During a House Education and Workforce Committee hearing prior to the congressional recess, Rep. Tim Walberg (R-MI) questioned Jonathan Wolfson, the Chief Legal Officer and Policy Director of Cicero Institute, about overtime pay.
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00:00Go to Chairman of the full committee, Mr. Wahlberg from Michigan.
00:04Thank you, Mr. Chairman. Thank you for this hearing, and thanks to an excellent committee for being here.
00:10Mr. Wolfson, 25 years ago, the Worker Economic Opportunity Act amended the Fair Labor Standards Act
00:18to exempt certain types of equity compensation, such as employee stock options from inclusion
00:25in overtime regular rate calculations.
00:28While this law appropriately exempted many types of compensation, it did not exempt restricted share units
00:37and other full-value share awards.
00:41How should restricted share units be treated when it comes to calculating overtime pay?
00:47Thank you, Mr. Chairman.
00:48I think that the concept that I would propose would be that any sort of compensation that is not based on
00:56you have to have worked this number of hours to get this amount of pay should not be calculated as part of an overtime calculation.
01:02And so ultimately, restricted stock options, those should all be included as items that we want to encourage employers to provide to their employees.
01:10And so including them as part of the overtime pay calculation reduces the likelihood that those employers are going to provide that to their employees.
01:18And so I think that we should treat it in the same way that we do a contribution to a pension plan or a contribution to a 401k,
01:24where we want to encourage employers to do this.
01:27And so we are not going to punish the employer when that worker then does overtime hours by making them figure out how much that's worth to a specific hour of time.
01:37We want to encourage those things.
01:38And so I think that that exemption should be much more broadly applied, which benefits, with that flexibility, the employee.
01:44Absolutely.
01:45In the long run.
01:45Yes, it does.
01:47And welcome to your daughter as well.
01:50Ms. Bohan, community banks like the one you work for are an essential tool for small businesses to gain access to capital they sorely need.
02:00Yet federal regulations often make doing business more challenging for these banks.
02:05When an employee's classification is changed from exempt to non-exempt under FLSA, how does that affect payroll processes and other HR requirements for that employee?
02:21As I said in my oral testimony, some employees actually prefer an exemption because it comes with certain flexibility and benefits that are perceived by the employee.
02:31So when you're having, if an overtime threshold is changed and you're having to place an employee from exemption to non-exemption, it places, you know, a burden on the timekeeping system.
02:47And also impacts the feelings of the employee himself or herself as well.
02:55Absolutely.
02:55I think that's one thing that I've seen and felt in the past year.
03:00We've had to change employee exemptions.
03:03And sometimes the employee doesn't quite understand why the exemptions, in my experience, why the exemption is being taken away.
03:09They feel like a certain career progression has been taken away from them.
03:15They've been downgraded.
03:16I would agree with that.
03:17Benefits are important, but also perception is important as well.
03:21Ms. McCutcheon, in your written testimony, you mentioned that the FLSA should allow private sector employees to choose compensatory time or comp time, which is extra paid time off work in lieu of receiving extra wages for overtime hours worked.
03:39Most government workers, let me state that again, most government workers are eligible to receive comp time.
03:46But FLSA prohibits the private sector from using comp time.
03:51Is this an oops?
03:52I love your technical term.
03:55How should a straightforward change like this benefit workers?
04:00Well, this is an interesting one because unions and large employers actually have objected to the many comp time bills that have been proposed.
04:09But employees want it.
04:11They want more paid time off.
04:14And that's what you get with comp time.
04:16So this particular bill is something that benefits workers.
04:21So if you want to benefit workers, you have to allow them to choose cash or paid time off.
04:27And if you look at any of the Forbes or SHRM recent surveys about the types of benefits employees today are looking for, paid time off is high on the list.
04:38That's the benefits of flexibility?
04:40Absolutely.
04:41It allows them to choose what they feel best about.
04:43Right.
04:44They could work four days a week.
04:46And the prior week, they might have to work 50 hours.
04:49And then the next week, they can work 30.
04:52And that is the type of flexibility that employees really, really want today.
04:57I'd love that for opening week of deer season.
05:00Thanks.
05:01In Pennsylvania, at Hershey, where I worked, we got that first day off.
05:05Okay.
05:07Well, thank you for your testimony.
05:08My time has expired.
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