[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]








               STANDING UP FOR WORKERS: PREVENTING WAGE 
                   THEFT AND RECOVERING STOLEN WAGES

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                         WORKFORCE PROTECTIONS


                                 of the

                    COMMITTEE ON EDUCATION AND LABOR
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

              HEARING HELD IN WASHINGTON, DC, MAY 11, 2022

                               __________

                           Serial No. 117-44

                               __________

      Printed for the use of the Committee on Education and Labor

                                     
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                     

          Available via: edlabor.house.gov or www.govinfo.gov 
                             _________
                              
                 U.S. GOVERNMENT PUBLISHING OFFICE
                 
47-708 PDF               WASHINGTON : 2023 























                    COMMITTEE ON EDUCATION AND LABOR

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

RAUL M. GRIJALVA, Arizona            VIRGINIA FOXX, North Carolina,
JOE COURTNEY, Connecticut              Ranking Member
GREGORIO KILILI CAMACHO SABLAN,      JOE WILSON, South Carolina
  Northern Mariana Islands           GLENN THOMPSON, Pennsylvania
FREDERICA S. WILSON, Florida         TIM WALBERG, Michigan
SUZANNE BONAMICI, Oregon             GLENN GROTHMAN, Wisconsin
MARK TAKANO, California              ELISE M. STEFANIK, New York
ALMA S. ADAMS, North Carolina        RICK W. ALLEN, Georgia
MARK DeSAULNIER, California          JIM BANKS, Indiana
DONALD NORCROSS, New Jersey          JAMES COMER, Kentucky
PRAMILA JAYAPAL, Washington          RUSS FULCHER, Idaho
JOSEPH D. MORELLE, New York          FRED KELLER, Pennsylvania
SUSAN WILD, Pennsylvania             MARIANNETTE MILLER-MEEKS, Iowa
LUCY McBATH, Georgia                 BURGESS OWENS, Utah
JAHANA HAYES, Connecticut            BOB GOOD, Virginia
ANDY LEVIN, Michigan                 LISA C. McCLAIN, Michigan
ILHAN OMAR, Minnesota                DIANA HARSHBARGER, Tennessee
HALEY M. STEVENS, Michigan           MARY E. MILLER, Illinois
TERESA LEGER FERNANDEZ, New Mexico   VICTORIA SPARTZ, Indiana
MONDAIRE JONES, New York             SCOTT FITZGERALD, Wisconsin
KATHY E. MANNING, North Carolina     MADISON CAWTHORN, North Carolina
FRANK J. MRVAN, Indiana              MICHELLE STEEL, California
JAMAAL BOWMAN, New York, Vice-Chair  CHRIS JACOBS, New York
MARK POCAN, Wisconsin                Vacancy
JOAQUIN CASTRO, Texas                Vacancy
MIKIE SHERRILL, New Jersey
ADRIANO ESPAILLAT, New York
KWEISI MFUME, Maryland
SHEILA CHERFILUS-McCORMICK, Florida

                   Veronique Pluviose, Staff Director
                  Cyrus Artz, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

               ALMA S. ADAMS, North Carolina, Chairwoman

MARK TAKANO, California              FRED KELLER, Pennsylvania,
DONALD NORCROSS,New Jersey             Ranking Member
PRAMILA JAYAPAL, Washington          ELISE M. STEFANIK, New York
ILHAN OMAR, Minnesota                MARIANNETTE MILLER-MEEKS, Iowa
HALEY M. STEVENS, Michigan           BURGESS OWENS, Utah
MONDAIRE JONES, New York             BOB GOOD, Virginia
ROBERT C. ``BOBBY'' SCOTT, Virginia  MADISON CAWTHORN, North Carolina
Vacancy                              MICHELLE STEEL, California
                                     VIRGINIA FOXX, North Carolina (ex 
                                         officio)   
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on May 11, 2022.....................................     1

Statement of Members:
    Adams, Hon. Alma S., Chairwoman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     4
    Keller, Hon. Fred, Ranking Member, Subcommittee on Workforce 
      Protections................................................     5
        Prepared statement of....................................     6

Statement of Witnesses:
    Cacace, Karen, Labor Bureau Chief, The New York State Office 
      of the Attorney General....................................     8
        Prepared statement of....................................    11
    Esparza, Francisco, Representative, United Brotherhood of 
      Carpenters.................................................    14
        Prepared statement of....................................    17
    McCutchen, Tammy, Senior Affiliate, Resolution Economics.....    21
        Prepared statement of....................................    24
    Swenson-Klatt, Daniel, Owner & Operator, Butter Bakery Cafe..    34
        Prepared statement of....................................    37

Additional Submissions:
    Ranking Member Keller:
        Letter dated May 17, 2022 from the NFIB..................    60
        Letter dated May 18, 2022 from the US Chamber of Commerce    62
        Letter dated May 18, 2022 from the ABC...................    64
        Report dated December 2021, ``The Great Realization'', 
          from MBO Partners......................................    65
        Letter dated May 16, 2022 from the NRF...................    88
        Letter dated May 24, 2022 from the RILF..................    90
        Letter dated May 17, 2022 from the IAW...................    93

 
                  STANDING UP FOR WORKERS: PREVENTING  
                 WAGE THEFT AND RECOVERING STOLEN WAGES 

                              ----------                              


                        Wednesday, May 11, 2022

                  House of Representatives,
             Subcommittee on Workforce Protections,
                          Committee on Education and Labor,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:15 a.m., 
2176 Rayburn House Office Building, Washington, DC, Hon. Alma 
Adams (Chairwoman of the Subcommittee) presiding.
    Present: Representatives Adams, Takano, Norcross, Jayapal, 
Omar, Stevens, Scott, Keller, Stefanik, Miller-Meeks, Good, 
Steel, and Foxx (ex officio).
    Staff present: Brittany Alston, Staff Assistant; Nekea 
Brown, Director of Operations; Ilana Brunner, General Counsel; 
Kyle deCant, Labor Policy Counsel; Scott Estrada, Professional 
Staff; Daniel Foster, Health and Labor Counsel; Rasheedah 
Hasan, Chief Clerk; Sheila Havenner, Director of Information 
Technology; Eli Hovland, Policy Associate; Stephanie Lalle, 
Communications Director; Andre Lindsay, Policy Associate; Kevin 
McDermott, Director of Labor Policy; Kota Mizutani, Deputy 
Communication Director; Max Moore, Staff Assistant; Lorin 
Obler, GAO Detailee; Kayla Pennebecker, Staff Assistant; Mason 
Pesek, Labor Policy Counsel; Veronique Pluviose, Staff 
Director; Robert Shull, Labor Policy Staff; Banyon Vassar, 
Deputy Director of Information Technology; Sam Varie, Press 
Secretary; ArRone Washington, Clerk/Special Assistant to the 
Staff Director; Cyrus Artz, Minority Staff Director; Gabriel 
Bisson, Minority Staff Assistant; Mini Ganesh, Minority Staff 
Assistant; John Martin, Minority, Minority Workplace Policy 
Counsel; Hannah Matesic, Minority Director of Operations; Audra 
McGeorge, Minority Communications Director; and Ethan Pann, 
Minority Press Assistant.
    Chairwoman Adams. Good morning. The Subcommittee on 
Workforce Protections will come to order. Welcome everyone. I 
note that a quorum is present. The Subcommittee is meeting 
today to hear testimony on Standing Up for Workers: Preventing 
Wage Theft and Recovering Stolen Wages.
    This is a hybrid hearing pursuant to House Resolution 8 and 
the regulations thereto. All microphones, both in the room and 
on the platform will be kept muted, as a general rule, to avoid 
unnecessary background noise. Members and witnesses will be 
responsible for unmuting themselves when they're recognized to 
speak or when they wish to seek recognition.
    When Members wish to speak or seek recognition, they should 
unmute themselves and all a pause of 2 seconds to ensure the 
microphone picks up their speech. I would also ask that Members 
please identify themselves before they speak.
    Members who are participating in person should not be 
logged onto the remote platform in order to avoid feedback, 
echoes, and distortion. Members participating remotely shall be 
considered present in the proceeding when they are visible on 
camera, and they shall be considered not present when they are 
not visible on camera.
    The only exception to this is if they're experiencing 
technical difficulty and inform Committee staff of such 
difficulty. If any Member experiences difficulty during the 
hearing, you should stay connected on the platform, make sure 
you're muted, and then use your phone to immediately call the 
Committee's IT director, whose number was provided in advance.
    Should the Chair need to step away for any reason, another 
majority Member is hereby authorized to assume the gavel in the 
Chair's absence. In order to ensure that the Committee's five-
minute rule is adhered to, staff will be keeping track of time 
using the Committee's digital timer on the remote platform.
    For Members participating in person, the timer will be 
broadcast in the Committee Room on the television monitor as 
part of the platform gallery view and visible in its own 
thumbnail window. The Committee Room timer will not be in use. 
For Members participating remotely, this will be visible in 
gallery view in its own thumbnail window on the remote 
platform. Members are asked to wrap up promptly when their time 
has expired.
    And finally, while the recent guidance from the Office of 
the Attending Physician has made mask wearing optional at this 
time, please know that we have in our midst, at both the Member 
and staff levels, individuals who are immune compromised or who 
may have immediate family members who are immune compromised, 
as well as those who might not be vaccinated, either due to 
medical reasons or because the vaccine is not yet available to 
children under the age of five.
    Therefore, the Committee strongly recommends that masks 
continue to be worn out of concern for the safety of 
unvaccinated and immune compromised Committee Members and staff 
and their families.
    So, pursuant to Committee Rule 8(c), opening statements are 
limited to the Chair and the Ranking Members. This allows us to 
hear from our witnesses sooner and it provides all Members with 
adequate time to ask questions. I now recognize myself for the 
purpose of making an opening statement.
    Today we're meeting to discuss the pervasive and serious 
consequences of wage theft and examine a legislative solution 
to protect workers' wages and hold unscrupulous employers 
accountable. Too often, dishonest employers cheat their 
employees out of wages that they are legally entitled to 
receive.
    This can take many forms, whether by paying workers less 
than the minimum wage, withholding overtime pay, or forcing 
them to work off the clock. Regardless of the form, it allows 
those employers, who skirt the law, to get richer and pushes 
the most vulnerable workers deeper into poverty.
    This is a multi-billion-dollar problem. Each year dishonest 
employers steal at least $15 billion from workers' paycheck in 
minimum wage violations alone with all forms of wage theft 
possibly exceeding $50 billion annually in stolen compensation. 
This has serious consequences for workers across the Nation and 
disproportionally hurts women and people of color who are more 
likely to work low-wage jobs.
    According to a 2016 study conducted by the Economic Policy 
Institute, hourly workers cost 25 percent of their annual 
hearings. Now, that's more than $3,000 in stolen wages that 
could not be used for essential expenses like rent, groceries, 
or childcare. Ultimately, wage theft prevents workers from 
taking meaningful steps to enter the middle class.
    In fact, workers who suffer a minimum wage violation are 
more than three times as likely to be in poverty. Moreover, 
about one in three workers who are victims of a wage theft 
violation receive some form of Public Assistance.
    Although wage theft practices are already illegal under the 
Fair Labor Standards Act of 1938 or FLSA, the law's trivial 
penalties and damages provisions have not prevented wage theft. 
Furthermore, employers use a variety of legal loopholes to 
evade accountability.
    So, today FLSA civil monetary penalties are just $1,100 for 
wage and hour violations and the Department of Labor's maximum 
penalty for repeated or willful violators is $2,203. So, let me 
repeat that. An average hourly worker lost more than $3,000 per 
year in stolen earnings. Therefore, it certainly looks like it 
is cheaper to willingly violate the FLSA than it is to pay 
employees what they are entitled to receive.
    Now, this is not only bad for workers, but it put honest 
businesses that abide by the law at a competitive disadvantage. 
The FLSA also does not require detailed paystubs or 
recordkeeping, which are critical for workers to confirm pay 
accuracy and, if necessary, establish a legal claim for stolen 
wages.
    So, when workers do have the evidence to mount a case, 
their claims are often stymied by employer-imposed class action 
waivers and arbitration clauses. Simply put, current law favors 
dishonest employers over hard-working Americans. So, if we want 
to raise people out of poverty, if we want to ensure Americans 
can enter the middle class, and if we believe that workers 
deserve a decent wage for an honest day's work, then we must 
enact a meaningful deterrent to wage theft and help workers 
seek justice.
    The Wage Theft Protection and Wage Recovery Act, which I'm 
proud to co-sponsor, is a responsible solution to deliver on 
that goal. The legislation increases civil monetary penalties 
and liquidated damages to meaningfully deter any business 
considering stealing their workers' wages. It also will help 
level the playing field for those businesses already playing by 
the rules.
    Further, the bill requires detailed paystubs be delivered 
to employees regularly and adequate recordkeeping to provide 
employees information necessary to hold employers accountable 
in court for violating the law.
    And finally, it prevents employers from exploiting 
mandatory arbitration and collective action waivers and it 
protects an employee's ability to pursue remedies for stolen 
wages under the law.
    I'm also pleased that President Biden's Fiscal Year 2023 
budget proposes the necessary resources to help restore the 
Department of Labor's ability to enforce the FLSA after 4 years 
of staff cuts made under the Trump administration. However, 
more money cannot fix the deficiencies in the FLSA. If we, as 
Congress, know better, we should do better. Therefore, I'm 
committed to working with my colleagues to pass the Wage Theft 
Prevention and Wage Recovery Act of 2022 to ensure workers 
receive the wages that they earn.
    [The statement of Chairwoman Adams follows:]

     Statement of Hon. Alma S. Adams, Chairwoman, Subcommittee on 
                         Workforce Protections

    Today, we are meeting to discuss the pervasive and serious 
consequences of wage theft and examine a legislative solution to 
protect workers' wages and hold unscrupulous employers accountable.
    Too often, dishonest employers cheat their employees out of the 
wages that they are legally entitled to receive.
    This can take many forms-whether by paying workers less than the 
minimum wage, withholding overtime pay, or forcing them to work off-
the-clock.
    Regardless of the form, it allows those employers who skirt the law 
to get richer and pushes the most vulnerable workers deeper into 
poverty.
    This is a multi-billion-dollar problem. Each year, dishonest 
employers steal at least $15 billion from workers' paychecks in minimum 
wage violations alone, with all forms of wage theft possibly exceeding 
$50 billion annually in stolen compensation.
    This has serious consequences for workers across the Nation and 
disproportionately hurts women and people of color-who are more likely 
to work low-wage jobs.
    According to a 2017 study conducted by the Economic Policy 
Institute, hourly workers lost 25 percent of their annual earnings, 
that's more than $3,000 in stolen wages-money that could not be used 
for essential expenses like rent, groceries, or child care.
    Ultimately, wage theft prevents workers from taking meaningful 
steps to enter the middle class.
    In fact, workers who suffer a minimum wage violation are more than 
three times as likely to be in poverty. Moreover, about 1-in-3 workers 
who are victims of a wage theft violation receive some form of public 
assistance.
    Although wage theft practices are already illegal under the Fair 
Labor Standards Act of 1938, or the F-L-S-A, the law's trivial 
penalties and damages provisions have not prevented wage theft. 
Furthermore, employers use a variety of legal loopholes to evade 
accountability.
    Today, F-L-S-A civil monetary penalties are just $1,100 for wage 
and hour violations, and the Department of Labor's maximum penalty for 
repeated or willful violators is $2,203.
    So, let me repeat that-on average, workers who were victims of wage 
theft lost more than $3,000 per year in stolen earnings.
    Therefore, it certainly looks like it is cheaper to willingly 
violate the F-L-S-A than it is to pay employees what they are entitled 
to receive. This is not only bad for workers, but it puts honest 
businesses that abide by the law at a competitive disadvantage.
    The F-L-S-A also does not require detailed pay stubs or 
recordkeeping, which are critical for workers to confirm pay accuracy 
and, if necessary, establish a legal claim for stolen wages.
    When workers do have the evidence to mount a case, their claims are 
often stymied by employer-imposed class action waivers and arbitration 
clauses.
    Simply put, current law favors dishonest employers over hard-
working Americans.
    So, if we want to raise people out of poverty; if we want to ensure 
Americans can enter the middle class; and, if we believe that workers 
deserve a decent wage for an honest day's work, then we must enact a 
meaningful deterrent to wage theft and help workers seek justice.
    The Wage Theft Prevention and Wage Recovery Act-which I am proud to 
cosponsor-is a responsible solution to deliver on that goal.
    This legislation increases civil monetary penalties and liquidated 
damages to meaningfully deter any business considering stealing their 
workers' wages. This also will help level the playing field for those 
businesses already playing by the rules.
    Further, the bill requires detailed pay stubs be delivered to 
employees regularly and adequate recordkeeping to provide employees 
information necessary to hold employers accountable in court for 
violating the law.
    Finally, it prevents employers from exploiting mandatory 
arbitration and collective action waivers and protects an employee's 
ability to pursue remedies for stolen wages under the law.
    I am also pleased that President Biden's Fiscal Year 2023 budget 
proposes the necessary resources to help restore the Department of 
Labor's ability to enforce the F-L-S-A after 4 years of staff cuts made 
under the Trump administration.
    However, more money cannot fix the deficiencies in the F-L-S-A. If 
we as a Congress know better, we should do better!
    Therefore, I am committed to working with my colleagues to pass the 
Wage Theft Prevention and Wage Recovery Act of 2022 to ensure workers 
receive the wages that they earn.
                                 ______
                                 
    I now recognize the distinguished Ranking Member for the 
purpose of making an opening statement.
    Mr. Keller. Thank you. All workers must be paid in full for 
their work. That is not in question or open for debate. 
Republicans fully support the enforcement of the Fair Labor 
Standards Act, FLSA.
    What we do not support is weaponizing this Act or any 
Federal legislation to be used against our country's job 
creators. Unfortunately, that is exactly what H.R. 7701, 
Congresswoman's DeLauro's bill, is attempting to accomplish.
    First of all, Democrats' approach to employers is wrong. 
Referring to unintentional technical errors in payroll as wage 
theft demonstrates Democrats' hostility toward America's job 
creators. Employers want to do the right thing by their 
employees and pay them what is owed. People work hard and get 
the job done every day. I see that across central and 
northeastern Pennsylvania. Calling our country's job creators 
thieves is beyond outrageous and should have no place in our 
policymaker's discourse.
    It would be far more productive for the Department of Labor 
to provide compliance assistance to employers instead of 
assuming all employers are bad actors, which my Republican 
colleagues and I know is not the case. Both workers and job 
creators benefit from clear and concise compliance procedures, 
but Democrats' proposed changes to the FLSA would make 
employment and wage regulations even more convoluted.
    This legislation would then impose crushing penalties on 
employers for not being able to effectively navigate the maze 
of red tape it intends to create. This is nothing short of 
entrapment. We should be supporting easy to understand wage and 
hour rules, not impossible compliance burdens. The enforcement 
penalties are extremely punitive and could severely hinder 
employers, especially, small businesses. This is not the way to 
treat those keeping our country's economy running. In fact, it 
is counterproductive.
    Further, the onerous mandates and disproportionate 
penalties in this bill will have a chilling effect on the 
ability of employers to offer additional benefits to workers, 
including greater compensation or flexibility. Employers want 
to do what is best for their employees, but the Federal 
Government is threatening to stand in their way.
    Democrats are completely ignoring the adverse consequences 
that will come from their meddling. In truth, this legislation 
is a massive power grab meant to substantially increase the 
Federal Government's control over the workforce. H.R. 7701 
would fundamentally alter the FLSA by expanding its 
jurisdiction to all employer/employee contracts, including 
collective bargaining agreements.
    This legislation will harm America's job creators and 
workers. Whenever Democrats and Washington bureaucrats expand 
Federal control over private businesses, it reduces innovation 
and the ability of businesses to respond to changing economic 
circumstances. This is not the way our country will recover 
from the pandemic, the worker shortage, or record-high 
inflation. This legislation is short-sighted and destructive.
    In the case of bad actors, the FLSA already has strong 
remedies in place for employers who do not comply with the law. 
Instead of adding burdensome reporting requirements and 
increasing penalties, the Department of Labor should simply use 
existing law. Democrats continue to fail to recognize the 
importance of independent contractors in today's evolving 
economy and this legislation would have a negative effect on 
their opportunities.
    If Democrats had their way, independent contracting would 
come to an end; yet independent contractors are serving a vital 
purpose in many industries and workers seek out the benefits 
and flexibility these arrangements provide. If Democrats truly 
care about our people, they will start looking to bolster job 
creators instead of tearing them down.
    The truth is we need more freedom in the marketplace, not 
less. Thank you and I yield back.
    [The statement of Ranking Member Keller follows:]

    Statement of Hon. Fred Keller, Ranking Member, Subcommittee on 
                         Workforce Protections

    All workers must be paid in full for their work-that is not in 
question or open for debate. Republicans fully support the enforcement 
of the Fair Labor Standards Act (FLSA).
    What we do not support is weaponizing this Act, or any Federal 
legislation, to be used against our country's job creators. 
Unfortunately, that is exactly what H.R. 7701, Congresswoman
    DeLauro's bill is attempting to accomplish.
    First of all, Democrats' approach to employers is wrong. Referring 
to unintentional technical errors in payroll as `wage theft' 
demonstrates Democrats' hostility toward America's job creators. 
Employers want to do right by their employees and pay them what is 
owed. People work hard and get the job done every day-I see that across 
Central and Northeast Pennsylvania. Calling our country's job creators 
`thieves' is beyond outrageous and should have no place in our 
policymakers' discourse.
    It would be far more productive for the Department of Labor to 
provide compliance assistance to employers instead of assuming all 
employers are bad actors-which my Republican colleagues and I know is 
not the case.
    Both workers and job creators benefit from clear and concise 
compliance procedures, but
    Democrats' proposed changes to the FLSA would make employment and 
wage regulations even more convoluted. This legislation would then 
impose crushing penalties on employers for not being able to 
effectively navigate the maze of red tape it intends to create. This is 
nothing short of entrapment.
    We should be supporting easy-to-understand wage and hour rules-not 
impossible compliance burdens. The enforcement penalties are extremely 
punitive and could severely hinder employers, especially small 
businesses. This is not the way to treat those keeping our country's 
economy running. In fact, it is counterproductive.
    Further, the onerous mandates and disproportionate penalties in 
this bill will have a chilling effect on the ability of employers to 
offer additional benefits to workers, including greater compensation or 
flexibility. Employers want to do what is best for their employees, but 
the Federal Government is threatening to stand in their way. Democrats 
are completely ignoring the adverse consequences that will come from 
their meddling.
    In truth, this legislation is a massive power grab meant to 
substantially increase the Federal
    government's control over the workforce. H.R. 7701 would 
fundamentally alter the FLSA by expanding its jurisdiction to all 
employer-employee contracts, including collective bargaining 
agreements.
    This legislation will harm America's job creators and workers. 
Whenever Democrats and Washington bureaucrats expand Federal control 
over private businesses, it reduces innovation
    and the ability of businesses to respond to changing economic 
circumstances. This is not the way our country will recover from the 
pandemic, the worker shortage, or record high inflation. This 
legislation is short-sighted and destructive.
    In the case of bad actors, the FLSA already has strong remedies in 
place for employers who do not comply with the law. Instead of adding 
burdensome reporting requirements and increasing penalties, the DOL 
should simply use existing law.
    Democrats continue to fail to recognize the importance of 
independent contractors in today's evolving economy, and this 
legislation would have a negative effect on their opportunities. If 
Democrats had their way, independent contracting would come to an end. 
Yet, independent contractors are serving a vital purpose in many 
industries-and workers seek out the benefits and flexibility these 
arrangements provide.
    If Democrats truly care about our people, they will start looking 
to bolster job creators instead of tearing them down. The truth is, we 
need more freedom in the marketplace, not less.
                                 ______
                                 
    Chairwoman Adams. Thank you very much. Without objection, 
all of the Members who wish to insert written statements into 
the record may do so by submitting to the Committee Clerk, 
either, electronically, in Microsoft Word format by 5 p.m. on 
May 25th.
    I would now like to introduce our witnesses. Ms. Karen--is 
that Cacace?
    Ms. Cacace. It's Cacace.
    Chairwoman Adams. Cacace. Excuse me. OK, Ms. Cacace is the 
Labor Bureau Chief of the New York State Office of the Attorney 
General. As Labor Bureau Chief, Ms. Cacace has extensive 
knowledge of Federal and New York wage and hour laws and the 
current realities of wage theft enforcement.
    Mr. Francisco Esparza is the representative for the United 
Brotherhood of Carpenters. Mr. Esparza has been a victim of 
wage theft himself and he now draws on that experience to 
educate other workers about their workplace rights with the 
carpenters.
    Ms. Tammy McCutchen is a Senior Affiliate at Resolution 
Economics. Ms. McCutchen provides expert services to employers 
on employment law, compliance issues, and previously served as 
Administrator of the Wage and Hour Division at the U.S. 
Department of Labor under President George W. Bush.
    I'd now like to turn to Representative Omar to introduce 
the final witnesses. Representative Omar will provide a brief 
introduction for Daniel Swenson-Klatt. If Representative Omar 
is--
    Ms. Omar. Yes, thank you, Chairwoman.
    Chairwoman Adams. You're here. Great. Thank you.
    Ms. Omar. Thank you, Chairwoman. I am honored to introduce 
Daniel Swenson-Klatt, a small business owner from my district 
who has been advocating for workers' rights in our community 
and other communities across the country.
    Mr. Swenson-Klatt is former middle school educator turned 
to small businessperson and has owned and operated the Butter 
Bakery Cafe in Minneapolis since 2006. Daniel served as 
Minneapolis's Workforce Advisory Committee and help launch its 
small business team and currently serves as the representative 
of Kingfield Neighborhood for Local Development Projects.
    He's a board member of Main Street Alliances Minnesota 
Chapter and serves on the Steering Committee of Rise, a High 
Restaurant Employer Association. Daniel's currently assisting 
the Bloomington City Council to prepare an Earn, Sick, and Safe 
Time ordinance for their city.
    Daniel, thank you for making Minnesota proud through your 
leadership and tireless advocacy on behalf of working families. 
I yield back, Chairwoman.
    Chairwoman Adams. Thank you. Thank you, Representative 
Omar. So, these are the instructions for the witnesses. We do 
appreciate you for participating today. We look forward to your 
testimony but let me remind the witnesses that we've read your 
written statements. They will appear in full in the hearing 
record.
    Pursuant to Committee Rule 8(d) and the Committee practice, 
each of you is asked to limit your oral presentation to five-
minute summary of your written statement. So, before you begin 
your testimony, please reMember to unmute your microphone. 
During your testimony, staff will be keeping track of time and 
the timer is visible to you at the witness table. Please be 
attentive to the time, wrap up when your time is over, and re-
mute your microphone.
    We'll let all of the witnesses make their presentations 
before we move to Member questions. When answering a question, 
please remember to unmute your microphone. The witnesses are 
aware of their responsibility to provide accurate information 
to the Subcommittee and therefore will proceed with their 
testimony.
    I'd like to first recognize Karen Cacace and Ms. Cacace, 
you are now ready to give your testimony.

  STATEMENT OF KAREN CACACE, LABOR BUREAU CHIEF, THE NEW YORK 
              STATE OFFICE OF THE ATTORNEY GENERAL

    Ms. Cacace. Good morning, Chair Adams, Ranking Member 
Keller, and distinguished Members of the Subcommittee. My name 
is Karen Cacace and I'm the Bureau Chief of the Labor Bureau at 
the Office of the New York State Attorney General. Prior to 
joining the Office of the Attorney General, I was the Director 
of the Employment Law Unit at the Legal Aid Society in New York 
City.
    I want to thank you for convening this important hearing at 
such a vital time for workers and for giving our office an 
opportunity to share our experiences and insight. The Labor 
Bureau of the Office of the New York State Office of the 
Attorney General enforces Federal, State, and local laws 
affecting workers in New York State.
    Our office prioritizes enforcement of wage theft against 
low-wage workers. Our office recently resolved several wage 
theft investigations, including investigations involving home 
health aides, restaurant workers, and residential building 
staff. While I was at the Legal Aid Society, the Employment Law 
Unit litigated many cases of wage theft in different 
industries, including for restaurant workers, domestic workers, 
and residential building services employees.
    Wage theft continues to be a devastating issue for low-wage 
workers across industries. It is an area that requires 
legislation to increase protections, deter violations, and 
encourage greater enforcement. There are several potential 
amendments to the Fair Labor Standards Act that would 
significantly improve the law.
    The Fair Labor Standards Act has not increased the minimum 
wage since 2009 and it provides that workers who are required 
to be paid the minimum wage be paid only $7.25 an hour. In 
contrast, the New York Labor Law provides that within New York 
City, Long Island, and Westchester the minimum wage is $15 per 
hour and throughout the rest of New York State the minimum wage 
is 13.20 per hour.
    In addition to minimum wage increases, there are other 
important protections that can be added to the Fair Labor 
Standards Act. For instance, as part of New York's Wage Theft 
Prevention Act, which went into effect in 2011, New York 
requires that employers provide employees a hiring notice that 
explains whether they are covered by the minimum wage laws and, 
if they are, what their hourly wage and overtime rate will be. 
This notice must be provided in English and the employee's 
primary language. Without this protection, workers may not know 
that there are any wage laws that apply to them or that they 
are entitled to a specific hourly rate.
    Another important provision of New York's Wage Theft 
Prevention Act is that employers are required to provide 
employees with paystubs which detail how many hours they worked 
each week and the amount that they are being paid per hour. 
This allows workers to review the number of hours they are 
being paid and to address any issues immediately and seek legal 
assistance.
    If hiring notice and paystub requirements are enacted, it 
will be easier for workers to prove wage theft claims. 
Sometimes employers report on paystubs that they are paying 
workers less than the minimum wage and thereby hand the workers 
strong evidence of the violation. If employers fail to provide 
the paystubs, employees may prove their claims through their 
own credible testimoneys. Penalties for failing to comply with 
hiring notice and paystub requirements are also important.
    In addition, the New York Labor Law provides that workers 
must be paid their promised wage. And if an employer promises 
to pay an employee a rate above the minimum, it's a violation 
of the New York Labor Law. This is important because the New 
York Labor Law violation allows attorney's fees and it allows 
liquidated damages, something that a regular breach of contract 
claim does not allow.
    Another issue that is prevalent is for employers to fail to 
pay employees their last paycheck and so additional penalties 
for that violation are significant because they will encourage 
lawyers to take on those cases which can be for a small amount 
of wages but are still significant to the workers.
    Increasing penalties, overall, may be the most effective 
method of deterring employers from violating the substantive 
provisions of the Fair Labor Standards Act. For many employers, 
the cost of having to pay their employees once a wage theft 
claim is filed, is not significant enough to deter them from 
violating the law.
    It is also essential that workers be allowed to pursue wage 
theft claims jointly or in groups by bring a class or 
collective action. The time and cost of a wage theft litigation 
is difficult for an individual worker to bear alone.
    Finally, lengthening the statute of limitations is also 
important. Low-wage workers are often unaware of their rights, 
and it may take them time to recognize that there have been 
violations and to find legal representation. In New York, the 
statute of limitations is 6 years.
    We very much appreciate the opportunity to share our input 
with you here today and welcome the chance to continue this 
conversation. Thank you.
    [The Statement of Ms. Cacace follows:]

                   Prepared Statement of Karen Cacace

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Adams. And thank you very much. We'll now hear 
from Francisco Esparza. You're recognized for your testimony.

  STATEMENT OF MR. FRANCISCO ESPARZA, REPRESENTATIVE, UNITED 
                   BROTHERHOOD OF CARPENTERS

    Mr. Esparza. Well, good morning, Chair Scott, Ranking 
Member Fox, and Members of the Education and Labor Committee. I 
appreciate the opportunity to testify today on my experience 
and expertise on the issues of workers' rights, wage theft, and 
the uneven process of wage recovery for victims of wage theft.
    I am Francisco Esparza and I am a council representative 
for the Eastern Atlantic States Regional Council of Carpenters, 
a union carpenter, and a former victim of wage theft in the 
construction industry's underground economy.
    I came to the United States 18 years ago when I was 11 
years old. I am a Dreamer. As a DACA recipient, I understand 
that I am fortunate to be able to have a career in this country 
and the ability to work for all that I earn. To be honest, that 
realization is not one that comes easily to many people like 
me.
    Countless construction workers, especially, in the District 
of Columbia, see themselves as voiceless and invisible. In the 
underground economy of the construction industry, you are told 
you are lucky to have a job, in general, and will be 
compensated by the means dictated by your employer or your 
labor broker. This is not how things should work in this 
country, but all too often they do.
    It takes education, some courage, and self-respect for many 
to decide that they have been cheated and deserve fair 
compensation. In 2019, myself and 222 others started to speak 
up and take action to receive the $618,000 in stolen wages we 
earned. Our class action lawsuit against Contractor Anning 
Johnson was for unpaid wages, unpaid overtime, and workplace 
fraud under Federal and District of Columbia law.
    This was a major victory for workers who did not think they 
have a voice. It was historic because it is so rare. Without 
the laws put into place in the District of Columbia, we would 
not have had the ability to take this step. The District of 
Columbia has stronger than average laws in place to help 
workers fight back against wage theft.
    The District's Minimum Wage Payment and Collection Law and 
Workplace Fraud Act provide more opportunity for----
    Chairwoman Adams. Excuse me. Mr. Esparza, can you turn your 
volume up please, sir. We're having difficulty, some of the 
Members hearing you. Turn your volume up just a little bit 
more.
    Mr. Esparza. How do I do that?
    Chairwoman Adams. Let's see. It should be at the bottom of 
your computer, if you move your--can someone give him some 
instructions about that. Maybe if you could speak up a little 
bit, maybe that'll help.
    Mr. Vassar. Mr. Esparza, if you could, sir, in the bottom 
left-hand corner of your screen should be your microphone mute 
button. In the corner of that microphone button is a little 
arrow. If you can click on that little arrow and go to audio 
settings, sir, you should see a separation for mike and 
speakers and you should see test microphone with a little bar 
that you can drag to the right. If you can drag the bar to the 
right to increase your microphone pickup, sir. Thank you.
    Mr. Esparza. Better?
    Chairwoman Adams. Yes, that is. That is. Thank you, sir.
    Mr. Esparza. I apologize.
    Chairwoman Adams. We stopped the clock, so you're not going 
to lose any time. OK. Proceed.
    Mr. Esparza. OK. The actions workers have taken have now 
deterred unscrupulous contractors and labor brokers from 
stealing wages from the most vulnerable workers so that they 
can profit more. These profits are not only on the backs of 
workers they victimize, but the honest U.S. taxpayers like me.
    Worker's Compensation, funding for American infrastructure, 
our schools, veterans' programs, and more are not paid into 
because of these actions. Recent studies and research show the 
issues are still prevalent and more enforcement and changes to 
our laws are necessary.
    In a national study by researchers and economist from 
Harvard University, Michigan State University, and Allegany 
College, it was estimated that we have lost on $8.4 billion in 
State and Federal tax revenue. Additionally, the study found 
that possibly 2.60 million construction workers are 
misclassified or off the books. There's a $1.7 billion 
shortfall on Worker's Compensation, $725.1 million in 
unemployment insurance, and $811.1 million in overtime not 
paid.
    The District of Columbia has taken steps to improve our 
workers ability to fight back against these firms, but studies 
have found that workers are still victimized in D.C. all the 
time. A 2021 survey of workers found that nearly 50 percent of 
those surveyed are part of the underground economy. These 
workers reported that instead of receiving a paycheck with a 
paystub and with taxes deducted, they were being paid with a 
personal or a business check without any payroll deductions or 
they simply being paid in cash.
    After I was educated by the Carpenters Union on my rights, 
I joined the class action lawsuit against Anning Johnson, I 
became a union carpenter. I did this to protect myself and earn 
the fair wages I deserve with the backing of a union that will 
fight for me. I later was fortunate to become a council 
representative. I take the responsibility very seriously. I was 
once a voiceless worker. Now, I am the voice for not only the 
union carpenters I represent in the District of Columbia, but 
also the non-union workers looking for help.
    I hope my testimony and experience was helpful to you. 
Congress must act so that the Wage Theft Prevention and Wage 
Recovery Act is made law. Your actions toward strengthening 
penalties on violators, improving workers' ability to pursue 
wage theft claims, expand outreach to workers and businesses on 
the issues and facilitate the collection of evidence to assist 
in enforcement can help a worker gain the wage they deserve and 
hopefully help deter these crimes in the future. Workers 
deserve better in this country and with your help we will see 
less victims in the underground economy. Thank you again for 
your time.
    [The Statement of Mr. Esparza follows:]

                Prepared Statement of Francisco Esparza

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Adams. And thank you very much. Thank you for 
your testimony. I want to recognize Tammy McCutchen. Ms. 
McCutchen, we're ready for your testimony. You have five 
minutes.

  STATEMENT OF TAMMY McCUTCHEN, SENIOR AFFILIATE, RESOLUTION 
                           ECONOMICS

    Ms. McCutchen. Thank you. Chairwoman Adams, Ranking Member 
Keller, and Members of the Subcommittee, thank you for the 
opportunity to speak with you today.
    Protecting vulnerable, low-wage workers has been the focus 
of my entire Wage and Hour career. First, by expanding 
strategic enforcement in low-wage industries while serving as 
Wage-an-Hour Administrator and then by conducting audits of 
employer pay practices as defined and correct as FLSA 
violations. I believe we all have a common goal. Do what we can 
to ensure that workers are paid in compliance with the FLSA and 
receive that pay when they perform the work, not months or 
years later.
    Justice delayed is justice denied. There is nowhere truer 
than when low-wage workers must wait months or years to be 
paid. This workforce is often transient and the longer it takes 
to recover wages the harder it is to find the workers to give 
them their hard-earned money.
    The debate is how best to accomplish our common goal. I 
bring a unique perspective to the problem. During my career, I 
have seen the worst of employers and the best of employers. I 
have seen horrible practices. I have seen fabulous practices. I 
have seen bad people do bad things. I have seen amazing people 
do fabulous things, but still miss the compliance mark.
    I've thought about this problem for 20 years and these are 
the conclusions I have reached. We need clear and simple rules. 
We need swift and certain enforcement. We need to punish the 
bad, while rewarding the good. Achievement of these goals will 
require meaningful reform, but I'm afraid that the current bill 
will not improve protections for low-wage workers.
    Let me tell you why. The provisions on disclosures paystubs 
final pay and the right to full compensation are covered under 
State law. Adding Federal requirements would add complexity and 
confusion without actually improving the worker protections. We 
need to simplify the FLSA, not make it more complex. Making 
compliance more difficult will decrease compliance and thus 
harm workers.
    State contract laws, union CBAs, and arbitration procedures 
already ensure workers receive their full compensation. Also, 
Wage an Hour investigators have no training or experience in 
enforcing private contracts or CBAs. The heart of the bill 
focuses on enforcement. New and increased back wages, 
liquidated damages, civil and criminal penalties. These 
increases proposed are extreme and I fear will be 
counterproductive of the goals of this bill.
    Increasing the financial consequences for violations makes 
a great headline, but I urge you to think about the actual 
impact on low-wage workers. Employers faced with such massive 
damages and penalties will have only one way to react to 
violation allegations. Litigate, litigate, and litigate some 
more. Payment of back wages would be delayed by years. The 
plaintiff's bar will collect more fees, but low-wage workers, I 
am afraid, will see nothing at all.
    The proposed increases also are inflexible, with no room 
for discretion based on the size of business or the type of 
violation. In the increases should be lower for small 
businesses which have fewer resources to ensure compliance and 
should be limited to repeat, willful, and retaliation 
violations.
    I don't understand at all why a bill focused on protecting 
low-wage workers would include provisions on litigation. There 
are no limits to the ability of employees to unit and pursue 
lawsuits against employers. The Department of Labor litigates 
on behalf of all employees. Plaintiffs' attorneys file 
thousands of Wage and Hour class actions and collective actions 
every year.
    Removing the FLSA opt-in litigation procedures, especially, 
without any replacement will generate confusion and more 
litigation, which benefits only lawyers. Arbitration is cost 
effective, it's quicker with significant protections for 
workers. Swift resolution of wage claims is essential to 
protecting low-wage workers and arbitration can do that. 
Litigation cannot.
    Tolling the statute of limitations during agency 
investigations also would delay payment of back wages. DOL does 
take too long to resolve complaints. Tolling would remove any 
incentives of the Wage and Hour Division to move more quickly. 
A better approach is to set metrics and create incentives in 
the agency for quick resolution and reduce time for 
investigations.
    I've only time to discuss one of my concerns with the grant 
program. Deputizing advocates to help conduct investigations 
would eradicate the long tradition of employers voluntarily 
cooperating with agency investigations, producing documents, 
welcoming investigators into their worksite. But if DOL brings 
along unions and advocates, employers will stop cooperating and 
insist on search warrants and document subpoenas. After all, 
the 4th Amendment does apply.
    More complexity, longer investigations, more litigation 
will harm low-wage workers by delaying payment of wages. We 
need to find a better path. Thank you.
    [The Statement of Ms. McCutchen follows:]

                 Prepared Statement of Tammy McCutchen

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Adams. Thank you very much. We'll now from 
Daniel Swenson-Klatt. You are recognized for five minutes.

  STATEMENT OF DANIEL SWENSON-KLATT, OWNER & OPERATOR, BUTTER 
                     BAKERY CAFE 

    Mr. Swenson-Klatt. Thank you, Representative Omar, for your 
kind introduction and your strong support of small businesses 
like mine in Minnesota's Fifth congressional District. We 
certainly appreciate you taking the time to meet with small 
business owners from Main Street Alliance last week during our 
May Small Business Month of Action.
    Chairwoman Adams, Ranking Member Keller, and Members of the 
Subcommittee thank you for the opportunity to address you 
today.
    My name is Daniel Swenson-Klatt. I've owned and operated 
Butter Bakery Cafe for the past 16 years in Minneapolis, 
Minnesota. I'm also here on behalf of Main Street Alliance, a 
national network of small businesses working to build people-
centered, community-focused local economies.
    In my ideal world, fair wage laws wouldn't be necessary. 
What if instead we valued everyone fairly for their labor, 
providing each person with what they need in order to help them 
thrive. Sadly, that is not the history of our country and those 
unfair labor practices don't actually ring true to the ideals 
of our country.
    As a result, there's been a long and continual process of 
undoing those harms and righting the wrongs. The Fair Labor 
laws developed over many years are one way of moving closer to 
those goals. This philosophy has been at the core of my 
business. I learned about Fair Wage laws by doing. My first job 
out of college was as the sole employee of a small, nonprofit 
community center in Baltimore.
    And while I had held jobs before as an employee, I quickly 
needed to understand what it also meant to be an employer. I 
learned about payroll recording and taxes and how to decipher 
IRS letters through a great mentor who walked me through it and 
taught me the basics of accounting. Those lessons stayed with 
me over the years as I worked in public and charter schools, in 
nonprofits, in self-employment, and finally, now as a for-
profit business owner.
    Technology available to me now that didn't exist in the 
mid-eighties makes preparing payroll on your own accessible, 
even if you don't use a payroll service. I recognize that the 
complexity of payroll can at times be baffling and frustrating. 
I still make mistakes. I am still learning, but the process of 
hiring staff, setting up payroll, and retaining staff through 
fair labor practice is fundamental for business owners.
    The benefits of providing clear rules and policies far out 
way the effort to create them. The technical assistance 
available in many forms and with willing mentors it's a 
business owner's choice to not play fair. As someone who 
chooses to play by the rules, I lose out business owners who 
bend those rules and use their power and privilege to avoid 
paying a fair wage.
    When I price my products fairly to represent a true cost of 
labor, I get questioned by lower prices elsewhere. Because I 
have worked in the restaurant industry and knew its issues with 
wage theft, I was willing to work with my staff to deal with a 
systemic inequities, create a fair wage model, and treat all my 
staff as professionals. My staff appreciate the ability to know 
what they'll make when they come to work.
    When our city added an Earn Sick and Safe Time Ordnance for 
staff in 2016, we were at the lead teaching other businesses 
how to adopt it and build it into their payroll recording.
    During 2018 and 1919, I had the opportunity of serving on 
Minneapolis' Workforce Advisory Committee which worked to craft 
a Wage Theft Ordinance. A key component was an employee notice 
which would spell out the terms and conditions of employment 
for every staff member. We modified a State template for our 
city and it's an easy form. I complete it each time I go 
through the hiring process.
    During our research on wage theft, one of the stories that 
bothered me the most was that large, national chains that were 
willing to encourage wage theft practices knowing that in 
nearly all states restitution was limited to Federal minimum 
wage and that wage was lower in many states and so they would 
come out ahead, even if they were caught and lost.
    My staff gain a sense of agency in their role as an 
employee with a clear employee notice. My workers appreciate 
the openness and transparency, they appreciate a clearly 
spelled out policy for wages and payroll reporting. The tasks 
of hiring and setting up payroll should include this 
information. Your efforts to define what that notice include 
are helpful, not harmful. I can meet those compliance 
requirements.
    Thank you for continuing the effort to undo fair labor 
practices of the past and work with small businesses to build a 
sustainable economy, vibrate neighborhoods and strong 
communities across this country. I am happy to answer any 
questions you may have.
    [The Statement of Mr. Swenson-Klatt follows:]

               Prepared Statement of Daniel Swenson-Klatt

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairwoman Adams. Thank you very much. Under Committee Rule 
9(a), we'll now question witnesses under the five-minute rule. 
I'll be recognizing Subcommittee Members in seniority order. 
Again, to ensure that Members' five-minute rule is adhered to, 
staff will be keeping track of time. Please be attentive to the 
time, wrap up when your time is over, and re-mute your 
microphone.
    As Chair, I'll now recognize myself for five minutes. Ms. 
Cacace, under current law the FLSA provides that workers who 
are victims of wage theft can only be compensated for unpaid 
hours of work at the Federal minimum wage rate of $7.25 an 
hour. That would mean that a worker earning $10 per hour who 
was a victim of wage theft would only receive back wages at the 
rate of $7.25 per hour. So, how does this current limitation on 
damages under the FLSA harm low-wage workers?
    Ms. Cacace. Thank you, Chair Adams. Your question points 
out a significant problem. If you have an agreement with your 
employer to get paid above the Federal minimum wage, which is 
only 7.25 an hour, even if they don't pay you the $10 an hour, 
they said they would, if you are suing under the Fair Labor 
Standards Act, you cannot currently sue for that $10 an hour. 
You are only able to sue for the 7.25 an hour, there's no way 
for them under the Fair Labor Standards Act to obtain the money 
that the employer agreed to pay them and that they earned. And 
this significantly diminished their damages.
    If you work at $7.25 an hour for 40 hours a week for 50 
hours a year, it comes out to only $14,500 per year. So, you 
have somebody who's full time working making just $14,500 and 
only able to collect that much money, even if they were 
promised a wage of $10 an hour.
    Chairwoman Adams. OK. Thank you for that. Raising the 
Federal minimum wage is an issue of great importance to me and 
many of the Members of this Subcommittee. I appreciate your 
testifying and speaking to the importance of the issue, but Ms. 
Cacace, as you know, wage theft disproportionately impacts 
workers of color, including Black women.
    In your experience as a Labor Bureau Chief and as a Legal 
Aid attorney, can you share some of the ways in which wage 
theft impacts our most vulnerable communities?
    Ms. Cacace. Yes, of course. The low-wage workers work 
paycheck to paycheck, so they do not have savings in the bank 
if their employer does not pay them the wages they're owed for 
the last week. So, what happens is, as you mentioned in your 
opening statement, they're unable to pay their rent. They're 
unable to buy groceries, to pay their utility bills.
    And when I was at Legal Aid, we would screen every worker 
that came in for an employment law issue for any other issues 
and often they would already be in eviction proceedings. There 
would already be a scarcity of food in the house. There were so 
many fundamental issues that developed from not getting paid 
your minimum wages every single week and the stress that that 
puts on a person is enormous and people are really suffering. 
And so, any amendments to the Fair Labor Standards Act that 
will increase the ability to enforce the law will be an 
enormous benefit to these workers.
    Chairwoman Adams. Thank you very much. I've got a few 
minutes left. Mr. Swenson-Klatt, as a small business owner, 
what would you say in response to the argument that providing 
paystubs and pay records to employees is too burdensome?
    Mr. Swenson-Klatt. I am currently providing paystubs and 
all of the information required. I don't feel like it's a 
burden at all to me. It's a one-step click of a box and in this 
case I'm not afraid of it.
    Chairwoman Adams. OK. So, it doesn't appear to be a burden 
to you?
    Mr. Swenson-Klatt. Not at all.
    Chairwoman Adams. You've been doing it for how long?
    Mr. Swenson-Klatt. For 16 years.
    Chairwoman Adams. OK. Alright, well, you know it sounds 
like you have the model. Thank you very much. I have a little 
time left. I'm going to yield my time back, but I also want to 
now recognize Ranking Member for the purposes of questioning 
the witnesses. Rank Member Keller, you're recognized, sir.
    Mr. Keller. Thank you. Ms. McCutchen, thank you for being 
here today. Democrats have long been hostile to the independent 
contractor model, which has offered flexibility and well-paying 
opportunities to millions of Americans. Are you concerned that 
the burdensome requirements and excess penalties in 
Congresswoman DeLauro's bill would have a chilling effect on 
the ability of independent contractors to find work?
    Ms. McCutchen. Oh, absolutely, Representative Keller and 
thank you for asking. Now, you know there are over 10 million 
open jobs right now in this country and at the same time in 
2021 over 12 million workers joined the independent workforce. 
That's according to a study by NBO Partners. By the way 55 
percent of those are women and 67 percent are Gen Z and 
Millennials. The vast majority are choosing to do that 
voluntarily and are happier and healthier, according to this 
report.
    Now, employers need to tap into this workforce, 12 million 
versus 10 million open jobs, but uncertainty caused by DOL's 
illegal withdrawal of the Trump administration's IC regulations 
and then coupled with this massive increase in penalties means 
that no rational employer would actually want to engage the 
independent workforce which they really need to be able to do.
    Mr. Keller. Thank you. Also, Ms. McCutchen, the Fair Labor 
Standards Act covers roughly 143 million workers in the diverse 
businesses of all sizes that employ them. Are you concerned 
that the burdensome requirements contained in Congresswoman 
DeLauro's bill would unduly impact small businesses?
    Ms. McCutchen. Yes. You might as well call this bill the 
Bankrupt Small Business Act. Small businesses do not have in 
house attorneys. They can't afford outside employment law 
specialists. They don't have a professional HR. They primarily 
rely on the advice of their accountants, who I'm sorry to say, 
just do not know the FLSA sufficiently.
    Guidance for the small businesses is really hard to find on 
the Wage and Hour Division website. Sometimes I can't find it. 
Many small businesses, even when current law, need a payment 
plan to repay the back wages they owe and let alone the 
excessive penalties proposed here.
    I have seen small businesses bankrupted. There are 
perhaps--I don't know. Perhaps that's the goal. Under current 
leadership at DOL, targeting ICs, franchisees, guess what, 
bankrupt small businesses can't employ any workers at all.
    Mr. Keller. And this might be for, as you mentioned, the 
regulations are not clear and the guidance isn't always there, 
so a small business if they would make a mistake or something 
that would be detrimental to them because is that a lot what we 
find that businesses might have made a mistake, an error in 
trying to sift through the regulation?
    Ms. McCutchen. Yes. And that's the problem with the word 
'wage theft? in talking about this as if they're criminal 
activities. Good employers make mistakes because compliance is 
hard, and this bill does not distinguish between the good faith 
employer who makes an error versus the really bad actors that 
are out there.
    Mr. Keller. And we all want to hold people that are 
intentionally doing things wrong accountable. I think that's 
the minority of people. I mean I noticed in Mr. Swenson-Klatt's 
testimony he recognized that there's a complexity of payroll at 
times and can be baffling and frustrating and he still makes 
mistakes, according to his own testimony and I don't think 
they're going after the right thing.
    Mr. Klatt, I don't think you're doing those things on 
purpose, are you?
    Mr. Swenson-Klatt. Indeed not, and that's----
    Mr. Keller. That just proves the point that this 
legislation is going to be detrimental to people and the vast, 
vast majority of the employers in the United States want to do 
the right thing for their employees because their employees--I 
mentioned in my opening statement how I recognized that going 
across central and northeastern Pennsylvania, but when I was in 
high school, I worked in a restaurant. I worked in a nursing 
home washing pots and pans, and I worked in a factory right out 
of high school. And I tell you what, the people that owned 
those businesses back in the early and mid-eighties, guess 
what, the cared about the people that came to work every day. 
They wanted to do the right thing. So, I just think we, as 
policymakers, need to quit demonizing the people we represent 
that create jobs every day. Thank you and I yield back.
    Chairwoman Adams. Thank you very much, Ranking Member. I'll 
now recognize Mr. Takano. You're recognized for five minutes.
    Mr. Takano. Thank you kindly, Madam Chair. Ms. Cacace, what 
do you have to say about the allegation that this law, this 
proposed bill doesn't make a distinction between mistakes and 
willful wage theft?
    Ms. Cacace. Well, the liquidated damages they are more 
significant if it is somebody who has engaged in willful 
behavior, so it definitely does make a mistake. But I think the 
important thing to recognize is that this bill, the only 
additional substance that it's requiring of employers is to 
give a paystub. A paystub is the most basic thing that an 
employee should receive from their employer. They should know 
exactly how much they are getting paid. They should know for 
exactly how many hours their employer is paying them. That is 
not too much of a burden. It is not too complicated. And under 
the Fair Labor Standards Act, it's necessary because many 
states do not have that requirement, so this is an essential 
protection that is not going to burden anyone. And any small 
business who complies with that will have no--there's no 
penalties. Pay your workers the right amount and nobody is 
bankrupting your business.
    Mr. Takano. Thank you. Ms. McCutchen indicates that both 
Federal and State laws under the paystub disclosure 
requirements would, in her words, 'lead only to more complexity 
and confusion when employers try to figure out which law is 
more effective, but this doesn't make any sense to me. I think 
employers like Mr. Swenson-Klatt are smart enough to figure it 
out. Do you agree with Ms. McCutchen that a Federal paystub 
requirement, such as the one that you described, would lead to 
more complexity and confusion?
    Ms. Cacace. No. As I said, I think the paystub requirement 
is a very basic requirement. It is absolutely the bare minimum 
that you should give your employees. I do not think it will be 
more complicated for businesses and they should be able to 
figure it out.
    Mr. Takano. I'm astounded, quite frankly, Ms. Cacace, that 
there isn't a national requirement for paystub. I receive a 
paystub. I know the Ranking Member and every Member of this 
Committee, Republican or Democrat, receives a paystub. Every 
one of my employees receives a paystub. It's common sense that 
you need a paystub to figure out whether or not we're receiving 
the full amount that's due. We can actually go back and look at 
whether or not we're being paid minimum wage or whether we are 
being paid the overtime that we deserve and we can dispute with 
your supervisor.
    I think all this bill is doing is saying every American 
worker should get a paystub detailing their deductions. I think 
most Americans would say that this is common sense.
    Mr. Swenson-Klatt. Ms. McCutchen says that the Wage Theft 
Act propose increases to the penalties for violators of Fair 
Labor Standard Act are, 'very significant and even ridiculous.? 
I don't believe it's ridiculous to hold businesses accountable 
for stealing workers' wages. What do you think?
    Mr. Swenson-Klatt. I would find it a little more ridiculous 
to not charge someone for stealing. If I were to take my 
employees? wages after they took them out of the bank, I'm sure 
I would be in trouble, but if I do it before they get to put it 
in the bank, I should also be in trouble. So, I don't think 
it's ridiculous at all to take on the bad actors to let them 
know this is not the way to play business.
    Mr. Takano. Mr. Swenson-Klatt, you mentioned or alluded to 
the big national chains and some of their practices. How you 
have to compete against some of their bad acting. Can you tell 
us a little bit more about what you've experienced and what 
you've seen?
    Mr. Swenson-Klatt. Within our own city, it's pretty clear 
that the wage levels here are much higher than across the 
country. And so, when a company can use that difference to get 
the Federal minimum wage as the base, they're cutting wages for 
those staff who work in our city. I have to pay my staff in 
this city the full wage and that's a pretty discrepancy. They 
can certainly out compete me in a lot of ways by not having to 
do that.
    Mr. Takano. Madam Chair, I yield back, but I'm astounded 
that workers cannot recover the minimum wage that is set in 
Minneapolis that's higher than the Federal Government. They can 
only recover what the Federal Government has set at seven 
dollars and change. I find that astounding. I yield back.
    Chairwoman Adams. Thank you, sir. Thank you very much. I 
want to now yield to the gentlelady from North Carolina, 
Ranking Member of the Education Committee, Representative Foxx 
you're recognized.
    Ms. Foxx. Thank you, Madam Chairman. Ms. McCutchen, thank 
you very much for being here and for your very positive opening 
statement. The DeLauro bill creates a new requirement for DOL's 
Wage and Hour Division to enforce all employment contracts and 
collective bargaining agreements.
    Ms. McCutchen, based on your time leading the Division, are 
you concerned about the Division's ability to enforce this 
mandate and what implementation issues would the Division face?
    Ms. McCutchen. Yes, I'm very concerned. That type of 
contract claim is totally outside of the Wage and Hours 
experience and indeed the attorneys and solicitors' office too. 
They do not know contract law and certainly I would suggest 
that unions are the experts at enforcing collective bargaining 
agreements. So, you would have to develop, the agency would, 
new training and train every investigator and it's not an easy, 
new type of law. And all that time training new investigators, 
developing the training, every minute of that would be spent 
away from helping low-wage workers.
    And I'd also like to suggest employees who have contracts 
and union members under collective bargaining agreements are 
not the low-wage workers that we should be focusing on here, so 
it's just a bad idea all around. And believe me, they have 
remedies. It's called State contract laws and enforcing 
collective bargaining agreements.
    Ms. Foxx. Thank you. Ms. McCutchen, the legislation we're 
discussing today would force a business to comply with 
stringent disclosure requirements that would include 
unnecessary paperwork and costly analysis. How would these 
costly requirements subvert the legislation stated goal of 
benefiting workers?
    Ms. McCutchen. Well, first of all, let me correct the 
record. Every employee gets a paystub because every State does 
have a paystub requirement. Some of them require more and some 
less, but paystubs do exist, everybody gets them, but adding 
additional disclosures would mean additional time. It means 
working with our payroll provider to make sure that your 
paystubs actually comply with the law, that's more perspective. 
California versus Federal, for example.
    Under California law, you have to list total hours, not 
just regular and overtime. This law would just do regular and 
overtime, so it is confusing because this would add 51 laws 
that you have to comply with rather than just your local, 
State, or numbers of states. So, I would rather employers spend 
the time instead of trying to comply with unnecessary 
paperwork, which we frankly don't know whether it helps low-
wage workers, whether they even would read this additional 
paperwork. I'd rather spend the time and money and resources on 
enforcement of the bad actors for low-wage workers.
    Ms. Foxx. Thank you again. Ms. McCutchen, 5 years ago, a 
witness testifying before the Committee representing the 
Society of Human Resource Management discussed the challenges 
of complying with FLSA requirements in the modern workplace and 
how the FLSA has not kept pace with the 21st Century economy. 
Do you agree that employer compliance with the FLSA wage and 
hour requirement has become more complicated in light of 
technological developments? How has the COVID-19 pandemic 
accelerated this trend?
    Ms. McCutchen. Absolutely, I agree. The core requirements 
for FLSA, as you will recall, were enacted in 1938 and the 
workplace today is nothing like the workplace 80 years ago. 
Then we were primarily a blue-collar manufacturing economy and 
now today we are a service economy with more independent 
workers and COVID just accelerated all the changes, where we 
work, how we work, the types of jobs, the types of pay. It's 
more complicated to track hours. It's more complicated to 
calculate overtime. It's more complicated to figure out who is 
exempt from overtime and who is not.
    And yes, we need to help low-wage workers, but we need to 
focus on reforms that will do that, simple, clear rules and 
quick enforcement is what we need.
    Ms. Foxx. Thank you. Madame Chair, I yield back.
    Chairwoman Adams. Alright, thank you to the Ranking Member. 
So, I want to recognize Ms. Jayapal, Representative Jayapal, 
you are recognized.
    Ms. Jayapal. Thank you so much, Madam Chair. Wage theft is 
indefensible, especially, as corporations rake in record 
profits. Funding for the Wage and Hour Division to combat wage 
theft has essentially remained flat for the past decades thanks 
to corporate lobbying. In addition to beefing up Federal 
enforcement, we have to take an 'All of the Above? approach to 
protect workers' paychecks.
    One of the most effective recourses for workers is 
litigation. Between 2017 and 2020, class action lawsuits 
recovered more lost wages than Labor Department action and yet 
many employment contracts contain provisions that waive a 
worker's right to a day in court by subjecting them to 
mandatory arbitration and preventing them from bringing class 
action lawsuits.
    That's why I'm a proud co-sponsor of the Wage Theft 
Prevention and Wage Recovery Act, which bans these coercive 
practices against workers fighting to win their hard-earned 
wages.
    Mr. Esparza, thank you for sharing your story. I think it's 
too often that immigrant workers get overlooked and erased, 
even as they face very unique challenges. If you had been 
required to sign an employment agreement that mandated you to 
bring your wage claim in arbitration as an individual and pay 
out-of-pocket arbitration costs, do you believe that your wage 
claim would've been successful?
    Mr. Esparza. It would not be successful at all because, I 
mean, I don't have the resources to do it by myself. That's why 
the union supported me and thanks to them I was able to do this 
class action lawsuit. Without them, I wouldn't be able to.
    Ms. Jayapal. You wouldn't have been able to do it. It's 
just too expensive and you wouldn't have had the resources. On 
average, a worker experiencing minimum wage violations lose 
about $3,300 in 1 year, more than a month of rent in a city 
like Seattle, but a small sum compared to the cost of 
litigation.
    Ms. Cacace, would an individual, low-wage worker be able to 
easily find legal representation for such a claim?
    Ms. Cacace. No, definitely not. I mean before even being at 
Legal Aid I was in private practice, and it was very difficult 
for us to take claims of low-wage workers because the recover 
most significant to the workers was not great enough to warrant 
the resources put into the litigation and so the ability to 
bring collective and class actions is really essential so 
workers can have their rights vindicated and can receive the 
money that they're owed.
    And going to arbitration is not the answer. Arbitration is 
not as efficient as it is claimed to be. We had a recent case 
here in New York where the arbitration took over 3 years for a 
group of home health aides, so it's important that workers have 
the right to litigate in court as a group. Thank you.
    Ms. Jayapal. Let me followup on that because you were just 
starting to get at my next question, which is why do employers 
prefer settling wage theft disputes in arbitration rather than 
in the courts? Because if you look at the data, more than half 
of private sector non-union employees are subjected to this 
forced arbitration. So, what's in it for the employers?
    Ms. Cacace. So, many arbitration agreements say that a 
worker has to arbitrate individually, so, for instance, there 
is currently a collective and class action against Uber and 
Lyft in New York State brought by the Taxi Workers Alliance and 
that is claimed for thousands of workers.
    The companies have claimed that all of those workers are 
subject to individual arbitration, so thousands of individual 
arbitrations. It would be impossible to find representation to 
do that and would take decades to individually arbitrate each 
one of those claims, so it's more efficient to have class and 
group actions that can go into court.
    Ms. Jayapal. So, in a way, it's an effective way to quash 
many of these complaints from workers to be able to get what's 
fairly owed to them. Let me stick with you and say that the 
Wage Theft Prevention and Wage Recovery Act includes a 
provision that would automatically include qualifying workers 
in a class action lawsuit instead of requiring them to opt in. 
How will that impact the strength of class action cases and the 
Fair Labor Standards Act enforcement?
    Ms. Cacace. I think that makes sense because when workers 
often receive an opt in notice, they're afraid. They would be 
making themselves known. They could be currently still working 
for this employer and it's a difficult decision whether to opt 
in because of the fear of retaliation. So, if they don't have 
to take that affirmative step until after the case is over and 
there is going to be recovery, I think a lot more workers will 
get the compensation that they earned.
    Ms. Jayapal. Thank you so much. And Madam Chair, I'm proud 
that the House has passed the ending of Forced Arbitration of 
Sexual Assault and Sexual Harassment Act, my bill with Cheri 
Bustos, and that the Senate passed it and it got signed into 
law. I hope we can eliminate forced arbitration and provide 
limitations on class action and eliminate the limitations on 
class action with this bill. Thank you very much. I yield back.
    Chairwoman Adams. And thank you. I want to recognize now, 
Mrs. Miller-Meeks of Iowa. You have five minutes, ma'am.
    Mrs. Miller-Meeks. Thank you, Madame Chair and Ranking 
Member Keller and thank you to all of our witnesses for their 
important testimony.
    Ms. McCutchen, you had done an excellent job and thank you 
for appearing here in person, describing the onerous 
implementation and regulations around the FLSA and how 
difficult it is for a business that wants to comply and is 
paying a fair wage to comply with those regulations.
    The FLSA does not define the term 'joint employer.? 
congressional Democrats and the Biden administration support 
creating the broadest definition possible of joint employment 
and do have concerns about how broad joint employment 
definition would work with the DeLauro bill and would it 
significantly increase liability for employers and threaten the 
franchise business model.
    Ms. McCutchen. I think it would kill the franchise business 
model and also ruin many small businesses because they cannot 
afford the tripling and quadrupling of penalties that this bill 
would propose, especially, in a franchisee business. What 
company would have franchisees when they're going to be held 
responsible with these extreme penalties for every minor 
violation by every single franchisee who is a small business? 
Better just to have company stores where you can control the 
pay and the pay practices of the employees in the storefronts 
with our brand on it.
    So, the broader the joint--anti-joint employment is anti-
franchise and anti-small business.
    Mrs. Miller-Meeks. And I know that our small businesses in 
Iowa who are extremely concerned about this and they're paying, 
in many cases, well over $15 an hour. Your testimony discusses 
the complexity of the Fair Labor Standards Act and the value of 
streamlining requirements. During the Trump administration, DOL 
issued a final rule on workers classification as employees and 
independent contractors under FLSA. This rule emphasized the 
degree of workers control over their work and their great 
entrepreneurial opportunity for profit or loss. Does this rule 
provide greater certainty for workers and businesses?
    Ms. McCutchen. Absolutely. Before that there were no 
regulations. There were no clear standards at all. It was only 
informal guidance, which you had to be an expert to find on the 
Wage and Hour Division website. So, these were regulations. 
They were focusing on who controlled the work, which is the 
commonality in all the--sorry to say this--100 different 
Federal and State regulations and statutes on independent work.
    Now, of course, the Biden administration withdrew that 
rule. A Texas Court said that that was illegal, and it is back 
in force, but here's more confusion. It's not on the Wage and 
Hours Division's website. The Trump regulations that are in 
force today what we see on the website is a notice about the 
law, but not a link to the actual regulations and they have, 
instead, their Factsheet 13, which is a seven-factor test that 
was in place before the regulations. So, to help small 
businesses and franchisees, they need to put the Trump 
regulations back on their website and take off Factsheet 13.
    Mrs. Miller-Meeks. So, it sounds like that clarifying 
language needs to present and we need to stop practices where 
we know it's illegal, but we're going to continue to do it.
    In March of this year, a Federal court held that efforts by 
the Biden Labor Department to withdraw the Trump 
administration's final rule on independent contractors were 
invalid, to your point, and that the Trump rule, which became 
effective in March 2021 remains in effect today and I think you 
alluded to this. Do you know whether the Department is 
following the Trump administration work classification rule, 
and will they put it back on their website or is that an 
indication they're not following it?
    Ms. McCutchen. I don't know. I don't think anybody knows 
whether they're actually following the law, as they're required 
to do under the Texas District Court. I also don't know whether 
they're going to appeal that case, so we're in total disarray 
right now. My advice to employers is the rule is the Trump rule 
and that's the rule that you should insist DOL and in 
litigation be applied.
    Mrs. Miller-Meeks. Thank you so much for your testimony. 
Ms. Chair, I yield back my time.
    Chairwoman Adams. Thank you very much. Representative Omar, 
you are now recognized for five minutes, ma'am.
    Ms. Omar. Thank you, Madame Chairwoman. Thank you, Mr. 
Swenson-Klatt for joining us today. Can you please detail how 
illegal payroll practices from certain companies end up hurting 
businesses like yours and your employees?
    Mr. Swenson-Klatt. Thank you. It's been my experience that 
when I've made a mistake with any of my payroll issues, I get 
opportunity to learn. I've had great experience with the IRS in 
working through any issues. I haven't had any fines that I've 
needed to be afraid of. And when I hear about businesses that 
break rules willingly, make efforts to skirt the law in order 
to gain some competitive advantage, I feel like all the work 
I'm doing is kind of at a loss.
    It also just makes me feel like my consumers, my workers, 
my community feels devalued for their labor when they know 
businesses, on a large scale, can avoid paying a fair wage.
    Ms. Omar. Thank you. Democratic AG offices across the 
Nation have been working hard to protect workers' labor rights 
and make sure the economy is safe and sustainable for 
historically disenfranchised communities. And so, I first want 
to thank Ms. Cacace for fighting for working families in New 
York. You mentioned in your testimony that your office and 
State legislature enacted vital reforms to require universal 
payroll transparency and enforce tougher legal and mandatory 
repercussions for wage violations.
    In 2019, the Minnesota legislature passed similar worker 
protection which also authorized criminal penalties and 
increased civil fines for wage theft. That same year my good 
friend and predecessor, Attorney General Keith Ellison, 
established wage theft unit that is dedicated to advancing and 
protecting the rights of exploited workers.
    Over the past couple of years, our AG's office has won 
hundreds of thousands of dollars in payback unpaid overtime and 
other damages for workers in my District and across the State. 
Unfortunately, some of the most pervasive cases of wage theft 
in my State still occur in construction industries where almost 
one in five construction workers suffer some type of payroll 
fraud and misclassification.
    A very recent example of this happened last week where 
workers claimed wage theft for more than $100,000 by 
subcontractors at the Viking Lakes Development in Egan, 
Minnesota. It is clear that more DOL funding and additional 
Federal reforms are needed to assist our localities in 
protecting the most vulnerable workers. How do you think the 
Wage Theft Act aids in your legal work?
    Ms. Cacace. Thank you for your questions. So, as we're 
talking about the paystub requirements, I think it's important, 
not only so workers know each and every week what they are 
getting paid for and so they can address any discrepancy 
immediately, but if they need to litigate those records are 
really invaluable. So, we have seen cases in our office where, 
even though the minimum wage is $15 an hour, the workers are 
being paid $13 an hour and that's what it says right there on 
the paystub, so that just makes the case easier to litigate.
    And if there were even more penalties, I think rather than 
lead to more litigation, I think that leads that to less 
litigation, right? So, if you know that your paystub shows you 
did not pay correctly, you're going to be subjected to double 
or triple penalties. If you have a good lawyer on the 
employer's side, they're going to tell you to settle that case. 
Let's resolve this, let's start paying correctly, and then we 
won't face this again.
    One of the other things that's in the bill is also to 
codify the standard that if an employer doesn't keep records 
that then the employee's testimony is presumptively true about 
their hours and their wages. And it's really important to get 
that in the statute because I think that then employers will be 
on notice that, oh, it's good for me to give the paystub 
because then I'm doing something right. We deal with things 
immediately, if they happen. And they realize that if they 
don't what my worker comes in and testifies it's going to be 
very difficult for me to rebut that. So, I think a lot of the 
provisions will make it easier for employers to comply with the 
law and will make it more likely that there will be early 
settlements rather than long litigation.
    Chairwoman Adams. The Gentlelady's time has expired.
    Ms. Omar. Thank you.
    Chairwoman Adams. Alright, thank you very much. Mr. Good, 
you are now recognized, sir, five minutes.
    Mr. Good. Thank you, Madame Chairman. Thank you to Ranking 
Member for holding this hearing. I want to thank our witness 
who is here, Ms. McCutchen, for being with us in person. I 
suspect this will be a requirement of this and every other 
committee in a few months and I appreciate your courageous 
example of being here with us in person.
    As you know, though--as we all know, we're experiencing 
record inflation in the country thanks to the reckless and 
relentless spending sprees by this Administration. This is 
further exacerbated by the Democrat COVID lockdowns that have 
decimated small businesses, many of which will never recover. 
In fact, NFIB has reported that 25 percent of small businesses 
in my home State of Virginia have closed permanently, never to 
reopen again as a result of these Democrat lockdowns.
    This is even more tragic when you consider the fact that 
some 90 percent of Americans work for small businesses, so we 
know who ultimately this is impacted by. They're not going to 
make any wage without a job. But we should be working, I know 
you agree, to get the heavy, oppressive hand of government off 
the necks of working families and small businesses.
    As a matter of fact, tomorrow I plan to introduce my bill, 
the Small Business Before Bureaucrats Act, which would update 
the 60-year-old NLRB regulatory standards to reduce the number 
of businesses that are under the oppressive control of the 
NLRB. It would increase by tenfold the standard for when a 
business would have to qualify to be under that control.
    But back to the 40-year high inflation rate which we're all 
suffering under, which I believe is the No. 1 issue for most 
Americans today. In the State of the Union Address, this 
President made it clear that he blames business owners or seems 
to make that clear that he blames them. I don't know if he was 
dishonestly trying to deflect from his terrible record, his 
failed policies, or he simply after 50 years in government does 
not understand what it takes to run a business, to operate at a 
profit, when he said to businesses lower your costs, not 
recognizing that businesses every day try to do two things, 
increase revenue, reduce their costs so they can survive, meet 
their payroll, keep their doors open, and employ their 
employees.
    Congress should be looking, I think you agree, to empower 
job creators to survive this economic crisis. So, I ask you, 
what's the most important action or some of the most important 
actions that you believe that Congress could take to empower 
job creators and hopefully therefore bolster the wages or the 
opportunities for working Americans.
    Ms. McCutchen. Well, I think one of the most urgent things, 
just like your bill is going to be in NLRB, is exclude more 
small businesses from the FLSA coverage. It's 500,000 in annual 
business sales. It's been that way for decades and decades and 
decades. So, taking that out by ten times would be a help to 
get the Federal Government out of small businesses, but this 
bill would do the opposite effect, right?
    I mean, yes, this bill, even minor, unintentional 
violations the penalty is going to be $22,000 per violation per 
employee. Now, think about that. You have five employees, and 
you make a minor mistake on your paystubs. That's $100,000 in 
fines a week. That is going to bankrupt small businesses and it 
just can't happen in this economy.
    I will also say I was at a conference last week where 
hospitality employers the whole discussion was staffing, 
staffing, staffing. We cannot get employees. You've seen the 
'Help Wanted? signs on every store, on every restaurant. We 
need to simplify, simplify, simplify these rules so that 
employers can comply with them easily, pay the employees what 
they are owed now, not after 3 years of litigation.
    Mr. Good. Well said. I tell folks back home in the District 
this Democrat majority looks with contempt and distain at job 
creators, employers, business owners and believe that they seek 
to exploit their employees and they must have done that to 
become successful and to be an employer to begin with and 
continues to layer more and more consequence, punitive damages 
upon employers who are just trying to survive, just trying to 
pay their employees. Could you speak with the limited time that 
we have--you referenced the need for clear and simple Labor 
rules. What should Congress do to more simplify and eliminate 
some of those to help small business owners?
    Ms. McCutchen. Well, my written testimony actually has 10 
ideas for FLSA reform that would help do that. That includes, 
for example, a refocus on low-wage workers, that includes 
excluding high compensated workers from the coverage of the 
FLSA, make them exempt. It includes allowing businesses and 
employees to enter private waivers of claims so they can 
resolve issues quickly and privately without the danger of 
being sued again.
    I could just go on and on, but we just need the regular 
rates. I'm sorry for the time, but today to get staffing 
businesses have to give special benefits and special pay, like 
Dollywood, where I'm from in Eastern Tennessee, is giving full, 
free college educations to every full-time and part-time 
employee from Day One.
    Chairwoman Adams. That's time.
    Ms. McCutchen. Now, before the Trump administration's 
regulations on the regular rate that would've caused overtime 
liability.
    Chairwoman Adams. Ma'am. Ma'am.
    Ms. McCutchen. You can't give that without violating the 
FLSA.
    Chairwoman Adams. Ma'am, excuse me.
    Mr. Good. Thank you very much.
    Chairwoman Adams. We have to move on. You're out of time.
    Mr. Good. Thank you, Madame Chairman. I yield back.
    Chairwoman Adams. Thank you. The gentleman from New Jersey, 
Representative Norcross, you are recognized, sir, for five 
minutes.
    Mr. Norcross. Thank you, Madame Chairwoman, and for holding 
this incredibly important hearing. I know what it's like to be 
cheated out of wages. Unfortunately, when I was young man, I 
was a victim. And there is a difference between somebody making 
a mistake and what we're talking about today. And I will talk 
about this with one our witnesses to get his feedback.
    I have never heard in my entire career of somebody going 
into bankruptcy, being prosecuted criminally because of an 
accidental mistake. The ones that we are talking about today 
are intentional, are large, and hurt real people. I understand 
contractors are the partners of workers. We're in this 
together, but there's a distinction between a good contractor 
who does the right thing and might a mistake and what we're 
going to hear here in a few minutes.
    Mr. Esparza let's talk about the bad actors and in your 
case, the wage thefts. You joined with 200 plus other workers 
in a class action suit for $618,000. That's not an accidental 
mistake. Let's be clear. You were working for the employer. 
Talk to me about what kind of paystubs, earning statements that 
you received. How was it that you were either able to document 
or difficult to document the wage theft?
    Mr. Esparza. Well, the form of payment from this person 
that I was working for, she was just giving me a personal check 
with a certain amount of money for the hours that I worked. 
There was no overtime paid after 40 hours. I used to work from 
Monday to Sunday and still get paid the same amount. And for 
Saturday/Sunday, I mean, I was keeping a record of everything 
that I was doing because, like I said on my testimony, the 
union was educating me, and they told me to start saving those 
as proof.
    Mr. Norcross. So, when you got a personal check, it was 
just made out to you, the amount, and the signature by the 
employer?
    Mr. Esparza. Yes, that was it. There was no paystub or 
anything, so it was just an amount.
    Mr. Norcross. That happened week after week or was that a 
one-time occurrence?
    Mr. Esparza. It was week after week.
    Mr. Norcross. So, this isn't an accident by any stretch of 
the imagination and that's what I'm trying to suggest here to 
my colleagues. There's a huge difference trying to put little 
guys out of business. No, we're not. They're the ones who drive 
our country. The ones we worked with. That's not an accident, 
folks. Oh, gee, I forgot my paystub today. OK, that was once. 
How many weeks did that happen on your job?
    Mr. Esparza. I want to say around probably 10 weeks 
straight.
    Mr. Norcross. Yes, that's a pretty big accident. So, when 
we look at what's going on, if you had a standard, what most 
people around the country have, is how many hours you worked, 
the amount of pay, that would've been very helpful in terms of 
making sure you got the right pay. Now, was it just you on the 
job that got that or were there other workers?
    Mr. Esparza. No, there were multiple workers there.
    Mr. Norcross. Yes. And unfortunately, in the construction 
industry, these are some of the things that I ran into as a 
young apprentice trying to make my way through the industry 
like you, Mr. Francisco. It is tough. And all we're doing is 
checks and balances. Nobody wants to get beat up here. We all 
want to have a shot at life, but we want a fair playing field. 
And the fact of the matter is when they hold the hammer over 
some of the employees' heads like we're hearing here today, 
that's not a fair, that's not a level playing field.
    We all should be focused on getting rid of the bad actors 
and making sure that everybody plays by the same rules. 
Contractors don't go out of business for making a little 
mistake. They do not get criminally charged accidentally. It's 
bad actors. And I want to thank you for sharing your story and 
I yield back the balance of my time.
    Chairwoman Adams. Thank you. Thank you very much, Mr. 
Norcross. I want to recognize Ms. Steel. You're recognized for 
five minutes.
    Ms. Steel. Madame Chairwoman, thank you very much. 
Independent contractors and entrepreneurs and small businesses 
in my home State of California already understand the 
devastating effects California burdensome laws have had on 
their ability to provide for their families. There are more 
than two million independent contractors and entrepreneurs 
working across California. And now, more than ever, we should 
be supporting our workforce and providing clear guidelines to 
give workers more flexibility and independence to find the 
right job for them.
    Those who chose to become an independent contractor want 
and enjoy the independence and flexibility and control that is 
provided to them. Recently, the Court blocked the Biden 
administration's attempt to limit clarity and guidance on the 
classification of contractors under the Fair Labor Standard 
Act.
    Having said that, Ms. McCutchen--if I pronounce it wrong, 
sorry--with your background and knowledge of your Labor 
Department and recent Court rulings, how is current Department 
actually observing the independent contractor worker 
classification rule and do you agree there should be more 
certainty for workers and employers?
    Ms. McCutchen. Thank you for that question. Right now, 
there's actually no published regulations on independent 
contractor status and that's a particularly tough situation 
because under Federal and State law there are actually over 100 
different regulations and statutes which have independent 
contractor standards in them. So, the Trump administration did 
the right thing in establishing a clear, simple rule that 
employers could follow.
    Right now, what we have at DOL is no rules at all, so it's 
litigation. It's setting the standards through litigation 
rather than legislation and that is pretty tough, especially, 
for small businesses to figure out what is the law that they're 
supposed to be complying with.
    Ms. Steel. Thank you for the answer. I'm very supportive of 
local small business models and empowering minority 
entrepreneurs to start their own business. And let me ask you 
one more question. With bad definitions of independent 
contractor classifications and joint employer, would this hurt 
those who want to open their small business under the franchise 
model at this point?
    Ms. McCutchen. Well, it makes it very difficult, right? 
Most businesses, in my experience, want to comply. They want to 
do the right thing, but they're not compliance machines. When 
you're opening a small business, especially, today you have 
enough problems just trying to open a small business, let alone 
having to try to figure out all these laws. And with this bill, 
and the 22,000 per employee per violation for unintentional 
violations that's ruinous for small businesses. And so, I just 
don't know how, even if I was a small business owner, I would 
be scared today in trying to open a new business because I 
don't know how you survive this type of bill.
    Ms. Steel. Especially, in California, it's much worse than 
any other states in the Nation.
    So, thank you very much, Madame Chair, and I yield back.
    Chairwoman Adams. Thank you very much. I want to recognize 
Representative Stevens.
    Ms. Stevens. Yes, great.
    Chairwoman Adams. You've got five minutes, ma'am.
    Ms. Stevens. Yes. Sounds good. I'm ready to rock. I'm 
surprised that all of five minutes of questioning wouldn't be 
used by any Member of Congress the egregious topic at hand 
known as wage theft, preventing wage theft and requiring stolen 
wages, particularly, in a time of rising costs. Particularly, 
in a time of inflation, I think we should be helping the 
American worker achieve and recuperate and gain all of the 
wages that they are owed. I really want to salute Mr. Esparza 
for being here and for your testimony and for your effort.
    Certainly, as a labor-aligned Member of Congress hailing 
from the great State of Michigan. I represent Oakland County in 
the Congress, working alongside many building trade unions. I 
do want to express that we have our own challenge in Michigan 
as it pertains to prevailing wage, right, and making sure that 
prevailing wage continues to be the utilization and the method 
of how contracts go, going forward. And yet, it was rolled back 
in Michigan, and I know our Governor, Governor Whitmer, has 
been working to combat that.
    I know that here in the Congress I am very dedicated to 
this effort and I'm proud to be an original co-sponsor the Wage 
Theft Prevention and Wage Recovery Act, a responsible solution 
to deter wage theft and help workers seek justice. I'm going to 
be clear. If you're not on board with this, you're part of the 
problem. OK, I'm a daughter of small business owners. I've seen 
my dad go through it with his landscape company and he pays his 
workers for good day work. So, Ms. McCutchen says that 
increased penalties for violating the Fair Labor Standards Act 
could harm small businesses. Please remind us how many people 
do you employ?
    Mr. Swenson-Klatt. I employ 20. I have 20 on staff.
    Ms. Stevens. So, you consider yourself a small business?
    Mr. Swenson-Klatt. I am a small business.
    Ms. Stevens. And do you think businesses of any size that 
play by the rules would have anything to worry about with the 
increased penalties in the Wage Theft Act?
    Mr. Swenson-Klatt. I feel that I am in compliance with what 
is here. I am doing my best to match all of the requirements 
and I have no fears of what's going forward.
    Mr. Stevens. Right. And we know as a result of an ongoing 
pandemic, an unbelievable and catastrophic war started by 
Russia in Ukraine prices are rising, people are going to the 
grocery store, they're paying through the roof for the brisket, 
the roast, the this and that. So, could you please highlight, 
Mr. Swenson-Klatt, some of the technical assistance and 
resources available to small businesses that they can use to be 
sure that they're compliant with wage and hour laws?
    Mr. Swenson-Klatt. Now, within Minneapolis, we feel we're 
pretty fortunate. I have business associations. I have the 
city. I have the small business team. We have been able to work 
with our state-support community development corporations. All 
of them provide technical assistance and mentors. I, myself, 
have served as a mentor for new and emerging entrepreneurs in 
my own neighborhood. It's available. We put it to use online 
and in person.
    Ms. Stevens. And it's exciting. That's great. So, Ms. 
Cacace, thank you so much for being here and for your role at 
the New York State Office of the Attorney General.
    Considering that there are no penalties for recordkeeping 
violations and no requirements to provide employees with 
paystubs, employers currently have little legal incentive to 
maintain accurate records. How important are paystubs and 
payroll records for pursuing wage theft cases?
    Ms. Cacace. Thank you for the question. And yes, I think, 
as I said earlier, it's essential, right? It's essential for 
workers to know what they're getting paid to be able to deal 
with it immediately if there is a problem and then it's 
essential for the lawyers if there needs to be a wage theft 
claim. So, if you are litigating a claim, that is your first 
piece of evidence. Is there a paystub, what does it say, and is 
it accurate? And if an employer is correctly paying their 
employees, it is their best defense. So, it essential for 
everyone and will make things much easier.
    Ms. Stevens. Yes. Excellent. Well, with those 10 seconds 
remaining, the near full utilization of my five minutes. Thank 
you, Madame Chair and I yield back.
    Chairwoman Adams. And thank you very much. I want to yield 
now to Representative Stefanik. You are recognized, ma'am, five 
minutes. Is Representative Stefanik on? Is Representative 
Stefanik on? She is not. OK, Representative Scott are you on 
the platform?
    Mr. Scott. I'm not on the platform. I'm in the Hearing 
Room.
    Chairwoman Adams. OK, Representative Scott, you are 
recognized. I want to recognize the gentleman of the Full 
Committee in Labor. You are recognized, sir. You have five 
minutes.
    Mr. Scott. Thank you. Thank you. Thank all the witnesses 
for being with us. And I want to start with Ms. Cacace.
    We've heard a lot about technical errors. How do we know 
that wage theft is actually taking place, not as just technical 
errors, but intentional acts?
    Ms. Cacace. Yes. Thank you for the question. I think it's 
by the volume and I think that somebody recently just asked 
about this. If it is I forgot to give a paystub 1 day, that's 
very different from I didn't pay wages to thousands of 
employees for years on end. So, in the New York State Attorney 
General's Office, we recently had a case that we resolved with 
two large agencies that provide home health aides and there are 
two components to the settlement. One is over $5 million, and 
the other is over $6 million. So, this is for thousands of 
workers who were routinely not paid for all of the hours that 
they worked.
    Mr. Scott. We've heard a lot about errors that are made by 
people who don't understand the rules and that kind of thing. 
How often do you see these errors benefiting the employees?
    Ms. Cacace. I don't think in the 20 years I have been in 
this field have ever seen one of those, but people come to me 
when they have a problem.
    Mr. Scott. Now, you mentioned recovery and mentioned the 
minimum wage under FLSA. If you were promised $20 an hour and 
actually got paid $10 an hour, would you have recovery 
available to you under the FLSA because you've been paid more 
than the Federal minimum wage?
    Ms. Cacace. No, currently, you would not.
    Mr. Scott. You would not have a claim at all under the 
FLSA.
    Ms. Cacace. That's correct.
    Mr. Scott. You would have a claim under contract, I'd 
imagine.
    Ms. Cacace. You could have a breach of contract under State 
law, but as I said earlier, that does not come with attorneys' 
fees and it does not come with any liquidated damages, so it 
may be very difficult for you to find a lawyer to take that 
case.
    Mr. Scott. And if it goes to arbitration, who pays the 
arbitration fees?
    Ms. Cacace. It is usually split between the employee and 
the employer.
    Mr. Scott. So, the employee would have to pay part of the 
arbitration fees.
    Ms. Cacace. Yes.
    Mr. Scott. And if the claim is not a huge claim, you just 
ripped of a couple hundred dollars.
    Ms. Cacace. It's generally not worth it.
    Mr. Scott. It's just not worth it. Now, are you familiar 
with the pending legislation?
    Ms. Cacace. Yes.
    Mr. Scott. We've heard comments that the penalties are 20 
some thousand dollars up and then $100,000. Is that not to 
exceed those numbers?
    Ms. Cacace. Yes, of course. And the Department of Labor 
would have discretion if it was a small mistake not to award 
those high-level penalties.
    Mr. Scott. And could they take into consideration the size 
of the business?
    Ms. Cacace. Yes.
    Mr. Scott. And how egregious the situation was?
    Ms. Cacace. Yes.
    Mr. Scott. Thank you. Ms. McCutchen, you indicated that all 
states have paystub requirements; is that right?
    Ms. McCutchen. (Inaudible.)
    Mr. Scott. Well, we can agree at least most states.
    Ms. McCutchen. Yes.
    Mr. Scott. And if you're operating in a lot of different 
states, you'd have a lot of different compliance. Would it make 
sense to have one Federal law on paystubs to preempt all of 
those different laws?
    Ms. McCutchen. I think there's different viewpoints of 
that. I, myself, have sort of dreamed about writing a uniform 
code of employment law, but I think to do that would take a lot 
of study, right, because you shouldn't automatically adopt what 
California and New York are doing, which are very burdensome 
and haven't had a great affect in those states. So, you would 
want to study every single law and figure out what's the middle 
ground.
    Mr. Scott. Well, you would only have to learn one system. 
You wouldn't have to learn each and every one if you have in a 
number of different states.
    Ms. McCutchen. Right. Correct.
    Mr. Scott. You also talked about tolling the statute of 
limitations during the investigation.
    Ms. McCutchen. Yes.
    Mr. Scott. And you think that the statute of limitations 
should not be tolled.
    Ms. McCutchen. That is because I am afraid that if you toll 
the statute of limitations there would be no incentive for the 
Wage and Hour Division to complete their investigations more 
quickly and it is speed that low-wage workers need. They need 
to get their pay.
    Mr. Scott. Of course, on the other side, the statute of 
limitations may expire while the investigation is going on and 
the person waiting for action just lost his case.
    Ms. McCutchen. Every day, right, is a new back wages, so it 
very rarely happens that you lose all claims. You still will 
have two or 3 years of back wages to collect. And I think this 
Committee, in particular, can conduct great oversight of the 
Wage and Hour Division to make sure they don't do that. They 
shouldn't do that.
    Mr. Scott. Thank you, Madame Chair. I yield back.
    Chairwoman Adams. Thank you. Thank you, Chairman Scott, and 
appreciate you being here. And I want to just thank all of the 
witnesses. I don't think there are any other Members present, 
at least that's the information I have. So, let me thank all of 
the witnesses for their participation today.
    Members of the Subcommittee may have some additional 
questions for you, and we ask the witnesses to please respond 
to those questions in writing. The hearing record will be held 
open for 14 days in order to receive those responses. I do want 
to remind my colleagues that pursuant to Committee practice, 
witness questions for the hearing record must be submitted to 
the Majority Committee staff or Committee Clerk within 7 days. 
The questions submitted must address the subject matter of the 
hearing.
    I want to recognize the distinguished Ranking Member now 
for a closing statement.
    Mr. Keller. Thank you. As we've heard throughout today's 
hearing, Republicans and Democrats share a common goal in 
ensuring that workers are paid in full for their work as 
required under the Fair Labor Standards Act.
    Unfortunately, Democrats are advancing a partisan proposal 
which will fail to meet that goal. Instead, the DeLauro bill 
will add to the challenges job creators and American workers 
are already facing in our struggling economy. The bill's gotcha 
still treatment of unintentional or technical violations of the 
FLSA, combined with its disproportionate penalties will have a 
chilling impact on employers.
    In addition, the DeLauro bill drastically expands the 
authority of the Department of Labor's Wage and Hour Division, 
requiring the agency to enforce all pay-related contracts and 
collective bargaining agreements, interfering with its core 
mission of enforcing Federal wage and hour requirements.
    Workers and employers both benefit from clear and concise 
rules, but this bill is a step in the wrong direction. A supply 
chain crisis, raising inflation are already wreaking havoc on 
our economy. This legislation, if signed into law, could be the 
nail in the coffin for many struggling job creators.
    The DeLauro bill is counterproductive and will harm 
America's job creators and workers. These economic engines 
deserve better, and I urge my colleagues across the aisle to 
promote bipartisan solutions that ensure collaboration among 
the Department of Labor, employers, and workers.
    I'd like to thank our witnesses again for participating in 
today's hearing and I yield back.
    Chairwoman Adams. Thank you, Ranking Member Keller. I want 
to thank our witnesses for being here today. Today our 
witnesses underscored the pervasive and the severe consequences 
that wage theft has on our workforce. Everyday workers across 
the Nation keep our communities running and the economy 
growing. Unfortunately, unscrupulous employers stiff their 
workers out of the wages they have earned.
    Again, if we want to raise people out of poverty, if we 
want to ensure that Americans have the opportunity to enter the 
middle class, and if we believe that workers deserve a decent 
wage for an honest day's work, then we must enact a meaningful 
deterrent to wage theft and help workers seek justice. To do 
so, Congress must pass the Wage Theft Prevention and Wage 
Recovery Act, and finally ensure that wage theft is no longer 
profitable for dishonest employers.
    So, thank you again to our witnesses for your time and your 
testimony. If there's no further business, without objection, 
the Subcommittee stand adjourned.
    [Additional submissions by Ranking Member Keller follow:]  
    
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    [Whereupon, at 12:02 p.m., the Subcommittee meeting was 
adjourned.]

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