Examining the Policies and Priorities of the Department of Labor

House Committee on Education & the Workforce

Examining the Policies and Priorities of the Department of Labor

Wednesday, June 7, 2023

 

Topline

• Republicans raised concerns over the Department of Labor’s independent contractor rulemaking, comparing it to California A.B. 5, which they said killed the state’s gig economy.
• Members on both sides of the aisle discussed their concerns surrounding recent child labor violations and pressed Su on the Department’s response.

Witnesses

• Julie Su, Acting Secretary, U.S. Department of Labor

Opening Statements

Chairwoman Virginia Foxx (R-N.C.)

In her opening statement, Foxx explained the hearing is not about Su or her pending nomination, but about assessing the budget request for the Department of Labor (DOL). She explained that if enacted, the budget would add 2,000 new federal bureaucrats. Foxx said we should be shrinking, not expanding, the size of the federal government. She criticized President Biden for reversing multiple Trump Administration policies that would have promoted hiring and employment opportunities and accused President Biden of pursuing radical policies to pay back big labor. Foxx said the Biden Administration is picking winners and losers by turning over right-to-work laws, eliminating independent contracting, jeopardizing franchise businesses, and rewarding union bosses with unchecked power.

Foxx cited the PRO Act as an example of the Administration’s union favoritism and said the DOL is trying to bypass Congressional authority by implementing the PRO Act’s key features through regulations. She added President Biden’s anti-worker agenda is hurting our economy and criticized the DOL’s tyrannical vaccine mandate. Foxx criticized the Biden Administration for doubling down on burdensome registered apprenticeships, while shuttering the industry recognized apprenticeship program. She concluded that the government is not a job creator and urged the removal of the government from the equation to promote job creation.

 

Ranking Member Bobby Scott (D-Va.)

In his opening statement, Scott emphasized his strong support for Su’s nomination to be Secretary of Labor, noting that unemployment rates have been at historic lows during her tenure at DOL. He said the Biden Administration has created more than 13 million jobs in two years, more than any President has created in a four-year term. Scott explained that every Democratic administration since Kennedy has left their Republican successors a better deficit situation than the one they inherited, while every Republican administration since Nixon has left their Democratic successor a worse situation than the one they inherited. He noted that President Biden is continuing this trend as he creates record numbers of jobs.

Scott warned that Republicans would talk about unemployment insurance (UI) fraud in California, but noted that under Su’s leadership, California implemented additional safeguards which helped prevent UI fraud. He explained that the DOL’s proposed independent contractor regulation does not implement California’s A.B. 5, which adopts the ABC test. Scott concluded that Republicans pound the table because they have no substantive criticism of Ms. Su’s record.

 

Testimony

Julie Su, Acting Secretary, U.S. Department of Labor

In her testimony, Su said an investment in the DOL is an investment in our workers and the future of our country. She noted that the DOL’s budget requests a total of $15.1 billion in discretionary resources and focuses on three themes: protecting workers, investing in workers, and expanding good jobs for all workers. She recognized that Congress will be working under statutory budget caps for FY24, and said she looks forward to working with Congress to ensure these priorities are reflected. Su said DOL’s budget request will allow OSHA to improve workplace safety and health, while creating pathways into the jobs created by the Bipartisan Infrastructure Law (BIL), Inflation Reduction Act (IRA), and the CHIPS and Science Act (CHIPS Act). She concluded that the budget continues DOL’s support for the registered apprenticeship program.

 

 

Question & Answer

Independent Contractor Rule & California A.B. 5

Rep. Kevin Kiley (R-Calif.) noted Su was charged with enforcing A.B. 5 and asked if she was involved with the drafting of A.B. 5. Su said she was not. Kiley asked if she supported the law. Su replied that her job was to enforce the laws that were passed by the legislature.

Kiley asked if Su agrees or disagrees with President Biden’s comments that A.B. 5 is a good model for the nation. Su said A.B. 5 is not federal law and will only become federal law if Congress decides it should.

Kiley noted that people in California have lost their careers and livelihoods because of A.B.5, and asked Su if she had met with any of these people. Su said she had and noted that bonafide independent contractors will always have a role in our economy.

Rep. Mark Takano (D-Calif.) asked if it’s the position of the DOL that the Department can’t adopt the ABC test unless Congress passes a law enabling them to do so. Su confirmed it was. Takano asked if instead of an ABC test, the DOL’s proposed rule implements what the economic realities test is, to which Su said yes. Takano noted the economic realities test is consistent with decades of federal precedent under Republican and Democratic administrations.

Takano noted that Lyft and the International Franchise Association, two of the largest entities most vocal in their opposition to the ABC test, came out with their own statements when the DOL’s rule was released, recognizing that it did not include the ABC test.

Rep. Lisa McClain (R-Mich.) noted that Su oversaw the implementation of California A.B. 5, which reclassified every independent contractor and killed off the gig economy. She asked if Su would demand that Congress pass a similar bill to kill off independent contractors. Su said no, adding that the gig economy has not been killed off in California.

Rep. Erin Houchin (R-Ind.) noted that in October 2021, the WHD (Wage and Hour Division) published a notice of proposed rulemaking rescinding Trump’s independent contractor rule. She discussed the DOL’s proposal for a six factor economic realities test to determine whether a worker is “economically dependent on a company under the totality of the circumstances.”

Houchin asked if the American people should have the freedom to decide what work environment is best for them, and if Su would commit to protecting the independent contractor rule for people like stay-at-home moms engaging in the workforce under 1099s? Su said bonafide independent contractors will always have a place in our economy, and noted the rule that the DOL proposed is consistent with decades of federal case law.

Rep. Susan Wild (D-Pa.) asked if the case law that Su referred to stemmed from the fact that the independent contractor classification was being abused by employers to avoid payroll or benefit taxes.

Su said the independent contractor rule is about making sure everyone plays by the same rules and ensuring those who deserve employee protections get them. Wild said abuse of the independent contractor is to the detriment of the American worker and economy.

 

Rep. Eric Burlison (R-Mo.) asked if Su would support the rules of A.B. 5 being implemented nationwide.

Su noted she has not supported that, adding that while the DOL was putting together its independent contractor rule, she was clear that the Department could not do that. Burlison noted A.B. 5 was disastrous for California and drove jobs to Missouri.

Rep. Teresa Leger Fernandez (D-N.M.) said the independent contractor issue comes down to whether the DOL is going to stand with corporations or with workers. She added that the DOL’s proposed independent contractor rule was so reasonable that even the groups who had voiced concerns in the past hardly raised any issues with it.

 

ESG Rule

Rep. Rick Allen (R-Ga.) noted that last Congress, he and Rep. Andy Barr (R-Ky.) introduced the Ensuring Sound Guidance (ESG) Act to require investment advisors and ERISA retirement plan sponsors to prioritize financial returns over nonpecuniary factors when making investment decisions on behalf of their clients.

Allen asked Su if maximizing assets for retirements should be a pension plan’s top priority. Su said retirees should be able to maximize their savings. Allen responded that she needed to deal with the DOL’s rule.

Allen asked if Su would commit to providing Congress with the names and dates for the DOL’s meetings regarding the ESG rulemaking process. Allen also asked if the DOL conducted a detailed and realistic cost benefit analysis of the ESG rule’s proposed amendments. Su said the ESG rule did not require financial advisers to do anything in particular but gave them the flexibility to take other factors into account to maximize savings.

 

Pending Rulemakings

Rep. Tim Walberg (R-Mich.) brought up DOL’s proposed rulemaking altering the overtime regulations under the Fair Labor Standards Act. He cited his concerns that the proposed changes would be devastating to our economic recovery. He asked why the DOL is pursuing these changes. Su noted the rule is on the DOL’s agenda, and that the Department is conducting listening sessions involving thousands of participants to understand the rule’s impact. She affirmed that the Wage and Hour Division (WHD) is working with the Small Business Administration to understand the impacts of getting the rule right and is listening to all stakeholders and all parties.

Foxx asked if Su would commit to refrain from making any changes to the joint employer standard. Su said there is nothing regarding the joint employer standard on the DOL’s agenda.

Wild noted the Joint Employer rule is not on the DOL’s agenda and does not fall under DOL’s jurisdiction. She explained this is an NLRB rule.

Rep. John James (R-Mich.) explained that franchising is one of the surest ways to achieve the American dream, noting that the joint employer rules will disrupt the franchising business model and pathways to prosperity. James asked why the Biden Administration is so hostile to businesses. Su said her parents owned a franchisee business, which is how she was able to go to college.

James asked if Su agreed that franchise owners are small businesses, to which she said absolutely. James asked if Su would commit to no additional joint employer rulemakings. Su said there is nothing on the DOL’s agenda for joint employer, adding that if she had plans to do joint employer rulemakings, she would have put them on the agenda.

 

Immigration

Rep. Glen Grothman (R-Wisc.) asked Su what her office is doing to prevent people who are in this country illegally from taking jobs away from American workers, and how the DOL is ensuring that employers are obeying all the immigration laws, particularly regarding age. Su explained that WHD recently found a large number of children working in exploitative child labor conditions, after being hired by a company doing sanitation work in a meat processing facility. She said the children, many of whom were migrants, were working the nightshift. Su noted that some of this work involves other agencies in the federal government, and explained there is an interagency task force that includes the Department of Homeland Security.

Rep. Julia Letlow (R-La.) discussed how the change in H-2A Adverse Effect Wage Rate (AEWR) will tremendously increase the wage rate for H-2A workers in certain industries, noting the change is the most detrimental rule that has hit the Louisiana agriculture industry.

Letlow asked if the DOL solicited meaningful impact from the agriculture industry prior to promulgating the rule. Su said the DOL is deliberative when creating any rule and affirmed that the Department fully engages with stakeholders to make sure they get the rule right. Letlow replied that the rule is putting farmers in her district out of business.

 

Child Labor

Rep. Jim Banks (R-Ind.) asked Su what her Department is doing about child labor violations, noting the issue is a result of the Biden Administration’s border policies. Su said the DOL is conducting investigations, adding that it is their responsibility to ensure employers who profit from these abuses are held accountable. She cited the PSSI case as an example of the DOL’s work on the issue.

Rep. Alma Adams (D-N.C.) said corporations should not be making profits off the backs of children. She noted the case that the DOL brought against PSSI resulted in PSSI paying the maximum fines available for employing at least 102 children in hazardous conditions and served as a vivid illustration of how seriously DOL takes the child labor issue.

Adams asked Su to describe the steps she’s taken to combat child labor. Su said the DOL looks for exploitative child labor in every case and cites employers who engage in child labor. She noted that in the PSSI case, DOL issued the maximum penalty under the Fair Labor Standards Act (FLSA). Su added that the DOL has over 500 active child labor investigations.

 

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