As currently drafted, Section 1 of the bill would amend Section of the General Laws in Chapter entitled Minimum Wages to read:

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1 Rhode Island Society for Human Resource Management State Chapter Statement of Cindy Butler, SPHR, SHRM-CP On behalf of the Rhode Island Society for Human Resource Management State Chapter ( Submitted to the Rhode Island House Labor Committee H 5596: Minimum Wages (Exempt Employees for Overtime Purposes) March 30, 2017 Chairperson Craven, First-Vice Chairperson Messier, Second-Vice Chairperson Casey and Members of the Committee - my name is Cindy Butler and I currently serve in the volunteer position of Government Affairs Director for the Rhode Island Society for Human Resource Management (RI SHRM) i, an affiliate of the Society for Human Resource Management SHRM (SHRM), the world s largest HR membership organization devoted to human resource management representing more than 290,000 members in over 165 countries. I am grateful for the opportunity to provide testimony to the House Labor Committee on H 5596, which is currently pending before the General Assembly. I testify today on behalf of the Rhode Island Chapter of SHRM, a 100% volunteer organization. Representing more than 750 individual members in our State, the Society s mission is to serve the needs of human resource professionals, many of whom are charged by their employers to administer compensation programs. I come to you today with more than 30 years of human resources experience, servicing clients in the business and non-profit sector, primarily in Rhode Island and Massachusetts. I often audit compensation data and develop and implement compensation programs for clients. Given the practical experience RI SHRM and its members possess, we believe we are uniquely positioned to provide advice on this legislation that is fair to both employees and employers. As currently drafted, Section 1 of the bill would amend Section of the General Laws in Chapter entitled Minimum Wages to read: (a)(4) Any employee employed in a bona fide executive, administrative, or professional 5 capacity, as defined by the Fair Labor Standards Act of 1938, 29 U.S.C. 201 et seq., 6 compensated for services on a salary basis of not less than one thousand thirty-six dollars ($1,036) per week, and beginning on January 1, 2020, and every year thereafter, on an updated salary basis of not less than the fortieth percentile of weekly earnings of 9 full-time nonhourly

2 workers in the Northeast Census Region in the second quarter of the year 10 preceding the update as published by the Bureau of Labor Statistics. RI SHRM respectfully opposes H 5596, in its current form, for a variety of reasons. I. While Some Increase in the current RI Salary Threshold Is Justified, the Proposed Increase Is Too High, Too Fast and Will Have a Significant Negative Impact on Both Employers and Employees. Amending the salary level for exempt employees under Rhode Island law from the current salary of $200 per week to $1,036 ($53,872 per year) is an increase that is too high, too fast. If approved at its current level, this amendment would dramatically increase the salary level for exempt employees almost two-fold higher than the current federal requirement of $23,660 per year (or $455 per week) and over five times the current salary level in Rhode Island, as well significantly higher than all of our neighboring states. In addition, we do not support the proposal to automatically adjust salary levels under the rule. I m sure the Committee is well aware of the recent effort by the then-obama administration to increase the federal salary level for exempt employees under the Fair Labor Standards Act overtime requirements to a new level of $47,476 per year. That rulemaking, which was set to become effective on December 1 of last year, has been suspended due to a preliminary injunction being granted in federal court in November on a challenge that the U.S. Department of Labor (DOL) exceeded its authority in raising the salary threshold. While we agree that it is again time to update the salary level threshold for exempt, the proposed increases in both the federal and especially Rhode Island increase is too high and will present significant challenges for many employers and employees in our state. This is particularly true among nonprofit organizations. In submitting its comments on the proposed salary increase under the Obama administration, SHRM shared feedback from a member who had expressed concerns about how DOL s proposal would reduce and diminish the services provided to at-risk youth by her organization. Given the increase embodied in H 5596 is nearly $7,500 per year higher than that proposed by the Obama administration, her comments should ring true for all RI employers, particularly in the not-forprofit area: At our nonprofit organization, we prioritize a continuity of care model that ensures that the at-risk youth population receives services and care from the same therapists and supervisors. Months and sometimes years go into building that trust and bond, and this can t be replicated by swapping in another professional to avoid exceeding 40 hours on the part of the primary professional. Under this overtime

3 proposal, continuity of care would be undermined by limiting the ability of therapists to effectively respond to clients clinical needs, as well as their school and work schedules. Furthermore, currently many exempt employees are available during nontraditional hours and overnight on a regular basis to provide crisis services or supervisory response to crisis as needed. In our residential setting, managers commonly work longer hours and shift their schedules to ensure their presence during anticipated difficult admissions and discharges or, again, if client behaviors are elevated and unsafe, in order to provide direction and support to staff members. Limiting managers availability to their units risks jeopardizing client care and staff safety and violates state regulation. If the overtime regulations were to be implemented, my organization would likely have to decrease services because, as noted earlier, we would not be able to afford the additional overtime pay. In addition, we would be forced to reduce our client base and unfortunately underserve our county and family stakeholders. Rather than adjust employees to this higher salary level so that they will remain exempt under the law, far more employees are likely to experience negative consequences of reclassification, including reduced workplace flexibility, loss of professional status, and reduced access to opportunity to gain needed experience. Most employees will not reap any reward from this proposal in the form of additional compensation or time off. Rather, they will most likely to be reclassified to a non-exempt status. Reclassification of employees to non-exempt status can have several significant adverse consequences. In its 2015 Overtime Regulations Survey, SHRM asked members how likely certain scenarios would be if DOL s revised regulation led to an increase in eligibility for overtime pay. In that survey, the most significant result identified was the implementation of restrictive overtime policies leading to potential reduction in employees working overtime, with 70 percent of respondents indicating that would be a likely outcome. Decreased workplace flexibility and autonomy was the next most significant change, with 67 percent responding that such a change would be likely. Loss of Workplace Flexibility According to the 2014 National Study of Employers, a report released by the Families and Work Institute (FWI) and SHRM, human resource professionals believe the most effective way to attract and retain the best people is to provide workplace flexibility. 1 Moreover, a large majority 1 Challenges Facing Organizations and HR in the Next 10 Years (2010). Society for Human Resource Management.

4 of employees 87 percent report that the flexibility offered would be extremely or very important in deciding whether to take a new job. 2 The report indicates that from 2008 to 2014 workplace flexibility for full-time employees increased. For example, more employers are offering some employees the option to telecommute occasionally, with 67 percent providing this option in 2014 compared to 50 percent in The restriction in flexibility is one reason why many employees view reclassification as akin to a demotion, causing a decline in morale. Being classified as exempt promotes a sense of responsibility and ownership in the company as well as the ability to control when and where work gets done. Many employees have worked to attain that exempt classification through advanced training, continuing education and years of experience. If forced to reclassify, employees will believe their sense of status in an organization as a true professional has been removed. II. The Minimum Salary Threshold Should Not Be Automatically Increased. In addition to significantly increasing the proposed salary level, the proposed bill also seeks to establish a mechanism for automatically updating the standard salary threshold for Rhode Island. This proposed automatic annual update to the salary threshold is a significant change because when the DOL had considered similar adjustments in the past to the federal salary threshold, such automatic adjustments were consistently rejected as a method of updating the salary level and a similar approach in the final overtime rulemaking by the Obama administration was extremely contentious for employers. Automatic Salary Adjustments Pose Serious Compliance Challenges First, our members have expressed significant concern that automatic increases in the salary threshold could pose real practical challenges to effective compensation practices. Regularly mandated inflationary increases would significantly impair the ability of employers to manage merit increases for employees at or near the salary threshold. After several years of mandated salary level increases, the gap in pay between more senior and less senior, more experienced and less experienced, or more productive and less productive employees will become smaller over time, creating significant morale problems and other management challenges. In addition, we are concerned that automatic adjustments to the salary threshold will not account for the ways in which the workforce changes over time. 2 National Study of the Changing Workforce (2008). Families and Work Institute.

5 Conclusion RI SHRM believes that the proposed salary increase embodied in H 5596 is too high. While we would support a more reasonable increase, we have serious concerns about the adverse impact such a change would have upon both employers and employees in our state. In addition, we do not support automatic updates of the salary level test and believe that such changes should only be done through subsequent legislation and in conjunction with federal changes. Thank you for your consideration of these comments. Respectfully Submitted, Cynthia J. Butler, Director of Government Affairs Rhode Island Society for Human Resource Management State Chapter (RI SHRM) President Butler & Associates Human Resources Consulting 14 Mast Street Jamestown, RI Cbutler579@aol.com