SHRM Asks Congress to Modernize the Fair Labor Standards Act

SHRM testified before the House Subcommittee on Workforce Protections on March 25 to call for modernization of the Fair Labor Standards Act of 1938 (FLSA). 

To reach the U.S. workforce’s full potential, SHRM believes in turning three essential keys — modernizing the FLSA, closing the workforce participation gap, and shaping the future of work — all of which will open doors that lead to innovation, economic growth, and a more dynamic, competitive workforce, testified Paige Boughan, M.S., SHRM-SCP, a senior vice president and director of human resources. She testified in her capacity as legislative director for the Maryland SHRM State Council.

Clarity, consistency, and compliance are needed, Boughan noted in her oral testimony, including clarity of the definition of who is an employee versus an independent contractor and who is qualified for overtime.

“The world has undergone significant changes since the FLSA was first passed and since Congress last made significant changes to the law,” she said. “It has not been amended to account for significant differences in the way workers work or the kinds of work they perform.”

The U.S. Department of Labor’s frequent proposing and publishing of new regulatory interpretations, followed by lawsuits challenging their legality, creates uncertainty for workers, organizations, and HR professionals, Boughan said in her written testimony. “Businesses of all sizes need certainty, and the best way to achieve that certainty is through legislation that creates the necessary framework for us all to operate under,” she said.

Modernize Workplace Laws

A rule currently being challenged in multiple lawsuits outlines who is considered an employee or an independent contractor under the FLSA.

The Modern Worker Empowerment Act, currently before the House, “provides a great launching point and opens the door to an important conversation” about who is an employee, Boughan said in her written testimony. “It also addresses an important need to offer clarity, certainty, and consistency in structuring worker relationships, without granting favor to any one type of designation.” An important step would be to align the FLSA and the National Labor Relations Act on this threshold issue to help reduce confusion among organizations striving to comply, she added.

Another issue Boughan called attention to is white-collar exempt status for overtime pay. The determination of white-collar exempt status relies on three equally important tests: the salary basis, salary threshold, and duties tests. The duties test deserves attention, she testified.

For example, to qualify for overtime under the administrative classification:

• The employee’s primary duty must be the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.
• The employee’s primary duty includes the exercise of discretion and independent judgment with matters of significance.

The second criterion often creates confusion, partly due to employees’ perceptions about their roles and partly due to the back-and-forth between agencies and the courts, Boughan noted. “[S]hifting agency policies, driven by different administrations, can create industry uncertainty, forcing organizations to adapt quickly,” she testified.

Clarifications are also needed, Boughan said in written testimony, for the computer employee and the outside sales employee exemptions.

“When classification frameworks become outdated or are overly rigid, the legal language no longer reflects how positions are actually structured in the modern workplace,” she testified.

The term “compensable time” also needs to be modernized, Boughan said. “Under the FLSA, the ‘workday’ is defined as the period between an employee’s first and last principal activities, whether or not they are working throughout,” she said. “This ‘continuous workday’ doctrine does not account for today’s reality, where employees have greater flexibility in when and where they work.”

Remote work, flexible work, and organizations letting employees work nontraditional hours “have transformed the concept of a workday in ways unimaginable when the FLSA was enacted,” Boughan said.

In 2024, SHRM research found that 70% of employers recognized flexible work arrangements as “very important” or extremely important” for a third consecutive year. In addition, the availability of flextime during core business hours has remained relatively stable, with 53% of organizations offering it in 2024, down 1 percentage point from 54% in 2023, but up 3 percentage points from 50% in 2020.

Close the Workforce Participation Gap

The U.S. has a talent problem — not due to a lack of talent, but because workers are not being connected with the skills needed for today’s workforce, Boughan said further in written testimony. But upskilling opportunities can unintentionally impact employment status, deterring businesses from investing in workforce development, she noted.

“Beyond classification issues, outdated legal definitions may also restrict benefits for employees,” Boughan said.

One solution proposed in the previous Congress would be to exclude employer-funded dependent care from an employee’s regular rate of pay, which would encourage companies to offer these benefits, Boughan noted.

“This is of particular interest, as SHRM research indicates that at least 80% of working caregivers anticipate the care they provide to be long-term. And looking forward, within the next five years, 14% anticipate taking on new or additional adult care responsibilities, and 18% anticipate taking on new or additional elder care responsibilities,” she testified. “The law should promote — not hinder — expansive benefit offerings.”

Future of Work

Preparing for the future is essential for organizations to remain competitive, Boughan noted. “Employers must stay informed about how these changes will affect their workplaces, while workers need to understand the skills they must acquire to remain competitive in an evolving job market,” she testified.

However, employers and workers face challenges in their long-term success when the rules governing fundamental concepts related to work are constantly rewritten. “The lack of clarity hinders both employer and worker decision-making, ultimately stifling economic growth, job creation, and the ability of businesses and workers alike to thrive in the modern economy,” she said.

Rep. Tim Walberg, R-Mich., asked Boughan what effect the changing rules on who is exempt from overtime have had on her employer.

“Some employees prefer exemption,” she said, noting that it can afford them flexibility and benefits. Plus, moving employees from exempt to nonexempt status can burden the timekeeping system.

And employees feel like they’ve been downgraded when they lose exempt status, Walberg said.

“I’d agree with that,” Boughan replied.