Employment Law Daily Secretary Perez defends DOL policies before House Education and Workforce Committee
Friday, March 18, 2016

Secretary Perez defends DOL policies before House Education and Workforce Committee

By Pamela Wolf, J.D. On March 16, Labor Secretary Thomas Perez was grilled by members of the House Committee on Education and the Workforce, chaired by Rep. John Kline (R-Minn.), regarding DOL priorities and policies. When Kline expressed concerns about the Labor Department’s “extreme regulatory agenda,” Perez in response provided insight into existing needs and the department’s actions in response, peppering his comments with illustrative stories about victimized workers. Predictably, among the concerns that Kline pressed were the proposed white collar exemption regulations and a continuing perception by the business community that the Obama Administration is aggressively trying to expand the definition of “joint employer,” particularly with regard to franchisor-franchisee relationships. Proposed overtime rule. In his opening comments at the hearing, “Examining the Policies and Priorities of the U.S. Department of Labor,” Kline noted there was agreement that federal overtime rules need to be changed. “We have said repeatedly we want to partner with the department in a serious effort to streamline and modernize overtime protections,” he said. “Unfortunately, the department is pursuing an approach that will do nothing to provide employers more clarity and certainty. To make matters worse, the department’s proposal will actually stifle workplace flexibility and make it harder for lower-income Americans to move up the economic ladder. These and other consequences will unfold in communities across the country, in local retail stores, small businesses, non-profit organizations, and community colleges. The very places that can least afford it will be hit the hardest.” Question of fairness. Perez, in his opening comments, presented a different scenario: “The white collar exception to overtime eligibility originally was meant for highly compensated employees, but the regulations now apply to workers earning as little as $23,660 a year—below the poverty line for a family of four,” he said. “This is a question of basic fairness. When I was growing up, if you were a manager at a store, you had every expectation of being in the middle class. But over a period of decades, we’ve allowed overtime rights to become diminished, creating real economic anxiety and hardship for American families.” Perez said the DOL’s goal “is to modernize the regulations to ensure that the Fair Labor Standards Act’s … intended overtime protections are fully implemented, and to simplify the identification of overtime-eligible employees, thus making the white collar exemptions easier for employers and workers to understand.” The Labor Secretary called the proposal “a critical first step toward ensuring that hard-working Americans are provided the protections that they are entitled to in our modern economy.” He said that in drafting the proposed rule, his staff “conducted unprecedented levels of outreach, holding extensive listening sessions with employers and workers in a wide array of industries.” He added that issuing a final rule is “a top priority.” Will important flexibility be lost? Congressman Tim Walberg (R-Mich.) expressed concern about the proposed $50K-plus a year threshold at which the white collar exemption from overtime pay would apply. He particularly pointed to women, for example, as retail managers currently exempt from overtime pay, who benefit from the flexibility and resume-building opportunities offered by these salaried positions. He said that the proposed threshold would be a problem for managers at the beginning of their career who would now become hourly under the proposal because flexibility is important to them. He also suggested that using a calculation similar to that used last time the threshold was raised would result in a more appropriate $36K threshold. In response, Perez stressed the department’s extensive outreach in developing the proposed rule. He also talked about the very long work-weeks that many currently exempt employees endure. Perez pointed out that nothing requires hourly status—workers can be salaried and also get paid overtime. He said his staff was available to discuss options under the proposed rule. Joint employer standard. Kline also pressed Perez about a perception among the business community that the Obama Administration is aggressively trying to expand the definition of “joint employer” across all labor and employment laws. He pointed specifically to the impact of an expanded definition on the franchise model that “has served us so well.” Perez disagreed that the administration is trying to expand the joint employer definition. He said the Labor Department has been applying it both in the OSHA and wage-hour contexts when supported by the facts. He gave the example of a worker who was killed on his first day on the job because he was so ill-trained by both the staffing agency and the company on whose assembly line he died. Both bore responsibility, Perez said, underscoring that the facts took the department to that conclusion. “Corporate and enterprise-wide” enforcement. Kline also queried Perez about the Wage and Hour Division’s budget requesting a 22-percent increase to hire 300 full-time employees to develop “corporate and enterprise-wide” enforcement. Noting that it was the largest request in the department, Kline asked what “corporate and enterprise-wide” enforcement meant. In response, Perez noted that the WHD has a “critical” mandate to ensure that workers who work a full day get a full day’s pay. He pointed to a recent study finding that in just two states, California and New York, there had been $1 billion in wage theft. Perez also cited widespread misclassification and the WHD’s very active docket, relevant to both the “legacy” economy and the “on-demand” economy. He stressed that the division receives complaints from employers about other employers who are misclassifying employees, creating a playing field that is not level. Criminal penalties for safety violations. Among other things, Perez was asked to address the adequacy of criminal penalties in the worker-safety context. In response, he cited an OSHA case in which a worker was literally dissolved to death at work and the substance then discharged into water. The OSHA fine was $50K, while the EPA fine for killing fish was in the millions of dollars, Perez said, adding that fish had more protection than people.

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