Lawmakers Elevate HRPA RSU Issue, Modern Benefits in FLSA Overhaul

At this week’s hearing of the House Subcommittee on Workforce Protections on Fair Labor Standards Act (FLSA) reform, Committee Chair Tim Walberg (R-MI) emphasized the need for greater flexibility in employer-sponsored benefits. 

• Rep. Walberg highlighted the need to make it easier for employers to grant Restricted Stock Units (RSUs) to hourly wage workers, a key issue championed by the Association.

Why it matters: The hearing focused on modernizing the (FLSA) to better align with today’s workforce. As subcommittee Chair Ryan Mackenzie (PA-07) noted, “We can all agree that after 87 years, the FLSA requires a much-needed update.”

• In advance of the hearing, HRPA submitted a letter to Chairman Walberg urging an amendment to the FLSA to exclude RSUs from the “regular rate of pay” for overtime calculations.

What’s next: HRPA will collaborate with lawmakers to introduce a bipartisan bill to exclude RSUs from overtime calculations. Specifically, the bill would: 

• Help lower wage workers build wealth by allowing employees to participate in equity markets, contribute to long-term personal savings, and achieve both short- and long-term financial goals. 

• Close the loophole on the treatment of one equity vehicle over another (e.g., stock options), providing for consistent treatment of all equity types and preventing plaintiff attorneys from penalizing employers that choose to design consistent compensation programs applicable to both exempt and non-exempt workers. 

• In addition, several companies in the high-tech industry are facing class-action lawsuits for not including restricted stock awards (RSUs) when calculating the overtime pay rate for hourly employees. Addressing this issue legislatively would offer legal clarity and reduce the risk for employers while supporting equitable compensation practices.

Additional advocacy: The Association also sent a letter in support of two bills recognizing the importance of independent contractors. 

• The Modern Worker Empowerment Act amends federal labor laws to establish a clear and predictable test for determining whether a worker is classified as an independent contractor or an employee. 

• The Modern Worker Security Act establishes a federal safe harbor that allows companies to voluntarily provide portable benefits to independent contractors without the risk of federal agencies reclassifying those workers as employees.

The bottom line: Since its enactment in 1938, the FLSA has seen limited updates despite major shifts in the workforce. The current focus on modernization may yield long-awaited improvements for employers on both the classification of independent contractors and the treatment of RSUs.