During a House Education and Workforce Committee hearing prior to the congressional recess, Rep. Ryan Mackenzie (R-PA) questioned Tammy McCutchen, the Senior Affiliate at Resolution Economics, about the challenges small businesses face in achieving compliance with the Fair Labor Standards Act.
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00:00be here and happy to answer any questions. Thank you all. Under Committee Rule 9, we will now
00:06question witnesses under the five-minute rule. I will recognize myself first and then our ranking
00:12member. So again, I'll be recognizing myself right now for five minutes. My three questions
00:18go to Ms. Bohan, Mr. Wolfson, and Ms. McCutcheon in that order. Ms. Bohan, you talked about
00:27seeking clarity, consistency, and compliance, making compliance easier. The 2024 overtime rule
00:34had a negative impact on each of those things, though. And as an HR director, I would love to
00:41hear your experience performing your duties, and can you describe the challenges that a small bank
00:46like yours would face if the federal government were to finalize an overtime standard that caused
00:52a large number of your workers to lose their exempt status. Thank you, Mr. Chairman. Sure. So in my
01:03bank, I have about 101 employees, and funny enough, three years ago before they hired me, the bank didn't
01:11have a dedicated HR staff. So these types of issues, if overtime threshold change, would actually roll up
01:20to the corporate secretary and president of the bank. And they're not, you know, they don't have
01:25formal education. They're not formally trained in, you know, HR things. They use an outside legal
01:31counsel, which surely they would have gotten the update and made the appropriate changes. But I'm
01:37mentioning that because so many of, so many small employers, they often are relying on an office manager
01:45to make these decisions. And are we counting on them to make the right call? So I hope that helped
01:52answer your question. Absolutely. Thank you. Mr. Wolfson, BLS reported in November that 80% of
02:01independent contractors prefer their current work arrangement to actually being an employee.
02:07In my home state of Pennsylvania, we've seen bipartisan support for a program around portable benefits,
02:13a pilot program being offered by DoorDash. This program allows independent contractors across
02:19the Commonwealth to access health, retirement, paid leave, and other benefits without risking
02:24their independent contractor status. Do you have any recommendations on how this committee
02:30could increase access to portable benefits without triggering any unwanted worker classification changes?
02:37Thank you, Mr. Chairman. Yes, I believe that the Modern Worker Security Act
02:42is a great step in that direction. It would make it very clear that when a worker wants to receive
02:49that sort of compensation in a form of a portable benefits payment and that the business that they
02:53are interacting with on an independent basis wants to put that money into the account, that those
02:59dollars do not count toward a determination that that business is in fact their employer. Under the
03:04multi-factor test that the Wage and Hour Division is currently using under regulation for independent
03:09contracting, providing dollars in a form of a benefit. Even if that's what the worker wants,
03:14even if that's what the business wants, that is one factor that the Wage and Hour Division could
03:18use to determine that a worker is in fact an employee. And so a lot of businesses are afraid to do that
03:23because the worker and the business don't want the employer-employee relationship. They want an
03:28independent relationship. And so this opens the door for that opportunity. It's something that Governor
03:32Shapiro and the Democrats and Republicans have worked together in Pennsylvania to do. And I think it's a really good
03:36idea for us to take national. Great. Thank you. My final question is for Ms. McCutcheon, as is the case
03:43with so many laws and regulations, oftentimes the smallest of businesses are the ones that are the
03:49hardest hit. They just don't have the compliance ability. They don't have the resources. So in your
03:54view, what challenges have small businesses faced when dealing with FLSA compliance in recent years?
04:01Well, they don't have lawyers and they often don't have HR personnel. So they're relying on their
04:09advice generally from their accountants who just don't know the law. So it's not wage theft when they
04:14make a mistake. It's more like forgetting to run one of 50 items through the automatic checkout at a
04:21grocery store. It's an oops. And if they do the oops right now, there's no settlement of claims. There's no
04:27waivers. There's no affirmative defense like there is under Title VII. So what happens is they get hit
04:33with a sudden huge bill and it means bankruptcy. I've seen it. That's my lived experience.
04:41All right. Well, thank you to each of you for those responses to my opening questions. I now recognize
04:47the ranking member for the purpose of questioning the witnesses.
04:50Thank you, Mr. Chairman. Um, due to the relentless, uh, cuts to the Department of Labor.