House Education and the Workforce Committee: Examining the Policies & Priorities of the Department of Labor
House Committee on Education & the Workforce
Examining the Policies & Priorities of the Department of Labor
Topline
- Republicans criticized the Department of Labor’s Fiduciary Rule, Independent Contractor Rule, and Overtime Rule.
- Democrats defended the Department of Labor’s agenda and lauded the economy’s performance under the Biden Administration.
Witnesses
- Julie Su, Acting Secretary, U.S. Department of Labor
Opening Statements
Education & Workforce Committee Chair Virginia Foxx (R-N.C.)
In her opening statement, Foxx said the Senate made the right decision not to confirm Su as Secretary of Labor. She blasted the Biden Administration for allowing Su to become the longest serving Acting Secretary since before the Civil War. Foxx criticized the FY25 DOL budget requests including its increase in discretionary spending. She said that overzealous regulatory actions have been a priority of the Biden Administration and blasted DOL’s budget request for asking Americans to invest in the Davis-Bacon rule, which will make federal construction projects more unaffordable, in the Overtime Rule, which will force employers to cut hours, in the Independent Contractor Rule, which will bankrupt freelancers, and in the Fiduciary Rule, which will limit options for individuals to invest in their own financial future.
Foxx described the priorities pursued by the Biden Administration as detrimental to American workers and job creators. She warned that DOL priorities primarily serve the interests of big labor union bosses, and said the American people are not buying what the Administration is selling. Foxx concluded that Americans are being crushed by inflation and said the mirage of job growth is subsidized by gains in the public sector and is exclusively attributed to foreign born workers.
Education & Workforce Committee Ranking Member Bobby Scott (D-Va.)
In his opening statement, Scott praised the DOL for investing in apprenticeship opportunities and championing a pro-worker regulatory agenda. He explained how the Biden Administration and DOL worked to repeal the harmful restrictions imposed by the previous Administration, which allowed unscrupulous employers to misclassify workers as independent contractors, denying them the benefits of being an employee. Scott noted that more than 12.2 million jobs have been created since President Biden took office, and criticized House Republicans for prioritizing policies that undercut workers and supported harmful budget cuts at the DOL.
Scott warned that Committee Republicans would continue to discredit the economy’s performance under President Biden, despite the fact the previous Administration had the worst job performance in almost 100 years. He reiterated that every Democratic Administration since President Kennedy has left for their Republican predecessors a better budget deficit than they inherited, while every Republican Administration since Nixon has left their Democratic successor a worse budget deficit. He concluded that Committee Democrats were planning to introduce legislation to deter employees from violating workers’ rights, and said he hoped Republicans would put politics aside and work with them.
Testimony
Julie Su, Acting Secretary, U.S. Department of Labor
In her testimony, Su discussed how the DOL’s budget request would help more people get good jobs that can support families, uplift communities, and provide dignity and pride to workers. She noted the budget request has two priority areas, the first being pathways to good jobs for all of America’s workers. Su explained the DOL is requesting investments to develop and expand proven models to connect workers to the good jobs they want and need, and employers to the workers they want and need. She said the DOL’s next priority is protecting workers, especially those most vulnerable to exploitation, which is why the budget asks for $7.5 million for additional staff to combat wage theft and child labor, and an additional $23 million to investigate high hazard workplaces. Su affirmed the request would help advance workers’ rights and promote a level playing field internationally for U.S. workers and businesses. She concluded by discussing how the request would support better implementation of the Secure 2.0 Act, the No Surprises Act, and the Mental Health Parity and Addiction Equity Act.
Question & Answer
Fiduciary Rule
Rep. Tim Walberg (R-Mich.) discussed how the U.S. Court of Appeals for the Fifth Circuit ruled the 2016 Fiduciary Rule exceeded DOL’s authority, and noted the DOL recently finalized a Fiduciary Rule that would cover the same practices as the 2016 rule. Walberg asked Su why she expects the courts would respond to the rule differently than when they threw it out. Su said the DOL is confident that the rule is within their authority and incorporates the existing case law. She explained how the rule considers what the court said about why the prior rule could not stand, and noted the definition of a fiduciary is different, and what the rule covers is different. Walberg disagreed, and said the new rule was a waste of time and concerning for the industries involved.
Rep. Rick Allen (R-Ga.) noted the DOL received a number of comments on its Fiduciary Rule, many of which called for significant changes to the proposal or for its withdrawal. He asked if changes were made to reflect stakeholder input on the rule, or if input was ignored because DOL already decided the desired outcome. Su said the DOL doesn’t approach rulemaking with predetermined outcomes and affirmed that they took the comments into account.
Rep. Frank Mrvan (D-Ind.) highlighted the Fiduciary Rule, which he described as widely supported. Mrvan warned that conflicted advice can cost savers up to $5 billion a year, which is why he was proud to co-lead a letter in support of the rule. Mrvan asked Su to explain how Congressional action through the CRA to overturn the Fiduciary Rule would negatively impact workers and their families. Su said the Retirement Security Rule is meant to protect the retirement savings of hardworking Americans, to make sure that when you put away money, when you seek to invest that money, the advice you get is based on your best interest. She warned that conflicted advice is very costly to Americans.
Rep. Eric Burlison (R-Mo.) noted Su publicly justified the short notice for hearings and the short comment period for the new Fiduciary Rule by stating that the DOL had already heard comments. He asked whether the rule was new, or an old rule. Su said it was a new rule. Burlison asked how long the DOL provided for comments. Su said 60 days, which she described as a standard comment period. She noted they also held two public hearings during the comment period. Burlison asked whether the DOL received input from the National Association of Insurance Commissioners. Su said she didn’t know. Burlison lamented that the DOL did not involve state insurance commissioners in the rule.
Rep. Ron Estes (R-Kans.) described the Administration’s rollout of the Fiduciary Rule as disappointing, noting that its comment period occurred over a holiday period resulting in a reduced number of business days to submit comments. He added that deciding to hold a comment period over two holidays was not an appropriate approach to getting comments. Estes noted the White House said the rule was part of an effort to eliminate junk fees, which Estes said was the first-time annuities were ever accused of having junk fees. He asked how the term junk fees applies to the Fiduciary Rule and why there is no reference to junk fees in the preamble of the rule. Su reiterated that the comment period was 60 days and included two public hearings. She explained that the rule seeks to make sure that retirees get advice in their best interest from a financial advisor and that that financial advice is not informed by conflicts of interest. She added that one way that conflict of interest could come into play is through a fee the retiree must pay.
Estes said he expects people should get paid a fee for providing a service. He said junk fees is an insulting term to apply to financial advisers who are trying to help people save for their retirement. Su clarified that she was not referring to all fees that would not be charged for investment advice, but to fees that would not be charged if not for a conflict of interest that may exist for a financial adviser.
Estes asked how many individuals the DOL expects to lose access to investment because of the new Fiduciary Rule. Su said the DOL’s goal is to expand retirement security, not shrink it. She said they hope that by eliminating conflicts of interest, retirement savers will do better.
Independent Contractor Rule
Rep. Joe Wilson (R-S.C.) noted that DOL received thousands of comments on the reclassification of independent contractors from those who are concerned about the destruction of jobs. Wilson said the DOL ignored many of those comments in their final rule, writing in the rule that the Department did not anticipate any job loss as a result of the rule. He then asked Su what research she could point to that supports the DOL’s position. Su said over 15.2 million jobs have been created since President Biden came to office and that unemployment rates have remained low. She explained the Biden Administration created jobs in a way that doesn’t sacrifice the well-being of workers. Wilson disagreed, and said the new regulations and mandates are destroying jobs.
Walberg warned that the DOL’s Independent Contractor Rule would have a devastating impact on the ability of millions of Americans to engage in flexible work in the modern economy. He asked if the rule’s small entity compliance guide was updated to provide clarity, and whether there was any update on outreach to stakeholders. Su said one of the DOL’s most important roles is to ensure workers are protected.
Rep. Pramila Jayapal (D-Wash.) asked if bonafide independent contractors play a vital role in the US economy and deserve a place within it. Su said of course. Jayapal asked if the DOL’s final rule on misclassification prohibits people from entering bonafide independent contractor relationships. Su said it does not.
Jayapal asked whether the Independent Contractor Rule simply restates the existing case law. Su agreed that it restores decades of case law on how to determine whether someone is an independent contractor or an employee. Jayapal asked if the rule prohibits flexibility, and Su said no.
Jayapal said the rule seems to be a simple way to ensure workers are not unlawfully denied a century of labor protections because a business decides to label them as independent contractors. Su agreed, and noted the DOL sees that happen frequently.
Rep. Lisa McClain (R-Mich.) asked about the goal of the Independent Contractor Rule. Su explained that under the FLSA, employees are entitled to a host of protections. She reiterated that the definition of who is an employee is important. McClain asked whether that is the choice of the employee, saying that employees are hired as independent contractors and asked about the goal of the rule again. Su said the goal of the rule is to restore decades of interpretation on who is a contractor vs. who is an employee.
McClain said she was still confused on the goal, and said the rule is trying to fix a problem that doesn’t exist. Su said misclassification is a real problem. McClain responded that people have a choice, and if they don’t want to be an independent contractor, they should choose an employer that will hire them as a full-time employee. Su said many workers have come to the DOL and said they should have been paid and were not, because they were misclassified. She reiterated that working people in this country are entitled to protections. McClain told Su she is making policies that she knows nothing about.
Rep. Nathaniel Moran (R-Texas) asked Su about the Regulatory Flexibility Act. Su said the DOL adheres to it during their rulemaking to ensure they are hearing from all stakeholders, including small businesses. Moran said it also requires agencies to quantify in their rulemaking process what the administrative burden of a rule would be for small businesses. He asked how the DOL followed the Regulatory Flexibility Act during the rulemaking process for the Independent Contractor Rule. Su said they take their obligations seriously. Moran blasted the DOL for estimating the rule would take a mere 30 minutes and less than $25 for compliance for small businesses, noting it would take longer than that to just read the proposal. He said small businesses would incur many more expenses to comply with the rule and asked if DOL took into account the expenses related to moving an independent contractor to a full-time employee. Su said DOL takes all its obligations seriously and that DOL has other requirements to engage with small businesses as well.
Rep. Susan Wild (D-Pa.) said it’s important that people understand more about the Independent Contract Rule and warned about the misinformation flowing from the other side of the aisle. She asked Su to explain what the Independent Contractor Rule does and does not do. Su said the rule takes the criteria the courts have put into place and makes it the rule under the FLSA. She added that the last Administration’s rule was out of step with the case law.
Wild said the rule was not fashioned on California’s AB 5 but is a reinstatement of existing case law. Su agreed and said the DOL does not have the authority to adopt the ABC test. Wild asked how the violation of the IC rule hurts workers. Su explained that many caregivers end up working without basic protections. She also cited the example of restaurants and hotels and said hotel operators often hire some housekeepers to work as employees, and some to do the same work as independent contractors.
Wild asked if that enables the employer to avoid certain payroll taxes. Su said it does.
Rep. Michelle Steel (R-Calif.) warned that AB 5 is wiping out all of the independent contractors in California.
Rep. Kevin Kiley (R-Calif.) asked about the implementation of the IC Rule. Su said there are tools in place, including small entity guides, to help small businesses and employers understand the rule.
Kiley asked whether Su supports classifying independent contractors as employees against their will. Su said the Acting Secretary of Labor does not have the authority to force any classification against people’s will. She reiterated that the laws of this country protect working people when they should be employees and are misclassified as independent contractors.
Kiley asked if Su would challenge someone if they said they want to be an independent contractor. Su said it’s not about what she thinks, and explained the case law is clear. Kiley asked Su to assure people the rule wouldn’t change their status. Su said the outcome of applying the test depends on the circumstances of a worker.
Rep. Aaron Bean (R-Fla.) noted that 86% of independent contractors love what they are doing and don’t want to change. He added that AB 5 in California had to exempt over 100 professions, because it was going to be a disaster. Bean said the previous Administration allowed ICs to join their employer’s health plan and criticized the Biden DOL for reversing the rule and kicking them off their healthcare.
Scott asked if an employer could tell a prospective employee if they want to work at their firm, they are going to be an independent contractor and then strip them of their right to minimum wage, overtime, workers comp, unemployment comp, OSHA protection because they agreed to be an independent contractor – or whether the employer has to follow the law. Su said they have to follow the law.
Overtime Rule
Rep. Glenn Grothman (R-Wisc.) explained that the Biden DOL has proposed increasing the overtime salary threshold by about 70%, which would subject millions of current salaried workers to overtime laws. He warned this would cause employers to shift salaried workers to hourly workers, resulting in lower overall compensation. Grothman asked Su to comment on the negative consequences of the big increase in the salary threshold on American industry. Su said nothing about the rule would require that outcome. She explained the DOL moved forward with an overtime rule because it’s important hardworking people get a fair day’s pay for a fair day’s work. Su said the rule ensures people have more money in their pockets, and explained that a few decades ago, the overtime threshold covered more than 60% of working people, while the Trump Administration set the threshold to a level where it covered less than 10%. She concluded that DOL stepped in because overtime protections were eroded.
Rep. Alma Adams (D-N.C.) asked how Su’s meetings with workers on the ground informed the DOL’s budget request. Su said the DOL’s policies, enforcement priorities, and budget request must be informed by the real needs of working people. She explained she meets with too many workers who report that wage theft is a regular experience but has also met with workers who said the Overtime Rule will put more money in their pocket.
QPAM Exemption
Allen asked whether DOL conducted a detailed and realistic cost-benefit analysis of its amendments to the qualified professional asset manager (QPAM) exemption. Su said the rule has been finalized but explained that the Department always conducts a financial analysis of the impact of its rules. She added that their rules in that space are meant to ensure the retirement security of working Americans is secure.
Apprenticeships
Foxx noted that apprenticeships do not exist without employers willing to participate. She described the DOL’s regulatory overhaul of the registered apprenticeship system as full of new mandates on employers, and asked Su to name a single burden or existing requirement on apprenticeship sponsors that was removed in the proposed rule. Su said the proposal seeks to align high school programs and CTE programs with apprenticeship programs and emphasized the need to open up opportunities for more young people.
Grothman asked why the DOL issued a proposed rule that eliminates the successful competency-based model for registered apprenticeships. Su said under the Biden Administration, the DOL has invested over $445 million in apprenticeship programs across the country, while another $200 million will be announced in June.
Rep. G.T. Thompson (R-Pa.) asked whether the federal government understands the needs of employers and specific occupation requirements in each state better than the state apprenticeship agencies. Su said no, and explained that’s why the DOL is investing in creativity and partnerships that originate on the ground. Thompson blasted the DOL for proposing a rule that would strip states of their ability and force all programs to adhere to a one-size-fits-all approach.
Rep. Don Norcross (D-N.J.) asked whether any law prevents a company from privately creating their own apprenticeship program. Su said no. Norcross explained it’s only when companies want the federal government to give them the money that they have to follow their rules.
Rep. Lucy McBath (D-Ga.) said the failure to invest in our workforce is a disservice to our students and employers. She lamented that the U.S. spends just four-hundredths of a percent of our GDP on workforce training and employment programs, and habitually underfunds workforce programs. She asked Su to discuss how important it is to fully fund these efforts and expand on the work done with apprenticeships. Su called for double down on those investments, explaining they are good for everybody.
Child Labor Violations
Adams asked what tools are at the DOL’s disposal and what tools they need to prevent placing children in harm’s way with firms that have records of child health and safety violations. Su said the question gets to the importance of the DOL’s budget request, explaining that they need enough investigators on the ground to combat child labor.
Rep. Kathy Manning (D-N.C.) cited the recent explosion in child labor abuse cases, and noted the DOL is forced to address this problem with a resource-starved Wage & Hour Division. She asked about the effects of the DOL’s ability to enforce with less staff, and how Republicans’ proposed cuts would harm this mission. Su discussed the recent horrific child labor cases uncovered by the DOL, citing examples of 13-year-olds working on the kill floor of a meatpacking plant on the overnight shift with dangerous chemicals.
Rep. Ilhan Omar (D-Minn.) noted child labor violations are soaring, and said states are rolling back child labor protections. She asked for an update on the interagency task force on child labor, and how the DOL is following up on potential hot spots. Su said the DOL uncovered horrific cases. She noted that during the last fiscal year, the DOL assessed the most penalties ever under child labor laws.
Scott said Republicans complain about something in place of a solution. He noted Democrats have asked for a hearing for child labor and haven’t gotten it. He also discussed the lack of Republican support for Democrats’ bill to increase fines for child labor violations. Scott asked what Republican governors are doing in the child labor space. Su cited the child labor protection rollbacks in states.
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