Congressional Hearing Examines Problems with Fair Labor Standards Act
.jpg)
During a hearing conducted by the House Subcommittee on Workforce Protections, lawmakers and panelists questioned whether the Fair Labor Standards Act (FLSA) has kept pace with modern industry. Subcommittee Chairman Tim Walberg (R-MI) began the hearing by claiming that federal labor standards have fallen behind the times, and that increased regulations and ambiguity within the statute itself have lead to unintended consequences for well-meaning employers. Specifically, he and the majority of those testifying claimed that the FLSA as currently written and interpreted has led to a flood of wage and hour litigation, reduced workplace flexibility, and decreased an employer’s incentives to hire. The Subcommittee’s media advisory claimed:
Despite the broad impact of the law on the American workforce, it is largely outdated and does not accurately reflect the realities of modern technology or today’s economy. The law has also created an environment of uncertainty with employers facing a patchwork of conflicting interpretations of the law and employees facing difficulty understanding their rights under the law.
Testifying on behalf of the HR Policy Association, J. Randall MacDonald, Senior Vice President of Human Resources for IBM, claimed that the FLSA is neither employer- nor employee-friendly, must be modified and clarified, and is “failing America.” As stated during his testimony, “even the Department of Labor has been sued for FLSA violations. If they can’t get it right, how can they expect employers to?”
MacDonald further testified that some of the work now being done by employees was not anticipated when the FLSA was enacted. For example, several employees use employer-provided PDAs and other mobile devices during their work hours. In order to ensure that non-exempt employees do not use these devices on their own time and potentially trigger overtime requirements, MacDonald claimed that one large retailer requires its employees to return them at the end of their shifts, which can be burdensome for employees who spend a majority of their hours outside of the central workplace.
Another example of how the FLSA is not applicable to current situations is an aerospace company that is forced to limit “the amount of discretion exercised by highly-educated, entry-level engineers due to the security content of their jobs. Because discretion is a large litmus test in the FLSA, they must be classified as non-exempt – totally at odds with their training and compensation.”
In addition, the witness claimed that the ambiguity of the statute regarding who should be exempt versus non-exempt has caused many employers to simply classify employees as non-exempt – and reduce wages to compensate for the added potential overtime costs – to avoid potential lawsuits. Among other recommendations, MacDonald said that the FLSA’s computer exemption needs to be expanded, the “de minimis” exception to paid time must be clearly defined, the FLSA exemption must be expanded to cover well-compensated, commissioned inside salespeople who do comparable work to those of outside salespeople, remove the disincentives for performance-based bonuses, and provide for the preemption of local and state wage and hour law to ensure clarity for employers and better reflect a modern workforce.
Echoing this sentiment was Nobumichi Hara, Senior Vice President of Human Capital, Goodwill of Central Arizona, who testified on behalf of the Society for Human Research Management (SHRM). According to Hara, a major flaw of the FLSA – which “reflects the realities of an industrial workplace of the 1930s” – is that it prevents employers from providing the flexibility that employees want. As the law is structured, employers are unable to allow non-exempt employees to work the same types of compressed schedules as enjoyed by public sector employees because doing so would trigger overtime requirements. In addition, he claimed he is not able to allow employees to take time off and make up the work at a later date because this, too, would likely make the employer responsible for paying overtime.
A management attorney testifying at the hearing called the FLSA “an anachronism in today’s economy” that places “catastrophic burdens on employers.” Specifically, he noted that between the year 2000 and 2010, the number of wage and hour lawsuits filed under the FLSA increased by more than 300%, 40% of which can be classified as collective and class actions. He testified that more than 6,000 FLSA lawsuits were filed last year alone. He claimed the rise in such litigation was due to the ambiguity and inconsistencies inherent in the FLSA, and the fact that wage and hour class actions are extremely lucrative for plaintiffs’ attorneys. Although many employers are well-intentioned, he claimed that most class actions are settled because of the huge cost of defending against such suits, and the potential penalties involved.
Overall, the majority of those testifying claimed that the Act has not kept pace with technological developments, does not provide employers and employees with enough flexibility, and must be clarified to enable employers to better comply with the law.
Not all present at the hearing found fault with the FLSA, however. Judy Conti, Federal Advocacy Coordinator of the National Employment Law Project (NELP), praised the law for being “elegant in its simplicity,” and called for more vigorous enforcement of its provisions. Similarly, ranking minority member Lynn Woolsey (D-CA) claimed that “nothing in the law prevents employers from developing family-friendly policies,” and claimed that more must be done to combat worker misclassification. According to Woolsey, 10 million workers representing 7.4% of the workforce are misclassified as independent contractors. She noted that the bill she introduced last term – the Employee Misclassification Prevention Act – would help reduce misclassification by creating new record-keeping requirements for employers that hire independent contractors, and imposing stricter penalties for misclassification. She concluded her remarks by stating that she planned on introducing similar legislation shortly.
A list of the panelists, links to their testimony and an archived web cast of the hearing can be found here.
.jpg)
On April 5, 2011, the 
In its first Administrator Interpretation Letter, the .jpg)
The U.S. Supreme Court has agreed to review the Seventh Circuit’s decision in 