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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 

( 

Available via the World Wide Web: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=education 

or 

Committee address: http://edworkforce.house.gov 

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(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Matt Salmon, Arizona 

Brett Guthrie, Kentucky 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Joseph J. Heck, Nevada 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

David Brat, Virginia 

Buddy Carter, Georgia 

Michael D. Bishop, Michigan 

Glenn Grothman, Wisconsin 

Steve Russell, Oklahoma 

Carlos Curbelo, Florida 

Elise Stefanik, New York 

Rick Allen, Georgia 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Ranking Member 

Rube ́n Hinojosa, Texas 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Pocan, Wisconsin 

Mark Takano, California 

Hakeem S. Jeffries, New York 

Katherine M. Clark, Massachusetts 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Juliane Sullivan, Staff Director 

Denise Forte, Minority Staff Director 

SUBCOMMITTEE ON WORKFORCE PROTECTIONS 

TIM WALBERG, Michigan, Chairman 

Duncan Hunter, California 

Glenn Thompson, Pennsylvania 

Todd Rokita, Indiana 

Dave Brat, Virginia 

Michael D. Bishop, Michigan 

Steve Russell, Oklahoma 

Elise Stefanik, New York 

Frederica S. Wilson, Florida, 

Ranking Member 

Mark Pocan, Wisconsin 

Katherine M. Clark, Massachusetts 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Marcia L. Fudge, Ohio 

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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 

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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 

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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:] 

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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 

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4 

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 

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5 

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. 

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6 

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 

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7 

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. 

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8 

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:] 

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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 parttime 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 

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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 

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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. 

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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. 

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Additional consequences include reducing opportunities for parttime 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 multiskilled, 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. 

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ers 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. 

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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 

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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 

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crease 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 idenCEWDOCROOM with DISTILLER

57 

tifying 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. 

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58 

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 

CEWDOCROOM with DISTILLER

59 

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 

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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. 

CEWDOCROOM with DISTILLER

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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. 

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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 

CEWDOCROOM with DISTILLER

63 

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. 

CEWDOCROOM with DISTILLER

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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? 

CEWDOCROOM with DISTILLER

65 

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 

CEWDOCROOM with DISTILLER

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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 

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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? 

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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 

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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 

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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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