The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“WHITE COLLAR REFORM ACT” mentioning the U.S. Dept of Labor was published in the Extensions of Remarks section on pages E1789-E1790 on Sept. 28, 1996.
The publication is reproduced in full below:
WHITE COLLAR REFORM ACT
______
HON. THOMAS E. PETRI
of wisconsin
in the house of representatives
Friday, September 27, 1996
Mr. PETRI. Mr. Speaker, today I am introducing a bill to clarify and modernize the white collar exemption in the Fair Labor Standards Act. I hope this bill will receive close attention in the next Congress.
The Fair Labor Standards Act enjoys a unique status among Federal labor laws. The rights it creates, including the minimum wage and the 40-hour workweek, have become as ingrained as constitutional guarantees. Any attempt to tinker with the FLSA is immediately perceived as an attack on these basic rights or at least is so portrayed by political opponents.
It is now becoming increasingly apparent, however, that more than a half century of hands-off politics has left a law that is seriously out of step with the times. No one is suggesting that the FLSA's fundamental precepts should be rethought in any way. Rather, it is the way the law achieves these ends that needs improvement.
Two relatively recent developments have brought the issue to a head. First, disgruntled employees have begun to use the FLSA's salary basis test as a tool--not for logically distinguishing exempt from non-exempt employees--but rather for seeking revenge. The problem would not be so bad if it were limited to a few individual overtime awards; but it is not. Instead, seizing upon a single two-word phrase in the regulations, employees have argued that everyone theoretically ``subject to a technically flawed payroll policy is entitled to the same windfall--
regardless of whether the flaw affected any particular employee's pay. Employers, of course, rarely issue separate payroll policies for different groups of exempt employees; thus, every employee, up to the top levels of the corporate boardroom, becomes an equally viable candidate for unexpected largesse. The potential overtime liability is as enormous as it is irrational.
Second, and just as disturbing, is the increasing arbitrariness of FLSA duties tests. Concepts such as discretion and independent judgment have always been difficult to define, but these problems seemed manageable in the era of assembly lines and hierarchical management structures. Today, however, technology has diversified job duties, service-based employment has proliferated, and even old-line manufacturing operations have moved to team management concepts. In this environment, employers can no longer rely on cookie-cutter paradigms in making duties judgments. Employers often have to guess--
and too many are guessing wrong. Even the courts struggle to achieve consistency, reaching irreconcilable results in cases involving the growing ranks of quasi-professionals such as accountants, engineers, insurance professionals, and journalists.
The legislation I am introducing addresses these problems in three separate ways. First, my proposal will restore original understandings of the salary basis test by requiring the Department of Labor, and the courts, to focus on actual pay reductions rather than speculation as to potential deductions under some nebulous policy. The FLSA still will protect exempt employees from inappropriate practices, since regulatory provisions denying exempt status for actual salary deductions would remain unchanged. My legislation, however, will prevent employees from using a policy's theoretical application to extort huge overtime windfalls for company-wide classes of highly-paid employees who never could have imagined themselves as non-exempt laborers.
Second, my proposal will address perhaps the most confusing and indefensible requirement among the FLSA's duties tests: the attempted distinction between production and management workers. Under current regulations, for example, an administrative assistant might meet exemption standards simply by opening a management executive's mail and deciding who should handle it, because such a job is directly related to management policies or general business operations of (the) employer or (the) employer's customers. On the other hand, employees with far more sophisticated, challenging, and lucrative jobs may be nonexempt simply because they work on production tasks. The regulations reasonably expect an administrative employee to exercise a certain level of discretion and independent judgment, and my legislation would not alter that requirement. There is no reason to think, however, that a production or management label on the object of an employee's discretion or judgment has anything to do with that employee's professionalism, or the need for FLSA protections. Therefore, my bill eliminates the requirement that the employee's exercise of discretion and judgment be directly related to management policies or general business operations of (the) employer or (the) employer's customers.
Third, and perhaps most significantly, my legislation would directly reverse the recent trend toward questionable overtime awards for highly compensated employees by creating an income threshold exempting the highest stratum of the workforce from FLSA scrutiny. There is no reason that the FLSA, which was passed to protect laborers who toil in factory and on farm helpless victims of their own bargaining weakness should ever be interpreted to protect workers making high five-figure or six figure incomes. Yet, without considering the policy implications, courts are reaching such conclusions on an alarmingly frequent basis.
A worker drawing a large salary must perform some valuable job duty for an employer. Why, then, should that employer have to satisfy a complex set of artificial and archaie duties tests to prove that the employee is valuable? A worker drawing a large salary also must possess considerable bargaining leverage. Why then, should employers be forced, regardless of the employee's needs or preferences, to calculate paychecks only in the inflexible manner dictated by government salary basis regulations?
The FLSA, in nearly six decades, has strayed from its laudable goal of protecting the poorest and weakest laborers from workplace abuses. The Department of Labor, and the courts, need to refocus their efforts in this direction. My proposal would go a long way--both by directly exempting highly paid employees and by making long overdue adjustments to the salary and duties tests--toward providing this new direction. I ask that a copy of the bill be printed in the Record at this point.
A BILL
To amend the Fair Labor Standards Act of 1938 to prescribe a salary base for an exemption of an employee from the wage requirements of such Act and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND REFERENCE.
(A) Short Title.--This Act may be cited as the ``White Collar Reform Act''.
(b) Reference.--Whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provisions, the reference shall be considered to be made to a section or other provision of the Fair Labor Standards Act of 1938.
SEC. 2. SALARY EXEMPTION.
(a) Exemption Amendment.--Section 13(a)(1) (29 U.S.C. 213(a)(1)) is amended by adding after ``(1)'' the following:
``any employee whose rate of annual compensation is not less than $40,000 or''.
(b) Definition.--Section 13 (29 U.S.C. 213) is amended by adding at the end the following:
``(k) For purposes of subsection (a)(1)--
``(1) the term `annual compensation' includes all amounts reportable to the Internal Revenue Service for Federal income tax purposes by an employee's employer;
``(2) an employee's rate of annual compensation shall be determined without regard to the number of hours worked by the employee and shall be prorated for any employee who does not work for an employer during an entire calendar year to reflect annual compensation which would have been earned if the employee had been compensated at the same rate for the entire calendar year; and
``(3) reasonably anticipated bonuses, commissions, or other elements of annual compensation not paid on an evenly distributed bases throughout the year may be prorated over an entire calendar year or over the portion of the calendar year worked by the employee for the employer in determining the employee's rate of annual compensation.''.
SEC. 3. ADMINISTRATIVE EXEMPTION EMPLOYEE.
Section 13 (29 U.S.C. 213), as amended by section 2(b), is amended by adding at the end the following:
``(l) The relationship between an employee's job duties and the management policies or general business operations of the employee's employer or employer's customers shall not be considered in determining whether such employee is employed in a bona fide administrative capacity for purposes of subsection (a)(1).''.
SEC. 4. EFFECT OF CERTAIN SALARY PRACTICES.
Section 13 (29 U.S.C. 213), as amended by section 3, is amended by adding at the end the following:
``(m)(1) The fact that an employee is subject to deductions from pay for absences of less than a full day or of less than a full pay period shall not be considered in determining whether such employee is an exempt employee described in subsection (a)(1) when there has not been an actual reduction in pay. For purposes of this paragraph, the term `actual reduction in pay' does not include any reduction in accrued pay leave or any other practice that does not reduce the amount of the employee's pay for a period.
``(2) The payment of overtime compensation or other additions to compensation based on hours worked in excess of a daily or weekly amount shall not be considered in determining if the employee qualifies for the exemption under subsection (a)(1).''.
SEC. 5. EFFECTIVE DATE.
The amendments made by this Act shall take effect on the date of the enactment of this Act and shall apply to any civil action involving section 13(a)(1) of the Fair Labor Standards Act of 1938 which has not reached final judgment before such date.
____________________
