that I like Mr. Belman. I like his input 
because you provide a necessary part of this conversation. We 
need to know where this is coming from and the other side of 
this. So your testimony is very important.
    My concern is for members of Mr. Wilson's organization or 
these other folks out there and maybe people in the audience 
today who are directly impacted. Even by the suggestion of a 
rule, it causes a freezing effect for employers out there when 
rules like this get passed. And I may be wrong, Mr. Wilson, but 
that has a really serious impact on the economy.
    Mr. Wilson. It can. I would just add in terms of Dr. 
Belman's characterization that there are these the there's an 
administrative procedure here in terms of how rules are 
published, proposed, and published as final, that works well in 
this particular area. I would argue that in the case of the 
proposed overtime rule that there's a really big problem with 
that and that is their request for comments on potential 
changes to the duties test. They didn't propose specific 
language that the public could respond to in terms of this is 
what we're going to this is how we're going to change the 
duties test, which are very vague, somewhat subjective, 
somewhat arcane, certainly dated when it comes to the 
professional computer professionals. And they didn't propose 
anything. They just asked a series of questions and said, so 
what you think we should do with the duties test?
    The problem is that they didn't by not proposing a specific 
thing, employers have no idea what the final rule is going to 
look like. And there's some serious unintended consequences of 
just the misplacement of a comma in the duties test for 
managerial or executive employees can have a significant impact 
on litigation. And so without publishing specific proposals, 
they're sort of circumventing the traditional Administrative 
Procedures Act here and getting around it, which is of great 
concern to, I think, all employers that are out there.
    Chairman Walberg. The gentleman's time is expired. Mine has 
come back. Let me carry on with Mr. Wilson on that train of 
thought.
    I would like to get your feedback on the Wage and Hour 
Division's change and this method of providing guidance. The 
Obama administration made a decision to provide so-called 
``administrator interpretations'' to assist in clarifying the 
law as it relates to an entire industry, a category of 
employers. To quote from the Department of Labor's Web site, 
they say, ``The Wage and Hour Division believes that this will 
be a much more efficient and productive use of resources than 
attempting to provide definitive opinion letters in response to 
a fact-specific requests submitted by individuals and 
organizations where a slight difference in the assumed facts 
may result in a different outcome.''
    Although opinion letters had been issued previously for 
decades, the administration decided it would self-select issues 
and make broad policy pronouncements. Has the Department of 
Labor frequently utilized administrative interpretations under 
FLSA to provide clarification of employers, and what impact has 
that had?
    Mr. Wilson. No, it has not. This it's new. The 
administrator interpretive letters is new to this current 
administration. They suspended actually issuing opinion 
letters, which are authorized under the Fair Labor Standards 
Act. And the administrator interpretive letters are more akin 
actually to regulations that are not that don't go through 
notice and public comment.
    And it's hard to say what deference these interpretation 
letters will get in the courts in the future, and there's 
always the threat by not going through notice and public 
comment that there's always the possibility that a future 
administration could simply resend the interpretive letter and 
you end up with a law that goes back and forth or the rules and 
regulations that ping-pong back and forth over the course of 
four or eight years, which is really no way to run a 
government, let alone try to set the rules for an economy.
    Chairman Walberg. It doesn't provide certainty.
    Mr. Wilson. It certainly doesn't, and that's what employers 
are really desperate for this point in time.
    Chairman Walberg. Mr. Meyer, while the Department of Labor 
seems intent on making it more difficult for workers to 
participate in the sharing economy, I would like to discuss 
what Congress might do to make it easier for these workers. 
According to your testimony, many of these workers would like 
portable benefits such as health costs and retirement savings. 
However, if sharing economy firms were to offer much benefits, 
this might endanger the independent contractor status of online 
users. What could Congress do that would assist in spurring on 
this sharing economy--
    Mr. Meyer. Well--
    Chairman Walberg.--and encourage the benefits that are 
necessary and wanted as opposed to one-size-fits-all?
    Mr. Meyer. Well, there is actually a letter signed by the 
CEOs of over 30 sharing economy companies bringing up the 
portable benefits or something they want to provide to their 
workers because, again, this work is transient, it's done in 
addition to other work, but hey, some workers really want this. 
And in the sharing economy, just as any other part of the 
economy, you have to compete for the best workers. And if you 
can't get them, your company is not going to succeed. But the 
more they offer, the more they start to resemble employers 
under the law.
    And there's really no trust with the Department of Labor 
right now because they can just, through a blog post, decide 
that one of the six criteria for determining if someone is an 
employee doesn't matter anymore. So they don't have really any 
trust in the Department of Labor, and they're worried it that 
if they start giving workers access to these benefits that they 
want while workers don't want all the wage and hour protections 
something that comes up over and over again is the portable 
benefits, if they start doing that, next thing you know, they 
could be liable for providing all the wage and hour benefits.
    Chairman Walberg. With no choice in intermediate--what does 
it do to the intermediaries in this process?
    Mr. Meyer. So what it would do for the intermediary is 
completely destroy their business model. I mean you could 
imagine an Uber driver signing onto the app and just sitting in 
the car getting paid minimum wage while they're also driving 
with another phone for Lyft. I mean, it's actually impossible.
    Alan Krueger, the Princeton University professor, he 
released a paper where he agrees with me on all the wage and 
hour, that these are completely inapplicable. We disagree over 
the collective bargaining and some of the other protections, 
but wage and hour, it's really uncontroversial that these do 
not apply to intermediaries.
    Chairman Walberg. Just stifle?
    Mr. Meyer. Yes. It would destroy the sharing economy.
    Chairman Walberg. Okay. Mr. Bishop, I yield to you.
    Mr. Bishop. Thank you, sir.
    I wanted to pick up with Ms. Thomas and a question that you 
asked earlier. You indicated that your postdocs and research 
fellows consider themselves professionals. I mean, they are 
considered professionals. Do they consider themselves 
professionals?
    Ms. Thomas. Absolutely.
    Mr. Bishop. Sure.
    Ms. Thomas. Learned professionals, absolutely.
    Mr. Bishop. Would research at U of M I am concerned about 
the research grant system. You have a very important system in 
place, especially in Michigan with the three big research 
universities. Does this have an impact on the research grant 
system in our state?
    Ms. Thomas. It does have an impact in how we would conduct 
the work on an exempt or nonexempt basis in order to conduct 
the research. The work of a research assistant or associate, 
the work of a primary researcher, the work of the postdocs who 
are being trained for higher-level work in the academy is not 
subject to a 40-hour week. All of the nature of that work is 
performed as described by the researcher, by the grant itself, 
by the level of experimentation that they're doing. And so to 
impose nonexempt standards of hourly reporting, it's just 
incompatible with the work of research.
    Mr. Bishop. What is the net effect?
    Ms. Thomas. The net effect, as we are predicting, because, 
for instance, the NIH sets our stipend level, which is below 
the proposed threshold, would be the employment of fewer 
individuals in this area in order to ensure that they could 
remain exempt.
    Mr. Bishop. Mr. Chair, I don't know how long you would like 
us to go, but I am prepared to wrap up if you are.
    Chairman Walberg. Well, I am prepared to ask a few more 
questions.
    Mr. Bishop. Okay. I will yield back to you then.
    Chairman Walberg. Okay. Thank you. I appreciate that. I am 
just reveling in the fact of having more than five minutes of 
questioning. And that is nothing on my Chairman, Chairman 
Kline, who was with you yesterday. That is just the rules of 
the process and the time frame, but here we have a little bit 
more time. And I know you have a meeting to go to following, as 
do I. But while we have these people here, I would certainly 
like to ask a few more questions on my own.
    Ms. McKeague, your written testimony highlights how FLSA 
hampers employers and their ability to provide workers with 
greater flexibility, and yet employees are increasingly 
demanding greater flexibility and control over how, when, and 
even why they work.
    That is something, Mr. Meyer, I have been impressed with 
learning more about the millennial. There is a why to why you 
work beyond simply put food on the table, care for my family. 
There are soft, soft values that really are important and that 
we ought to be considering.
    But back to Ms. McKeague here, the laws of prohibition on 
the use of comp time, for instance, in the private sector is 
one example of how the law curtails flexibility. Are there 
legitimate reasons for treating the public sector and the 
private sector differently in this regard?
    Ms. McKeague. Not in my opinion. We're competing for the 
same employees often in the same field of knowledge. It puts us 
on an uneven footing.
    Chairman Walberg. And so you could use comp time very well?
    Ms. McKeague. I would argue I could use compensatory time 
off perhaps more efficiently than the public sector could.
    Chairman Walberg. Dr. Belman, let me just turn to you to 
give you the opportunity to answer that as well. Is there a 
difference in public and private sector employees relative to 
things like this, compensatory time as being part of the 
benefits that would be offered?
    Dr. Belman. I would say that the allowing compensatory time 
for public employees was very specifically done because at the 
time they had not had fair labor standards coverage. And so as 
a result, this was partially an adjustment to the concept that 
they were sovereign, that this was an extension of protections 
into a sector where it hadn't existed.
    And particularly, the real the issue driving this was 
public safety employees who worked irregular hours, or 
potentially worked firefighters and so on very long hours in a 
given week. So in my view, comp time two issues, one, public 
sector different, and there's a reason why the extension of the 
fair labor standards into the public sector came with comp 
time.
    The other thing which I would point to is it becomes almost 
unenforceable. You know, public sector we can be reasonably 
sure that they keep good payroll records and that they're very 
thoughtful about this, particularly in public safety. Private 
sector, a lot harder. I'm not saying that any particular 
organization, but from construction we know that there are a 
lot of employers who push the limits of the law and perhaps 
push well over it so that trying to administer comp time in a 
system in the private sector would be it would essentially gut 
the overtime provisions.
    Chairman Walberg. Mr. Wilson--
    Mr. Wilson. Yes.
    Chairman Walberg.--there are differences between public and 
private sector employees. I think you accurately talked about 
some of the inception of the idea with public safety. But we 
have now gone beyond just thinking of safety but thinking of 
benefits, thinking of life values, thinking of flexibility for 
employees, thinking of single-parent families, we are thinking 
of advancement opportunities for females that frankly we didn't 
think about in the past, that we are considering right now, and 
rightly so. Mr. Wilson, respond to that, and then I will 
probably come back to Ms. McKeague on that issue of--
    Mr. Wilson. Well, I would just add yes.
    Chairman Walberg.--the assertion that the private sector 
won't keep the records as well as the public sector.
    Mr. Wilson. Well, I would just add in terms of public 
safety that, you know, in terms of hospitals, you know, the 
nurses, the technicians, there's a very key public safety 
component to that, particularly in an emergency situation that 
where comp time could be very useful in that particular 
industry.
    So in the sense of, you know, voluntary for both employers 
and employees and the comp time arrangement and the private 
sector would be a beneficial change to the law and would allow 
the private sector to have the same flexibility of benefits 
that the public sector employees currently enjoy.
    Chairman Walberg. Ms. McKeague?
    Ms. McKeague. I'd like to give you a really clear example 
on the value of compensatory time off in the private sector. I 
work with a young woman, a recent hire at MHA who works in our 
human resources department. She was trained and educated very, 
very well at Michigan State University in the Broad School. I 
have a great deal of regard for Dr. Belman's work. So she's 
come to work with us. She worked with us first as an intern, 
then as a fellow, same sort of opportunity Mr. Meyer got. Now, 
she's a full-time, regular employee at the MHA.
    In the last couple of weeks she's been working on closing 
on her new house, moving. I never have to wonder whether she's 
putting in the hours that she should put in, and I really don't 
care if she wants to work 10 hours today and six hours tomorrow 
because she needs to meet with the loan officer. She's the one 
who put together some of the research behind my testimony 
today. She's in the audience, Tori Martin, and she is one of 
the employees that, under these guidelines, I would have to 
move back to nonexempt status. And it would undermine 
everything she told me she values about working at MHA.
    And, while I would agree with Dr. Belman that there are 
industries that have required greater scrutiny than others, 
we've worked really hard in the private sector to be an 
employer of choice. I wouldn't even be affected by these laws 
if the change had been 30 percent increase or under because we 
try to stay ahead of it and provide these sorts of 
opportunities. That's what those of us who are involved with 
SHRM do.
    What really offends me is legislation like this that starts 
from the premise that none of us can be trusted to treat our 
employees correctly.
    Mr. Wilson. I would also add that large employers keep very 
good records, most employers, nearly all employers. There are 
some that don't. And the Wage and Hour Division, their 
enforcement is appropriately focused on some of those 
industries. And where they go out and have directed 
investigations and they find that, you know, they take action 
against those employers that don't keep good records.
    But the vast majority of employers keep records primarily 
for tax purposes because they have to comply with the IRS. 
Nobody wants the IRS coming down on them. And also primarily 
for potential litigation that may ensue. If you're not keeping 
good records, you're opening yourself up to litigation that 
could be very, very costly.
    Chairman Walberg. Well, compliance costs today, the most 
recent I have seen is about $1.9 trillion to businesses for 
just compliance, white paper costs of regulatory issues. So, 
Dr. Belman--
    Dr. Belman. My answer to that is Walmart, the largest 
employer in the U.S., maybe was involved in a few wage and hour 
violations, seems to fall exactly into your category and 
clearly basically didn't care about that law. So I'm not sure 
what large employer--
    Mr. Wilson. Well, actually, they did. They actually Walmart 
actually came to us to help them with what they referred to as 
their arcane and somewhat outdated bonus structure system. And 
they came to us and we worked with them to work out the 
particular issues that they had with their between their 
exempted nonexempt employees. We worked it out to a mutual 
benefit of both the employer and the employees and the federal 
government on a satisfactory basis.
    Dr. Belman. So how did you deal with locking employees into 
their stores for uncompensated overtime? Did you come up with a 
policy for that?
    Mr. Wilson. That was after that those alleged violations 
were after I was there, after the I was out of the Department 
of Labor, so I can't address those particular issues. I'm just 
particularly speaking of the wage and hour investigations we 
conducted on Walmart back in 2005, 2006, I believe.
    Dr. Belman. Okay. So--
    Mr. Wilson. I can't address that.
    Chairman Walberg. There are certainly bad actors or 
mistakes both that take place. Our concern, though, in the 
governmental entity is making sure that we don't just regulate 
on the basis of the small number of bad actors or mistakes that 
take place, but we do something that fosters the growth of 
those that are doing the right thing for their employees.
    Let me ask one final question, and I am glad there are no 
lights left so I can ask that final question. And I am going to 
go back to Mr. Meyer again. When individuals who provide 
services through online platforms are deemed to be employees, 
this can have a number of consequences for both the sharing 
economy company and the platform users. What has been the 
experience of sharing economy companies when they have shifted 
from an independent contractor model to an employer-employee 
model? And secondly, was this a good thing for the independent 
contractors?
    Mr. Meyer. Well, one company I can speak of, Homejoy, it 
actually had to shut--
    Chairman Walberg. What was that?
    Mr. Meyer. Homejoy. So think an Uber of housecleaning.
    Chairman Walberg. Okay.
    Mr. Meyer. You can bring in find someone who's an 
independent--
    Chairman Walberg. Man alive, I am finding more all the 
time. Where are you guys coming up with these things?
    Mr. Meyer. But so they had to shut down actually over 
employment classification questions. And the reason for this is 
the CEO said their labor costs went up about 40 percent. So 
their costs, because of added labor costs, it increased 40 
percent. And this is right in line with what the Department of 
Labor's employment cost index shows, which is about a 30 
percent increase to move to classifying employees.
    And I just want to point out when you're working for 
multiple companies I mean, I have friends who work for 
Postmates, work for Uber, and have a full-time job also so why 
do you need these other companies then paying for your workers' 
comp or your unemployment? I could start I could do one ride 
for Uber this afternoon as a driver and then not work for four 
months, then do another ride. How does unemployment insurance 
figure into that?
    So it just shows that this is a different nature of work 
where it's really entrepreneurial. You are working for 
yourself. We can't apply the same standards to a completely 
different model of work.
    Chairman Walberg. Yes. It was interesting, just last week, 
I took an Uber ride from my office downtown, and the driver 
that I had, very articulate, come to find out in the course of 
conversation he has four degrees, two doctoral degrees. And I 
asked what in the world are you doing driving Uber? Are you 
writing a book on experiences?
    He says, you know, that might be an idea, he says, but no, 
I am paying off my student loan debt.
    So there is an economy there that serves.
    Well, I appreciate it. I don't want to belabor this, 
getting toward the end of the time, and I know that my 
colleague has to get to a veterans event of great importance. 
And we are going to spend a little bit more time here in this 
community college looking at what is going on here. But I would 
offer to my colleague an opportunity for any final comments 
that you would like to make.
    Mr. Bishop. Well, I had the opportunity to research, to be 
in the practice of law, to do what I have done over the years 
and see some of this firsthand for 25 years now. Before I came 
to Congress I was in the private sector. I was actually in the 
compliance officer arena. I was the chief counsel for a small 
company in the financial world. And we had the opportunity to 
face many, many compliance issues. And it was very difficult. 
It was very difficult for us to survive.
    But the impact that every single law they came down, 
compliance issues, was to freeze what we were doing so that we 
could assess whether or not we could withstand what the new 
rule was. We didn't want to stick our neck out too far because 
we knew and when I say stick our neck out meaning we would like 
to hire more people, we would like to expand, but we're not 
going to until we can figure this whole thing out.
    And now, Mr. Chairman, we live in a world where it is not 
government, seated government anymore that is doing this. It is 
agencies and the departments and different boards of unelected 
officials who don't face re-election, who don't have to face 
the reelection process and face, ultimately, voter 
accountability.
    And to me that has raised all new problems in this country, 
especially in an economy that is just absolutely handcuffed 
right now, being choked out, and especially in the small 
business environment which is the backbone of our economy. We 
see small business holding on for life. They want to grow, they 
want to create jobs, but they just won't do it because this 
world is too crazy and there is too much government, too much 
regulation.
    The rules that we have talked about tonight were created in 
an environment that did not give the people that really have to 
live with it the opportunity to weigh in, and they don't make 
sense. And it is embarrassing to a certain extent for members 
of Congress to be told that by constituents and by a panel like 
this and not be able to do a thing about it because we don't 
have the proper oversight to do so.
    I am grateful to you and this Committee for bringing these 
issues forward so that we can discuss them in a public 
environment and so that we can raise awareness to those that 
are promulgating these rules as to why rules like this should 
be given more consideration, more vetting, more public debate 
because in the end we are seeing more of the unintended 
consequences than we are of the actual intent of whatever the 
promulgating organization is that put the rule forward.
    So, again, I am grateful for what you have provided us 
today, the time and those that have weighed in on this subject, 
thank you all for your testimony. I am hoping that in the 
future that Congress will have the opportunity to address this 
in a meaningful way so that we can bring some sense of calm and 
clarity to the law and that we can grow and expand this economy 
and that people will get hired and students that are in debt 
won't have to deal with this anymore and that maybe one day you 
and I can look at and be Uber drivers.
    [Laughter.]
    Chairman Walberg. There is always that option, isn't it?
    Mr. Bishop. Or Homejoy, too, that sounds like a good idea.
    Chairman Walberg. Well, thank you. And thank you to the 
panel for taking your time to come here, and I hope it was a 
little bit do except for at least well, two of you this was 
closer to your home site as well doing it in the field hearing.
    I, like my colleague here, had a life before Congress, and 
one of those areas was as a division manager in an institute of 
higher education, specifically in the area of development. And 
I had a whole team, national team that were salaried, every one 
of them. And every one of them had flexibility of being away 
from me most of the time but doing great work for the 
institution and stewardship in providing resources for major 
projects, too, over the course of to the tune of about $35 
million over the course of time projects raised. And they spent 
a lot of time in the field. They needed flexibility.
    I can't envision what impact this overtime reg would have 
on their functioning, which was amazing, the opportunities that 
they brought forward to students, faculty alike by their 
ability to serve the people that would provide the resources 
for international as well as national projects for this 
institution.
    We certainly don't ever want to let it be said that there 
is a divide in the minds of this Committee or Congress on the 
fact that employers and employees ought to be treated well. We 
ought to encourage employers to expand, to be more successful, 
in turn, to be able to hire more people but to take care of the 
people they have, developing greater opportunities for them.
    And I think that is why we wrestle with a 1938 law, almost 
80 years, 80 years where it really hasn't been changed all that 
much. And every time we attempt to go into areas where I think 
would foster growth for employees as well as employers, the 
landmines begin to develop on issues that go no place in 
extending the successful opportunities for both sides. It 
becomes partisan.
    And I have appreciated some of the efforts of issues we 
have talked with on our subcommittee and wish we could expand 
it still further to the full Congress to put aside the partisan 
politics issues and make sure we upgrade a law that could be 
very effective to expand the opportunity of this great country 
using free enterprise, using the market economy, using the 
creativity that is developing within our new generations coming 
forward with the tools that they have and the flexibility that 
can make for a better life and not hold people back. And so 
that will continue to be our effort.
    I would like to think that the bill that I have introduced 
would just do one simple thing, let's look at the economics. 
How does it truly impact both the employee and the employer and 
then find a way whereby we might upgrade the law but do 
positive things on both sides of the ledger to make sure that 
we continue to advance?
    Any opportunities that we have had to travel 
internationally on our Congressional Delegation trips and see 
the competition that is out there, they are not sitting back. 
They are aggressively moving forward. We don't have that luxury 
anymore. In our DNA we have everything necessary to stay at the 
head of the pack unless we hold ourselves back. And my 
contention is that over a large bureaucracy allowed by 
unlimited government takes away the unlimited opportunity back 
in the districts.
    So I appreciate this hearing today and thank you for each 
of you attending. I thank Lansing Community College again for 
giving us the opportunity for a great facility.
    And with that, I will close the hearing. It is adjourned.
    [Questions submitted for the record and their responses 
follow:]


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    [Whereupon, at 11:43 a.m., the subcommittee was adjourned.]

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