Transcripts For CSPAN3 Small Business Owners To Testify On T

20,660 a year to 50,440. The Senate Small Business Committee Held a hearing on the new labor rules. Senator david vitter chairs this hour 10 minute hearing. Good morning, everybody, and thanks for joining us today for the Senate Small Business and Entrepreneurship Committee hearing to examine the obama administrations proposal to more than double the current salary threshold under the fair labor standard acts overtime exemption for administrative, executive, and professional employees. Were going to hear from a Diverse Panel of experts and stakeholders on the impact this proposed rule would have an Small Businesses and organizations around the country. And i want to thank all of our witnesses for being here today. In previous hearings, this committee has focused on the need for Regulatory Reform in light of how federal agencies often issue new rules and regulations that cause extreme undue burden on Small Businesses. As one of the most controversial labor regulations pushed by the obama administration, the white collar overtime exemption from the department of labor certainly falls in this category. Under current rules, most employees making up to 23,660 a year are automatically entitled to overtime pay when working more than 40 hours per week. The proposed rule were discussing today would more than double the threshold to extend overtime requirements to earning up to 50,440. Additionally, the proposal sets the minimum threshold at the 40th percentile of Weekly Earnings for fulltime salaried workers, meaning the amount could increase every year going forward. While president Obamas Administration believes this is the correct way to increase pay for workers, it will actually have the opposite effect through Small Businesses. Its very likely that employers will respond to higher overtime costs in several ways that will actually reduce workers opportunities for longterm advancement and increased pay. Many employees could see their hours cut or limit to less than 40 hours per week and lose the benefit thats come with a salaried position such as Flexible Work hours and health insurance. These reactive changes would have severely negative effects in the workplace. Along with Small Businesses, several different types of employers are particularly vulnerable to the negative effects of this rule, including nonprofits, charities, state and local governments, and colleges and universities. My colleague and chair of the Senate Health education labor and Pensions Committee Lamar Alexander found that the new rule would increase operating costs for at least one Tennessee College by more than 1 million annually. The increase labor costs would ult 34589 malt have to be passed down to students in an 850 tuition increase or result in job cuts for the colleges employees. Senator alex ander joined senator tim scott to author s2707, the protecting workplace advancement and opportunity act, which would prevent the department of labor from finalizing president obamas proposed rule. I strongly support these efforts to move forward with the bill and want to commend their work on this important issue. Along with the Small Business Administrations Office of advocacy and members of congress from the house and senate, i have raised several concerns about the role and representation of Small Businesses throughout this rule making process. I storongly believe this proposl lacks adequate Economic Analysis and i was alarmed when the office of advocacy submitted comments that sharply criticized the mean in which the dol crafted the proposal. Their comments stated that the dols initial regulatory flexibility analysis was inaccurate and severely undercounted the number of Small Businesses that would be affectaffect ed by the rule. I hope our conversation today will also touch on the impact the rule will have on small Nonprofit Organizations. Add row cassies comment letter referenced a roundtable discussion that was held in new orleans where a small nonprofit operating headstart programs in louisiana stated that this proposal would result in 74,000 of first year costs. Since 80 of this organizations operating budget comes from federal programs which cannot be used to pay for management costs like labor, they may have to cut Critical Community services to reduce labor costs. This is really unacceptable, especially for rural and poor areas that rely on Different Services provided by nonprofits. After hearing from many concerned workers and Business Owners, i urged secretary perez to extend the Public Comment period to allow Small Business owners and employees the opportunity to examine the proposed rule and comment carefully. Shortly afterward, the office of advocacy wrote a similar Public Comment letter requesting a 90day extension of the comment period. Unfortunately, all of these requests were denied by secretary perez. I have serious concerns with president obamas proposed changes to overtime regulations which will negatively impact the ability of Small Businesses and other organizations to operate effectively. While the rule is expected to become finalized within the next several weeks, its crucial that the administration reconsider their onesizefitsall approach. Now lets get todays conversation started. Again, id like to thank everyone for being a part of this discussion. Im going to go ahead and introduce our entire first panel and then each of you will have five minutes in the order in which youre introduced and of course can submit any additional written comments for the record. Ms. Tammy mccrutchen serves as the principal at little mendelson pc, a law firm specializing in representing employment and law firm specializing in representing employment and labor law. Miss mccutchen also serves as Vice President and managing director of Strategic Solutions for compliance hr and previously served as administrator of the hr division at the u. S. Department of labor. Miss sarita gupta serves as executive director of jobs with justice, a union Rights Organization focused on workers civil rights. M mr. Octavio mantilla zrieds in new orleans and is coowner of the Besh Restaurant Group where he oversees operations of more than ten restaurants across the country. In addition to his responsibilities at the besh group hes a board member of the louisiana restaurant association, the louisiana hospitality foundation, the new orleans tourism and marketing corporation, and the john besh foundation. Mr. Ross eisenbray has been Vice President of the Economic Policy institute in washington, d. C. Since 2003. Mr. Eisenbrey focuses on labor and Employment Law along with pension and regulatory policy. And miss nancy duncan is the associate Vice President of Human Resources for operation smile, a nonprofit medical service dedicated to providing cleft lip and palate repair surgeries to children worldwide. Miss duncan is based out of Virginia Beach and has more than two decades of hr experience. So again, welcome to all of you. Thank you for being here. And well start with miss mccutchen. Mr. Chairman and members of the committee, thank you for giving me the opportunity to speak with you today regarding how the departments changes to the overtime regulations will impact Small Businesses. Of course, of most concern to Small Business is the departments proposal to increase the minimum salary level for exemption by 113 from the current 23,660 to 50,440. The purpose of setting a minimum salary level for exemption as the department itself has stated since 1949 is to provide a ready method of screening out the obviously nonexempt employees. D. O. L. s proposed 50 vrks 440 level did you exactly the opposite, excluding from the exemption many employees who obviously perform exempt duties including employees found to be exempt by Department Investigators and the federal courts. Such a large increase is unprecedented in the 77year history. And using any reasonable method to set the minimum salary level yields a much lower number. 30,000, for example, the salary level if the department used its methodology from 2004, setting the salary level to exclude from the exemption the lowest 20th percentile of salaried employees working in the retail and the south. 32,000. The salary level if the department applied increases in the employment cost index since 2004. 34,000. The salary level if the department used its methodology from 1958. Setting the salary level to exclude the lowest 10 of employees found in d. O. L. Investigations to be exempt and the lowest wage regions, the lowest wage industries, the smallest businesses and the smallest cities. 35,000. The minimum salary required for exemption under the laws of new york. Also, by the way, the salary level if the department looked to the historical percentage of increases from 1938 to 19 to 2004. 42,000. The minimum salary required for exemption under the laws of california. Also, by the way, the starting salary for federal Government Employees with masters degrees. Instead of using any of these reasonable methods the department arrived at 54,40, a number higher than either new york or california, both high cost of living states with very generous living laws, by using instead the 40th percentile of all salaries nationwide. It is irresponsible, particularly with the recent disturbing economic news, to use nationwide data that fails to distinguish salaries by region, industry, size of business or size of city. I am not suggesting that we adopt different salary levels for different regions or industries, which would be a compliance nightmare for employers. But i am stating that the minimum salary has to be set at a level that will work for highincome and lowincome states, for high profit low profit industries, for large, small, and nonprofit businesses in large cities and in small rural communities. The purpose of the salary level is to exclude obviously nonexempt employees. The duties tax in the regulation then come into employ once the obviously nonexempt have been eliminated. For 77 years it has been the duties test that serves as the primary method of distinguishing exempt from nonexempt, of identifying who is the xektd administrative and professional employee. Let me close with four quick points. First, thousands of Small Business owners and advocates and even more nonprofit businesses filed comments objecting to the proposed rule including the sbas office of advocacy, the National Federation of independent bez and the National Federation of women Small Business owners. Second, both the nfib and the sba office of advocacy concluded that the departments flexibility analyst grossly underestimates the cost of the rule to Small Business. I was personally shocked by the departments lowball estimate of the amount of time business will need to spend to comply with the rule. I would never tell my client my employer clients who spend so little time on compliance. Third the cost to Small Businesses will be even higher if the department decides to automatically increase the salary levels every year or to make changes to the duties tests. Finally, increasing the salary level to 54,040 or even the 47,000 that politico recently reported will not result in giving america a raise. Employees are unlikely to see higher paychecks. The Small Business owners i have talked to cannot afford to give a Salary Increase or pay overtime. So they must adjust in other ways, demoting to hourly workers, requiring them to clock in and out, closely monitoring the hours they work, decreation the flexibility to take time off for family without losses in pay, taking away bonuses and other family benefits and depriving employees of opportunities for advancements. The one thing Small Businesses cannot do is redistribute money they do not have. Thank you. Thank you very much. And now miss gupta. Chairman vitter and members of the committee, thank you for the opportunity to testify today about the administrations proposed update to the overtime rules under the fair labor standards act. My name is sarita gupta. Im the executive director of jobs with justice. Jobs with justice is an independent, Nonprofit Organization dedicated to advancing working peoples rights and an economy that benefits all americans. We bring together labor, community, faith and student voices at the national and local levels through a network of coalitions across the country. At jobs with justice, we believe the fair labor act protections are key to ensuring all americans can enjoy the countrys prosperity to which they contribute. The United States congress and president Franklin Delano roosevelt recognized in 1938 what todays working women and men know to still be true, that economic stability can only be achieved through familysupporting wages and hours. If todays employees are to realize the laws basic promise of reprieve from overwork in order to spend time with their families, the flsas overtime protections must be strengthened and protected. We believe the u. S. Department of labors proposal to adjust the salary test for determining overtime eligibility will do just that. Raising the salary threshold from 23,660 in annual pay to 50,440 in 2016 will broadly benefit millions of working people, whether they are newly eligible for overtime protections or more squarely protected against overtime misclassification that can occur under the more ambiguous duties test. The current threshold covers only 8 of salaried employees today. Employers are even currently within their rights to deny overtime pay to employees who earn less than the Poverty Level for a family of four. Real lives will change for the better by updating the overtime rules. Real people like wanda womack, who earned under 40,000 managing a Dollar General store in alabama. Wanda put in 50 to 70 hours a week, most of it spent doing nonexempt work like running the Cash Register and unloading merchandise from trucks. Parttime hourly employees also stand to benefit from a higher salary threshold. Too many people who stock the shelves, sweep the floors and serve us food are working fewer hours than they would like. In our recent study of employers scheduling practices in washington, d. C. s service sector, 80 of survey respondents told us it was very important or somewhat important that they received more hours. Many of these individuals will likely have an opportunity to gain additional hours as employers shift assignments from overworked workers previously exempted from overtime protections. As a nonprofit employer, i also have to assess i had to assess the proposed update to the overtime regulations. The proposed overtime rule update will require some of our local coalitions to examine and amend their employment practices. We believe this is a positive development. A higher salary threshold will require jobs with justice and nonprofits like us to promote practices that allow people to spend more time with their families, likely increasing Employee Satisfaction and lowering burnout rates along the way. This is good for our employees, for our organizations and for the people we strive to serve. I know some Nonprofit Organizations have expressed concerns about the proposed overtime rule update and the impact it could have on their budgets. I also know that much of the concern for nonprofits ability to comply with updated overtime rules have been raised by bigbusiness lobby groups that do not typically advocate for the interests of nonprofits or the people served by them. These concerns are vastly overstated, and frankly, they dismiss the rights of working people. Employees of nonprofits deserve a fair return on their work. I know firsthand that for nonprofit employees the work, while often rewarding, can be stressful, emotionally tolling and lower paying. These conditions only further substantiate the need for nonprofit employees to have time away from work to recharge and to reconnect with family and friends, just as was intended by flsa. Nonprofits that contract with state medicaid departments can push the state to increase rates. Many states revisit their medicaid budgets throughout the year since medicaid costs fluctuate based on the economy, enrollment, eligibility and other factors. The States Investment will be less than many people may assume. The federal match for medicaid spending can range from 5