Department of Labor
Wage and Hour Division Needs Improved Investigative Processes and Ability to Suspend Statute of Limitations to Better Protect Workers Against Wage Theft Gao ID: GAO-09-629 June 23, 2009The mission of the Department of Labor's Wage and Hour Division (WHD) includes enforcing provisions of the Fair Labor Standards Act (FLSA), which is designed to ensure that millions of workers are paid the federal minimum wage and overtime. Conducting investigations based on worker complaints is WHD's priority. On March 25, 2009, GAO testified on its findings related to (1) undercover tests of WHD's complaint intake process, (2) case study examples of inadequate WHD responses to wage complaints, and (3) the effectiveness of WHD's complaint intake process, conciliations (phone calls to the employer), and other investigative tools. To test WHD's complaint intake process, GAO posed as complainants and employers in 10 different scenarios. To provide case study examples and assess effectiveness of complaint investigations, GAO used data mining and statistical sampling of closed case data for fiscal year 2007. This report summarizes the testimony (GAO-09-458T) and provides recommendations.
GAO found that WHD frequently responded inadequately to complaints, leaving low wage workers vulnerable to wage theft and other labor law violations. Posing as fictitious complainants, GAO filed 10 common complaints with WHD district offices across the country. These tests found that WHD staff deterred fictitious callers from filing a complaint by encouraging employees to resolve the issue themselves, directing most calls to voicemail, not returning phone calls to both employees and employers, and providing conflicting or misleading information about how to file a complaint. An assessment of complaint intake processes would help ensure that WHD staff provide appropriate customer service. To hear clips of undercover calls illustrating poor customer service, see http://www.gao.gov/media/video/gao-09-458t/. According to WHD policies, investigators should enter all reasonable complaints into WHD's database. However, even though all of GAO's fictitious complaints alleged violations of the laws that WHD enforces, 5 of 10 complaints were not recorded in WHD's database. In addition, WHD policy in one region instructs staff not to record the investigative work done on small cases in which the employer refuses to pay, making WHD appear better at resolving these cases than it is. Reassessing its processes for recording complaints would help WHD ensure that all case information is available. Similar to the 10 fictitious scenarios, GAO identified 20 cases affecting at least 1,160 real employees whose complaints were inadequately investigated by WHD. Five of the cases were closed based on false information provided by the employer that could have been verified by a search of public records, such as bankruptcy records, but WHD investigators do not have access to publicly available or subscription databases. In another case, the employer claimed that the company did not meet the income requirement to be covered under federal law but did not provide documentary evidence. WHD investigators do not have access to income information collected by the Internal Revenue Service and were unable to verify the employer's claim. Obtaining more research tools and implementing information sharing processes with other agencies would assist WHD in verifying employer-provided information. GAO's overall assessment found ineffective complaint intake and investigation processes. WHD officials often told GAO that WHD lacks the resources to conduct an investigation of every complaint, allowing employers in some small cases to avoid paying back wages simply by refusing to pay. GAO found that WHD's investigations were often delayed by months or years. Monitoring the extent to which WHD staff are able to handle the volume of complaints would provide assurance that WHD has sufficient resources available. Under FLSA, the statute of limitations is 2 years from the date of the violation, meaning that every day that WHD delays an investigation, the complainant's risk of becoming ineligible to collect back wages increases. However, in several offices, backlogs prevent investigators from initiating cases within 6 months. Suspending the statute of limitations during a WHD investigation would prevent employees from losing back wages due to delays.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-629, Department of Labor: Wage and Hour Division Needs Improved Investigative Processes and Ability to Suspend Statute of Limitations to Better Protect Workers Against Wage Theft
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Report to the Committee on Education and Labor, House of
Representatives:
United States Government Accountability Office:
GAO:
June 2009:
Department Of Labor:
Wage and Hour Division Needs Improved Investigative Processes and
Ability to Suspend Statute of Limitations to Better Protect Workers
Against Wage Theft:
GAO-09-629:
GAO Highlights:
Highlights of GAO-09-629, a report to the Committee on Education and
Labor, House of Representatives.
Why GAO Did This Study:
The mission of the Department of Labor‘s Wage and Hour Division (WHD)
includes enforcing provisions of the Fair Labor Standards Act (FLSA),
which is designed to ensure that millions of workers are paid the
federal minimum wage and overtime. Conducting investigations based on
worker complaints is WHD‘s priority. On March 25, 2009, GAO testified
on its findings related to (1) undercover tests of WHD‘s complaint
intake process, (2) case study examples of inadequate WHD responses to
wage complaints, and (3) the effectiveness of WHD‘s complaint intake
process, conciliations (phone calls to the employer), and other
investigative tools. To test WHD‘s complaint intake process, GAO posed
as complainants and employers in 10 different scenarios. To provide
case study examples and assess effectiveness of complaint
investigations, GAO used data mining and statistical sampling of closed
case data for fiscal year 2007. This report summarizes the testimony
(GAO-09-458T) and provides recommendations.
What GAO Found:
GAO found that WHD frequently responded inadequately to complaints,
leaving low wage workers vulnerable to wage theft and other labor law
violations. Posing as fictitious complainants, GAO filed 10 common
complaints with WHD district offices across the country. These tests
found that WHD staff deterred fictitious callers from filing a
complaint by encouraging employees to resolve the issue themselves,
directing most calls to voice mail, not returning phone calls to both
employees and employers, and providing conflicting or misleading
information about how to file a complaint. An assessment of complaint
intake processes would help ensure that WHD staff provide appropriate
customer service. To hear clips of undercover calls illustrating poor
customer service, see [hyperlink, http://www.gao.gov/media/video/gao-09-
458t/]. According to WHD policies, investigators should enter all
reasonable complaints into WHD‘s database. However, even though all of
GAO‘s fictitious complaints alleged violations of the laws that WHD
enforces, 5 of 10 complaints were not recorded in WHD‘s database. In
addition, WHD policy in one region instructs staff not to record the
investigative work done on small cases in which the employer refuses to
pay, making WHD appear better at resolving these cases than it is.
Reassessing its processes for recording complaints would help WHD
ensure that all case information is available.
Similar to the 10 fictitious scenarios, GAO identified 20 cases
affecting at least 1,160 real employees whose complaints were
inadequately investigated by WHD. Five of the cases were closed based
on false information provided by the employer that could have been
verified by a search of public records, such as bankruptcy records, but
WHD investigators do not have access to publicly available or
subscription databases. In another case, the employer claimed that the
company did not meet the income requirement to be covered under federal
law but did not provide documentary evidence. WHD investigators do not
have access to income information collected by the Internal Revenue
Service and were unable to verify the employer‘s claim. Obtaining more
research tools and implementing information sharing processes with
other agencies would assist WHD in verifying employer-provided
information.
GAO‘s overall assessment found ineffective complaint intake and
investigation processes. WHD officials often told GAO that WHD lacks
the resources to conduct an investigation of every complaint, allowing
employers in some small cases to avoid paying back wages simply by
refusing to pay. GAO found that WHD‘s investigations were often delayed
by months or years. Monitoring the extent to which WHD staff are able
to handle the volume of complaints would provide assurance that WHD has
sufficient resources available. Under FLSA, the statute of limitations
is 2 years from the date of the violation, meaning that every day that
WHD delays an investigation, the complainant‘s risk of becoming
ineligible to collect back wages increases. However, in several
offices, backlogs prevent investigators from initiating cases within 6
months. Suspending the statute of limitations during a WHD
investigation would prevent employees from losing back wages due to
delays.
What GAO Recommends:
Congress should consider authorizing suspension of the statute of
limitations while an investigation by WHD is ongoing. GAO also
recommends that Labor reassess its complaint intake and resolution
processes; explore new investigative tools and interagency
partnerships; and monitor its ability to handle its workload. WHD
agreed with GAO's recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-09-629] or key
components. For more information, contact Gregory D. Kutz at (202) 512-
6722 or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Undercover Tests Reveal Inadequate Investigations and Poor Complaint
Intake Process:
Case Studies Show That WHD Inadequately Investigated Complaints:
WHD's Complaint Intake Process, Conciliations, and Other Investigative
Tools Do Not Provide Assurance of a Timely and Thorough Response to
Wage Theft Complaints:
Conclusions:
Matter for Congressional Consideration:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Testimony on Flaws in Wage and Hour Division's Complaint
Intake and Investigative Processes:
Appendix II: Comments from the Department of Labor:
Appendix II: IGAO Contacts and Staff Acknowledgments:
Abbreviations:
DBRA: Davis-Bacon and Related Acts:
FLSA: Fair Labor Standards Act:
FMLA: Family and Medical Leave Act:
IRS: Internal Revenue Service:
MSPA: Migrant and Seasonal Agricultural Worker Protection Act:
PACER: Public Access to Court Electronic Records:
WHD: Wage and Hour Division:
WHISARD: Wage and Hour Investigative Support and Reporting Database:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
June 23, 2009:
The Honorable George Miller:
Chairman:
Committee on Education and Labor:
House of Representatives:
Dear Mr. Chairman:
On March 25, 2009 we testified before the committee on findings related
to our investigation of the Department of Labor's (Labor) Wage and Hour
Division (WHD) processes for investigating and resolving labor
complaints.[Footnote 1] As we previously reported, over 100 million
workers are covered under labor laws enforced by WHD, including the
Fair Labor Standards Act (FLSA), the Migrant and Seasonal Agricultural
Worker Protection Act, the Family and Medical Leave Act, Davis-Bacon
and related acts, and other federal labor laws. By law, WHD
investigators and technicians[Footnote 2] enforce labor laws governing
issues such as minimum wage, overtime pay, child labor, and family
medical leave. Conducting investigations based on complaints is WHD's
first priority.
WHD investigators can take actions ranging from making phone calls to
the complainant's employer (known as conciliations) to taking other,
more resource-intensive actions such as interviewing the employer and
related witnesses, reviewing employer payroll records, and requesting
copies of self audits[Footnote 3] conducted by the employer.
Conciliations are generally limited to a single, minor violation, such
as a missed paycheck or an issue affecting a single worker. A
conciliation is used to resolve a complaint quickly and with minimal
resources on the part of WHD. Investigative work for conciliations is
generally limited to a telephone conversation in which the WHD
investigator explains the specific complaint against the employer,
describes applicable laws, and requests that the employer comply with
the law and pay any back wages due. In investigations, when WHD
determines that violations have occurred and computes back wages owed
to workers, it can assess back wages to be paid to the employees and
can impose monetary penalties against employers with repeated or
willful violations. Our testimony had findings related to (1)
undercover testing of WHD's complaint intake and conciliation
processes, (2) case study examples of inadequate WHD responses to
complaints, and (3) the effectiveness of WHD's complaint intake
process, conciliations, and other investigative tools. This report
summarizes our testimony, which is reprinted in appendix I, and offers
a matter for congressional consideration and makes specific
recommendations to Labor for corrective actions.
To test the effectiveness of WHD's complaint intake process and
conciliations, undercover GAO investigators posed both as complainants
and employers. Using 10 fictitious scenarios including minimum wage,
last paycheck, and overtime violations, investigators called WHD
offices in Alabama, California, Florida, Maryland, and Texas posing as
complainants. These field offices handled 13 percent of all cases
investigated by WHD in fiscal year 2007. When WHD investigators
attempted to follow up on the complaints, different undercover
investigators posed as the employers and followed a variety of scripted
scenarios to test how WHD investigators would respond. For more
information, refer to [hyperlink,
http://www.gao.gov/media/video/gao-09-458t/].
To identify case studies of inadequate investigations conducted in
response to actual employees' allegations of wage theft, we obtained
Labor's Wage and Hour Investigative Support and Reporting Database
(WHISARD) and data-mined for closed cases in which it took WHD more
than one year to complete an investigation, an employer could not be
located, or the case was dropped when an employer refused to pay. We
analyzed WHD's WHISARD database and determined it was sufficiently
reliable for purposes of our audit and investigative work. We also
obtained and analyzed WHD case files, interviewed WHD officials, and
reviewed publicly available data to gather additional information about
these cases.
To determine the effectiveness of WHD's complaint intake process,
conciliations, and other investigative tools, we used the results of
our undercover tests, case studies, interviews, and discussions of the
processes with management, and two statistical samples. We selected a
random statistical sample of 115 cases from 10,855 conciliations and
115 cases from 21,468 non-conciliations recorded by WHD in WHISARD that
were concluded between October 1, 2006, and September 30, 2007. We
obtained and reviewed WHD's case files for the selected cases and
performed tests to determine whether the investigations conducted were
adequate. We subsequently determined through our interviews that the
population of conciliations sampled was substantially incomplete.
Therefore, we were only able to project sample results to conciliations
that WHD chose to enter into its database rather than the entire
population of conciliations. See appendix I for more information on our
methodology. In addition, we reviewed relevant laws and policies and
conducted interviews with agency officials.
We conducted our forensic audit and related investigations from July
2008 through May 2009. We conducted our audit work in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. We conducted our investigative work in
accordance with the standards prescribed by the Council of the
Inspectors General on Integrity and Efficiency.
Undercover Tests Reveal Inadequate Investigations and Poor Complaint
Intake Process:
In our testimony, we stated that the results of our undercover tests
illustrated flaws in WHD's responses to wage theft complaints,
including delays in investigating complaints, failure to use all
available enforcement tools, failure to follow up on employers who
agreed to pay, an ineffective complaint intake process, and complaints
not recorded in the WHD database. WHD successfully investigated 1 of
our 10 fictitious cases, correctly identifying and investigating a
business that had multiple complaints filed against it by our
fictitious complainants.
Our undercover tests revealed that WHD's complaint intake process is
time-consuming and confusing, potentially discouraging complainants
from filing a complaint. Of the 115 phone calls we made directly to WHD
field offices, 87 (76 percent) went directly to voice mail. While some
offices have a policy of screening complainant calls using , other
offices have staff who answer the phone, but may not able to respond to
all incoming calls. In one case, WHD failed to respond to seven
messages from our fictitious complainant, including four messages left
in a single week. In other cases, WHD delayed over 2 weeks in
responding to phone calls or failed to return phone calls from one of
our fictitious employers. One of our complainants received conflicting
information about how to file a complaint from two investigators in the
same office, and one investigator provided misinformation about the
statute of limitations in minimum wage cases. In one case, a WHD
investigator lied to our undercover investigator about confirming the
fictitious businesses' sales volume with the Internal Revenue Service
(IRS), and did not investigate our complaint any further. WHD
management told us that their investigators do not have access to IRS
databases, and WHD does not have the legal authority to obtain
information about a business from IRS without the owner's consent. WHD
would be able to check employer-provided information against IRS
records if the business owner signed an IRS consent form, however, WHD
managers told us that they were unaware of this form and that
investigators in the field do not use it. To hear selected audio clips
of undercover calls illustrating poor customer service to our
fictitious callers, refer to [hyperlink,
http://www.gao.gov/media/video/gao-09-458t/].
Although all of our fictitious complaints alleged violations of laws
that WHD enforces, 5 of our 10 complaints were not recorded in WHD's
database. These complaints were filed with four different field offices
and included three complaints in which WHD performed no investigative
work and two complaints in which WHD failed to record the investigative
work performed. According to WHD policies, investigators should enter
reasonable complaints into WHD's database and either handle them
immediately as conciliations or refer them to management for possible
investigation. However, several of our undercover complaints were not
recorded in the database, even after the employee had spoken to an
investigator or filed a written complaint. In one of these cases, WHD
failed to investigate a child labor complaint alleging that underage
children were operating hazardous machinery and working during school
hours, and did not record the complaint in its database.[Footnote 4]
The number of complaints that are not entered into WHD's database is
unknown, but this problem is potentially significant.
Case Studies Show That WHD Inadequately Investigated Complaints:
Similar to our 10 fictitious scenarios, in our testimony we identified
20 cases affecting at least 1,160 workers whose employers were
inadequately investigated by WHD. We performed data mining on WHD's
database to identify 20 inadequate cases closed during fiscal year
2007. For several of these cases, WHD (1) did not respond to a
complainant for over a year, (2) did not verify information provided by
the employer, (3) did not fully investigate businesses with repeat
violations, and (4) dropped cases because the employer did not return
telephone calls. Five of the cases we investigated were closed based on
unverified information provided by the employer. In each case, the
information could have been verified by a search of public records,
such as bankruptcy records, but the case files contain no evidence that
the investigators attempted to perform these searches. WHD officials
told us that investigators rely on internet searches to collect
information about employers and generally do not have access to other
publicly available or subscription databases. Examples include:
* In November 2005, WHD received a complaint alleging that a boarding
school in Montana was not paying its employees proper overtime. Over 9
months after the complaint was received, the case was assigned to an
investigator and conducted as an over the phone self-audit because,
according to the investigator, WHD did not have the resources to
conduct an on-site investigation. The employer agreed to pay over
$200,000 in back wages to 93 employees, but WHD was subsequently unable
to make contact with the business for over 5 months. In June 2007, one
week before the 2-year statute of limitations on the entire back wage
amount was to expire, the employer agreed to pay $1,000 of the $10,800
in wages due for which the statute of limitations had not yet expired.
The investigator refused to accept the $1,000, and WHD recorded the
back wages computed as over $10,800 rather than $200,000, greatly
understating the true amount owed to employees. WHD determined that the
firm had begun paying overtime correctly based on statements made by
the employer but did not verify the statements through document review.
No further investigative action was taken and the complainant was
informed of the outcome of the case.
* In another case, the complainant alleged that the company employed 15-
year-old children, failed to pay its employees minimum wage, and did
not properly report income to IRS. The employer claimed that the
company did not meet the income requirement to be covered under federal
labor law but did not provide documentary evidence. When the employer
failed to return WHD's telephone calls or attend a conference with the
investigator, WHD concluded the case.
WHD's Complaint Intake Process, Conciliations, and Other Investigative
Tools Do Not Provide Assurance of a Timely and Thorough Response to
Wage Theft Complaints:
WHD's complaint intake processes, conciliations, and other
investigative tools are ineffective and often prevent WHD from
responding to wage theft complaints in a timely and thorough manner,
leaving thousands of low wage workers vulnerable to wage theft.
As discussed above, our undercover tests showed that some WHD staff
deterred callers from filing a complaint by encouraging employees to
resolve the issue themselves, directing most calls to voice mail, not
returning phone calls to both employees and employers, accepting only
written complaints at some offices, and providing conflicting or
misleading information about how to file a complaint. We also found
that WHD does not have a consistent process for documenting and
tracking complaints, resulting in situations where WHD investigators
lose track of the complaints they have received.
WHD's conciliation process is ineffective because in many cases, if the
employer does not immediately agree to pay, WHD does not investigate
complaints further or compel payment. When an employer refuses to pay,
investigators may recommend that the case be elevated to a full
investigation, but several WHD District Directors and field staff told
us WHD lacks the resources to conduct an investigation of every
complaint and focuses resources on investigating complaints affecting
large numbers of employees or resulting in large dollar amounts of back
wage collections. WHD investigators are allowed to close conciliations
when the employer denies the allegations, and WHD policy does not
require that investigators review employer records in conciliations. In
one case study, the employee stated that he thought the business was
going bankrupt. As a result, WHD closed the case; however, we used a
publicly available online database, Public Access to Court Electronic
Records, to determine that the employer had never filed for bankruptcy.
WHD management told us that the agency does not provide training on how
to use public document searches and investigators do not have access to
databases containing this information. In addition, WHD's poor record-
keeping makes WHD appear better at resolving conciliations than it
actually is. For example, WHD's southeast region, which handled 57
percent of conciliations recorded by WHD in fiscal year 2007, has a
policy of not recording investigative work performed on unsuccessful
conciliations in the database. WHD staff told us that if employers do
not agree to pay back wages, cannot be located, or do not answer the
telephone, the conciliation work performed will not be recorded in the
database,[Footnote 5] making it appear as though these offices are able
to resolve nearly all conciliations successfully. Inflated conciliation
success rates are problematic for WHD management, which uses this
information to determine the effectiveness of WHD's investigative
efforts. Without information on the outcomes of failed conciliations,
WHD cannot identify employers showing a pattern of violations.
Finally, we found WHD's processes for handling investigations and other
non-conciliations were frequently ineffective because of significant
delays. For example, 5.2 percent of the investigations in our
statistical sample were not initiated until over 6 months after the
complaint was received, and 6.6 percent took more than one year to
complete.[Footnote 6] See page 26 of appendix I for more information on
the methodology of our sample. Timely completion of investigations by
WHD is important because the statute of limitations for recovery of
wages under the FLSA is 2 years from the date of the employer's failure
to pay the correct wages.[Footnote 7] FLSA, unlike some other laws,
does not permit the suspension of the statute of limitations during a
federal investigation.[Footnote 8] Specifically, this means that every
day that WHD delays an investigation, the complainant's risk of
becoming ineligible to collect back wages increases. Labor has not
sought additional authority to suspend the statute of limitations
during an investigation, yet in several district offices, a large
backlog prevents investigators from initiating cases within 6 months.
One office we visited has a backlog of 7 to 8 months, while another
office has a backlog of 13 months. Additionally, our analysis of WHD's
database shows that one district office did not initiate an
investigation of 12 percent of complaints until over one year after the
complaint was received, including a child labor complaint affecting
over 50 minors. Once complaints were recorded in WHD's database and
assigned as a case to an investigator, they were often adequately
investigated. One example of a successful investigation involved a
complaint alleging that a firm was not paying proper overtime. The case
was assigned to an investigator the same day it was filed in April
2007. The WHD investigator reviewed payroll records to determine that
the firm owed the complainant back wages. The case was concluded within
3 months when the investigator obtained a copy of the complainant's
cashed check, proving that he had been paid his gross back wages of
$184.
In response to our testimony, the Secretary of Labor announced on March
25, 2009, that WHD would hire an additional 250 investigators to
"reinvigorate the work of this important agency, which has suffered a
loss of experienced personnel over the last several years."
Conclusions:
Our work clearly shows that Labor has left thousands of actual victims
of wage theft who sought federal government assistance with nowhere to
turn. Our work has shown that when WHD adequately investigates and
follows through on cases it is often successful. However, far too often
many of America's most vulnerable workers find themselves dealing with
an agency concerned about resource limitations, with ineffective
processes, without certain tools necessary to perform effective
investigations, and unable to address all allegations of wage theft and
other labor law violations within the 2-year statute of limitations.
While an influx of new staff may help address some of these problems,
without a careful assessment of WHD's workload and processes,
unscrupulous employers will continue taking advantage of our country's
low wage workers.
Matter for Congressional Consideration:
Our work documented several cases in which the employees' right to file
a private lawsuit was constrained by WHD's delays, resulting in
hundreds of thousands of dollars of identified wage theft going
uncollected. Therefore, Congress may wish to consider authorizing
suspension of the statute of limitations while an investigation by WHD
is ongoing.
Recommendations for Executive Action:
We recommend that the Secretary of Labor direct the Administrator of
WHD to take the following five actions to improve processes for
recording and responding to wage theft complaints:
* The Administrator should reassess current policies and processes and
revise them as appropriate to better ensure that relevant case
information is recorded in WHD's database, including all complaints
alleging applicable labor law violations regardless of whether the
complaint was substantiated, and all investigative work performed on
conciliations, regardless of whether the conciliation was successfully
resolved.
* To provide assurance that WHD personnel interacting with complainants
and employers appropriately capture and investigate allegations of
labor law violations, and provide appropriate customer service, the
Administrator should conduct an assessment of WHD's complaint intake
and resolution processes and revise them as appropriate.
* To improve the efficiency and effectiveness of WHD personnel handling
wage theft complaints, the Administrator should explore providing more
automated research tools to WHD personnel that would allow them to
identify key information used in investigating complaints such as
bankruptcy filings, annual sales estimates for businesses, and
information on additional names and locations of businesses and
individuals under investigation.
* To assist in the verification of information provided by employers
under investigation, the Administrator should explore gaining access to
information maintained by IRS and other agencies as needed through
voluntary consent from businesses being investigated.
* To provide assurance that WHD has adequate human capital and
resources available to investigate wage theft complaints, the
Administrator should monitor the extent to which new investigators and
existing staff are able to handle the volume of wage theft complaints,
and if inadequate, what additional resources may be needed.
Agency Comments and Our Evaluation:
We received written comments on a draft of this report from the Acting
Assistant Secretary for Employment Standards (see appendix II). Labor
concurred with our recommendations and provided additional clarifying
information. Labor noted that unlike investigations, conciliations do
not result in any determination of whether a violation occurred, but
provide a chance to assist more employees than WHD could otherwise
assist through more time-consuming investigations. Labor also stated
that staff balance a variety of factors, including office workload,
when determining whether to investigate a complaint, refer the employee
to another organization or advise the employee of the right to file a
private lawsuit.
Labor provided additional representations on one of our undercover
cases, an anonymous complaint alleging that children were operating
heavy machinery and working during school hours in a meat packing
plant. Because WHD had no record of this call, we reported that WHD had
not investigated the complaint or recorded it in its database. In its
written response to this report, Labor stated that our child labor
complaint was reviewed by two WHD assistant district directors who
determined that the complaint was bogus because the business address
was a mailbox store and the company was not listed on several business
websites. WHD did not call the business directly. Because no supporting
documentation was provided for this representation, we could not
confirm WHD's account of investigative steps taken. See appendix II for
more information. Labor also provided us technical corrections to the
report which we incorporated, as appropriate. We have reprinted Labor's
written comments in their entirety in appendix II.
As agreed with your office, unless you publicly release its contents
earlier we plan no further distribution of this report until 30 days
from the date of this letter. The report is available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov]. If you have any
questions concerning this report, please contact Gregory D. Kutz at
(202) 512-6722 or kutzg@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix III.
Signed by:
Gregory D. Kutz:
Managing Director:
Forensic Audits and Special Investigations:
[End of section]
Appendix I: Testimony on Flaws in Wage and Hour Division's Complaint
Intake and Investigative Processes:
Testimony:
Before the Committee on Education and Labor, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EST:
Wednesday, March 25, 2009:
Department Of Labor:
Wage and Hour Division's Complaint Intake and Investigative Processes
Leave Low Wage Workers Vulnerable to Wage Theft:
Statement of Gregory D. Kutz, Managing Director:
Forensic Audits and Special Investigations:
Jonathan T. Meyer, Assistant Director:
Forensic Audits and Special Investigations:
GAO-09-458T:
GAO Highlights:
Highlights of GAO-09-458T, a testimony before the Committee on
Education and Labor, House of Representatives.
Why GAO Did This Study:
The mission of the Department of Labor‘s Wage and Hour Division (WHD)
includes enforcing provisions of the Fair Labor Standards Act, which is
designed to ensure that millions of workers are paid the federal
minimum wage and overtime. Conducting investigations based on worker
complaints is WHD‘s priority. According to WHD, investigations range
from comprehensive investigations to conciliations, which consist
primarily of phone calls to a complainant‘s employer.
In July 2008, GAO testified on 15 case studies where WHD failed to
investigate complaints. This testimony highlights the findings of a
follow-up investigation performed at the Committee‘s request.
Specifically, GAO was asked to (1) test WHD‘s complaint intake process
in an undercover capacity, (2) provide additional case study examples
of inadequate WHD responses to complaints, and (3) assess the
effectiveness of WHD‘s complaint intake process, conciliations, and
other investigative tools.
To test WHD‘s complaint intake process, GAO posed as complainants and
employers in 10 different scenarios. To provide case study examples and
assess effectiveness of investigations, GAO used data mining and
statistical sampling of closed case data for fiscal year 2007. GAO
plans to issue a follow-up report with recommendations concerning
resource needs and the recording of complaints. GAO also confirmed key
findings with WHD officials.
What GAO Found:
GAO found that WHD frequently responded inadequately to complaints,
leaving low wage workers vulnerable to wage theft. Posing as fictitious
complainants, GAO filed 10 common complaints with WHD district offices
across the country. The undercover tests revealed sluggish response
times, a poor complaint intake process, and failed conciliation
attempts, among other problems. In one case, a WHD investigator lied
about investigative work performed and did not investigate GAO‘s
fictitious complaint. At the end of the undercover tests, GAO was still
waiting for WHD to begin investigating three cases”a delay of nearly 5,
4, and 2 months, respectively. The table below provides additional
examples of inadequate WHD responses to GAO‘s fictitious complaints.
Table: WHD Response to Fictitious Complaints Submitted by GAO:
Employee/location: Receptionist/Virginia;
Complaint: Employee was not paid minimum wage;
Result:
* GAO‘s fictitious employer agreed that she had failed to pay the
minimum wage but refused to pay back wages due.
* WHD investigator accepted the refusal without question and informed
the fictitious employee of his right to file a lawsuit.
* When the fictitious employee asked why WHD could not offer more help,
the investigator told the employee to contact his Congressman to
request more resources for WHD.
Employee/location: Meat Packer/California;
Complaint: Children using heavy machinery;
Result:
* WHD claims that among complaints, child labor complaints are its top
priority, but 4 months after GAO left an anonymous child labor
complaint, WHD had not conducted any investigative work.
* Complaint was never recorded in WHD‘s database.
Employee/location: House Painter/Texas;
Complaint: Employee did not receive last paycheck;
Result:
* GAO‘s fictitious employer told the WHD investigator he would pay, but
failed to fax proof of payment to WHD as requested. Investigator never
confirmed payment and closed the case as ’agreed to pay.“
* After 3 weeks, GAO‘s fictitious employee called back and reported
that he hadn‘t been paid. The WHD investigator contacted the employer
and, when asked, stated ’there is no penalty“ for failure to pay. The
fictitious employer refused to pay, and WHD informed the fictitious
employee of his right to take private action.
* Complaint was recorded as ’agreed to pay“ in WHD‘s database.
Source: GAO.
[End of table]
Similar to the 10 fictitious scenarios, GAO identified 20 cases
affecting at least 1,160 real employees whose employers were
inadequately investigated. For example, GAO found cases where it took
over a year for WHD to respond to a complaint, cases closed based on
unverified information provided by the employer, and cases dropped when
the employer did not return phone calls.
GAO‘s overall assessment of the WHD complaint intake, conciliation, and
investigation processes found an ineffective system that discourages
wage theft complaints. With respect to conciliations, GAO found that
WHD does not fully investigate these types of complaints or compel
employers to pay. In addition, a WHD policy instructed many offices not
to record unsuccessful conciliations in its database, making WHD appear
better at resolving conciliations than it actually is. WHD‘s
investigations were frequently delayed by months or years, but once
complaints were recorded in WHD‘s database and assigned as a case to an
investigator, they were often adequately investigated.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/products/GAO-09-458T]. For more
information, contact Gregory D. Kutz at (202) 512-6722 or
kutzg@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to discuss findings related to our
investigation of the Department of Labor's (Labor) Wage and Hour
Division (WHD) processes for investigating and resolving wage theft
complaints. In a hearing held in July 2008 before this committee, we
testified that WHD had inadequately responded to complaints from low
wage workers who alleged that employers failed to pay the federal
minimum wage and required overtime[Footnote 1]. Specifically, we found
cases where WHD inappropriately rejected complaints based on incorrect
information provided by employers, failed to make adequate attempts to
locate employers, did not thoroughly investigate and resolve
complaints, and delayed the initiation of investigations for over a
year. We also reported that WHD's investigation database contained
thousands of cases with characteristics similar to cases identified in
our testimony. At the request of this committee, subsequent to the
hearing, we performed additional audit and investigative work to
determine the magnitude of these issues. This testimony reflects
findings from the work we have performed since July 2008. We plan to
issue a report containing recommendations to Labor to improve their
complaint intake and investigation processes.
As we previously reported, over 100 million workers are covered under
labor laws enforced by WHD, including the Fair Labor Standards Act
(FLSA), the Migrant and Seasonal Agricultural Worker Protection Act
(MSPA), the Family and Medical Leave Act (FMLA), the Davis Bacon and
Related Acts (DBRA), and other federal labor laws. By law, WHD
investigators and technicians[Footnote 2] enforce labor laws governing
issues such as minimum wage, overtime pay, child labor, and family
medical leave. WHD uses a number of strategies including investigations
and partnerships with external groups - such as states, foreign
consulates, and employee and employer associations. However, conducting
investigations based on complaints is WHD's first priority.
WHD investigators can take actions ranging from making phone calls to
the complainant's employer (known as conciliations) to taking other,
more resource-intensive actions such as interviewing the employer and
related witnesses, reviewing employer payroll records, and requesting
copies of self audits[Footnote 3] conducted by the employer. In this
report, we refer to these more in-depth investigations collectively as
non-conciliations. Conciliations are generally limited to a single,
minor violation, such as a missed paycheck, or an issue affecting a
single worker. A conciliation is used to resolve a complaint quickly
and with minimal resources on the part of WHD. Investigative work for
conciliations is generally limited to a telephone conversation in which
the WHD investigator explains the specific complaint against the
employer, describes applicable laws, and requests that the employer
comply with the law and pay any back wages due. WHD staff generally do
not visit the employer's establishment or verify information provided
by the employer. When WHD determines that violations have occurred and
computes back wages owed to workers, it can assess back wages to be
paid to the employees and can impose civil money penalties against
employers with repeated or willful violations. If an employer signs an
agreement to pay back wages and/or civil money penalties but reneges on
their commitment, WHD can refer the case to the Department of Treasury
for debt collection or to Labor's Office of the Solicitor for
litigation. If the employer has not agreed to pay, WHD can only refer
the case to the Solicitor for litigation. According to the Solicitor's
office, it considers various factors including the merits of the case,
number of employees affected, difficulties of proof and whether the
employer is in current compliance, when deciding whether to litigate a
case.
Today's testimony summarizes the results of our forensic audit and
investigative work reviewing investigations conducted by WHD. As
requested, this testimony will highlight our findings related to (1)
undercover testing of WHD's complaint intake and conciliation
processes, (2) additional case study examples of inadequate WHD
responses to complaints, and (3) the effectiveness of WHD's complaint
intake process, conciliations, and other investigative tools.
To test the effectiveness of WHD's complaint intake process and
conciliations, undercover GAO investigators posed both as complainants
and employers. Using 10 fictitious scenarios including minimum wage,
last paycheck, and overtime violations, investigators called WHD
offices in Alabama, California, Florida, Maryland, and Texas posing as
complainants. These field offices handled 13 percent of all cases
investigated by WHD in fiscal year 2007. When WHD investigators
attempted to follow up on the complaints, different undercover
investigators posed as the employers and followed a variety of scripted
scenarios to test how WHD investigators would respond. Complaints and
employer responses to the WHD investigations were based on actual
situations we encountered in our work. For more information, see
[hyperlink, http://www.gao.gov/media/video/gao-09-458t/].
To identify case studies of inadequate investigations conducted in
response to actual employees' allegations of wage theft, we obtained
Labor's Wage and Hour Investigative Support and Reporting Database
(WHISARD) and data-mined for closed cases in which it took WHD more
than one year to complete an investigation, an employer could not be
located, or the case was dropped when an employer refused to pay. We
analyzed WHD's WHISARD database and determined it was sufficiently
reliable for purposes of our audit and investigative work. We also
obtained and analyzed WHD case files, interviewed WHD officials, and
reviewed publicly available data to gather additional information about
these cases.
To determine the effectiveness of WHD's complaint intake process,
conciliations, and other investigative tools, we used the results of
our undercover tests, case studies, interviews and walk-throughs of the
processes with management, and two statistical samples. We selected a
random statistical sample of 115 cases from 10,855 conciliations and
115 cases from 21,468 non-conciliations recorded by WHD in WHISARD that
were concluded between October 1, 2006 and September 30, 2007. We
obtained and reviewed WHD's case files for the selected cases and
performed tests to determine whether the investigations conducted were
adequate. Inadequate cases were those in which WHD did not initiate an
investigation within 6 months, did not complete investigative work
within one year, did not contact the employer, did not correctly
determine coverage under federal law, did not review employer records,
did not assess back wages when violations were identified, or did not
refer cases to Labor's Office of the Solicitor, when appropriate. We
subsequently determined through our interviews that the population of
conciliations sampled was substantially incomplete. Therefore, we were
only able to project sample results to conciliations that WHD chose to
enter into their database rather than the entire population of
conciliations.
We conducted our forensic audit and related investigations from July
2008 through March 2009. We conducted our audit work in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. We conducted our investigative work in
accordance with the standards prescribed by the President's Council on
Integrity and Efficiency.
Undercover Tests Reveal Inadequate Investigations and Poor Complaint
Intake Process:
The results of our undercover tests illustrate flaws in WHD's responses
to wage theft complaints, including delays in investigating complaints,
complaints not recorded in the WHD database, failure to use all
available enforcement tools because of a lack of resources, failure to
follow up on employers who agreed to pay, and a poor complaint intake
process. For example, WHD failed to investigate a child labor complaint
alleging that underage children were operating hazardous machinery and
working during school hours. In another case, a WHD investigator lied
to our undercover investigator about confirming the fictitious
businesses' sales volume with the Internal Revenue Service (IRS), and
did not investigate our complaint any further. WHD successfully
investigated 1 of our 10 fictitious cases, correctly identifying and
investigating a business that had multiple complaints filed against it
by our fictitious complainants. Five of our 10 complaints were not
recorded in WHD's database and 2 of 10 were recorded as successfully
paid when in fact the fictitious complainants reported to WHD they had
not been paid. To hear selected audio clips of these undercover calls,
go to [hyperlink, http://www.gao.gov/media/video/gao-09-458t/]. Table 1
provides a summary of the 10 complaints that we filed or attempted to
file with WHD.
Table 1: Results of Undercover Testing:
1;
Complainant: Dry Cleaners Clerk;
Location: Birmingham, AL;
Complaint: Employee did not receive last paycheck;
Result: Fictitious employer refused to pay and WHD did not record the
failed conciliation in the database;
* WHD attempted to conciliate the case, but never recorded the work
done in the database;
* WHD did not inform the employee of the result of the conciliation.
2;
Complainant: Meat Packer;
Location: Modesto, CA;
Complaint: Underage children working during school hours on heavy
machinery;
Result: WHD failed to investigate a complaint alleging that children
were working too many hours under hazardous conditions;
* WHD claims that child labor complaints are its top priority, but 4
months after we left an anonymous child labor complaint, WHD had not
conducted any investigative work;
* Complaint was never recorded in the database.
3;
Complainant: Siding Installer;
Location: Montebello, CA;
Complaint: Two separate complaints filed by employees who did not
receive their last paycheck;
Result: WHD successfully identified our fictitious employer with repeat
violations and attempted to make a site visit to the fictitious
employer when he failed to return phone calls;
* WHD accepted two complaints about the same business. One investigator
working on the first complaint took 5 weeks to contact the fictitious
employer but another investigator working on the second complaint
contacted the fictitious employer immediately;
* When our fictitious employer refused to pay in both cases, WHD
correctly determined that the problem affected multiple employees and
opened an investigation;
* Investigator made multiple attempts to contact the fictitious
employer after he stopped returning phone calls, including making a
site visit to the bogus address. The case was appropriately closed when
the fictitious employer could not be located.
4;
Complainant: Laundromat Clerk;
Location: Monterey Park, CA;
Complaint: Employee was a Spanish-speaking, illegal immigrant paid less
than minimum wage for over a year;
Result: WHD delayed investigating the complaint and inaccurately
recorded that the fictitious employee received back wages;
* Two weeks after we first contacted WHD, a Spanish-speaking
investigator called our fictitious employee;
* 5 weeks after the complaint was faxed to WHD, an investigator
contacted our fictitious employer, who eventually agreed to pay;
* The fictitious employee called WHD to report that she hadn't been
paid, but the complaint was recorded as "agreed to pay" in WHD's
database.
5;
Complainant: Convenience Store Clerk;
Location: Miami, FL;
Complaint: Employee did not receive last paycheck;
Result: WHD did not return phone calls and failed to record our
complaint in their database;
* WHD failed to return seven messages from our fictitious employee
attempting to file a complaint;
* In two cases during regular business hours, calls were routed to a
voice mail message stating that the office was closed;
* Complaint was never recorded in the database.
6;
Complainant: Dishwasher;
Location: Miami, FL;
Complaint: Employee did not receive overtime for an average of 4 hours
per week for 19 weeks;
Result: The WHD office's large backlog prevented it from investigating
our case in a timely manner;
* Investigator told our fictitious employee that it would take "8 to 10
months" to begin investigating his complaint;
* WHD failed to return four calls over 4 consecutive months from our
fictitious employee attempting to determine the status of his
complaint;
* Complaint was never recorded in the database.
7;
Complainant: Janitor;
Location: Frederick, MD;
Complaint: Employee was not paid minimum wage;
Result: WHD failed to record initial complaint and never returned calls
from our fictitious employer;
* WHD investigator accepted the complaint but did not attempt to
contact our fictitious employer to initiate a conciliation;
* Between September 24, 2008 and January 12, 2009, WHD failed to return
four calls from our fictitious employee attempting to determine the
status of his complaint;
* When the fictitious employee reached the same investigator, she had
no record of his initial call and suggested the employee look for
another job before filing a complaint against his employer;
* Investigator finally accepted the complaint and left a message for
the fictitious employer, but did not return his two subsequent calls;
* Complaint was never recorded in the database.
8;
Complainant: House Painter;
Location: Dallas, TX; Complaint: Employee did not receive last
paycheck;
Result: WHD inaccurately recorded that our fictitious employee received
back wages;
* Our fictitious employer told the WHD investigator he would pay, but
failed to fax proof of payment to WHD as requested. WHD investigator
never followed up to confirm payment and closed the case as "agreed to
pay";
* After 3 weeks, our fictitious employee called back and reported that
he hadn't been paid. The WHD investigator contacted our fictitious
employer and, when asked, stated "there is no penalty" for failure to
pay;
* After our fictitious employer refused to pay, WHD informed our
fictitious employee of his right to take private action;
* Complaint was still recorded as "agreed to pay" in WHD's database
despite WHD's knowledge that the fictitious employer had failed to pay
the back wages.
9;
Complainant: Lawn Mower;
Location: Dallas, TX;
Complaint: Employee was not paid minimum wage;
Result: Investigator lied to our fictitious employee about
investigative work performed and did not investigate the complaint;
* Investigator told the fictitious employee that WHD had no
jurisdiction because the gross revenues of the fictitious employer did
not meet the minimum standard for coverage, even though the fictitious
employee stated that his boss had told him the company's gross revenues
were three times greater than the minimum standard;
* Investigator claimed that he had obtained information on the
fictitious employer's revenue from an IRS database;
* However, our fictitious employer had never filed taxes, WHD officials
told us they do not have access to IRS databases, and the case file
shows that no contact was made with the IRS;
* We referred information related to this case to Labor's Office of the
Inspector General for further investigation.
10;
Complainant: Receptionist;
Location: Clifton, VA;
Complaint: Employee was not paid minimum wage;
Result: WHD readily accepted our fictitious employer's refusal to pay
and stated they could not assist the fictitious employee further;
* WHD investigator accepted this complaint and promptly called our
fictitious employer;
* Our fictitious employer agreed that she had failed to pay the minimum
wage but refused to pay back wages due;
* WHD investigator accepted the refusal without question and informed
our fictitious employee of his right to file a lawsuit;
* When our fictitious employee asked why WHD could not offer more help,
the WHD investigator said she was "bound by the laws I'm able to
enforce, the money the Congress gives us" and told our fictitious
employee to contact his Congressman to request more resources for WHD.
Source: GAO.
[End of table]
We identified numerous problems with the WHD response to our undercover
wage theft complaints. Key areas where WHD failed to take appropriate
action include delays in investigating complaints, complaints not
recorded in the WHD database, failure to use available enforcement
tools, failure to follow up on employers who agreed to pay, and a poor
complaint intake process.
Delays Investigating Complaints. WHD took more than a month to begin
investigating five of our fictitious complaints, including three that
were never investigated. In one case, the fictitious complainant spoke
to an investigator who said she would contact the employer. During the
next 4 months, the complainant left four messages asking about the
status of his case. When he reached the investigator, she had taken no
action on the complaint, did not recall speaking with him and had not
entered the complaint in the WHD database.
Complaints Not Recorded in Database. Five of our complaints were never
recorded in WHD's database. These complaints were filed with four
different field offices and included three complaints in which WHD
performed no investigative work and two complaints in which WHD failed
to record the investigative work performed. For example, we left a
message at one WHD office alleging that underage children were working
at a meat packing plant during school hours and operating heavy
machinery, such as meat grinders and circular saws. With respect to
complaints, WHD policy states that those involving hazardous conditions
and child labor are its top priority, but a review of WHD records at
the end of our work showed that the case was not investigated or
entered into WHD's database. In another case, an investigator spoke to
the fictitious employer, who refused to pay the complainant the back
wages due. The investigator closed the conciliation without entering
the case information or outcome into WHD's database. This is consistent
with the WHD Southeast regional policy of not recording the
investigative work performed on unsuccessful conciliations. The effect
of not recording unsuccessful conciliations is to make the conciliation
success rate for the regional office appear better than it actually is.
The number of complaints that are not entered into WHD's database is
unknown, but this problem is potentially significant since 5 out of our
10 bogus complaints were not recorded in the database.
Failure to Use All Enforcement Tools. According to WHD staff, WHD lacks
the resources to use all enforcement tools in conciliations where the
employer refuses to pay. According to WHD policy, when an employer
refuses to pay, the investigator may recommend to WHD management that
the case be elevated to a full investigation. However, only one of our
three fictitious employers who refused to pay was placed under
investigation. In one case, our fictitious employer refused to pay and
the investigator accepted this refusal without question, informing the
complainant that he could file a private lawsuit to recover the $262
due to him. When the complainant asked why WHD couldn't provide him
more assistance, the investigator replied, "I've done what I can do,
I've asked her to pay you and she can't—I can't wring blood from a
stone," and then suggested the complainant contact his Congressman to
ask for more resources for WHD to do their work. According to WHD
policy and interviews with staff, WHD doesn't have the resources to
conduct an investigation of every complaint and prefers to investigate
complaints affecting large numbers of employees or resulting in large
dollar amounts of back wages. One district director told us that
conciliations result from "a mistake" on the part of the employer and
he does not like his investigators spending time on them. However, when
WHD cannot obtain back wages in a conciliation and decides not to
pursue an investigation, the employee's only recourse is to file
private litigation. Low wage workers may be unable to afford attorney's
fees or may be unwilling to argue their own case in small claims court,
leaving them with no other options to obtain their back wages.
Failure to Follow Up on Employers Who Agree to Pay. In 2 of our cases,
the fictitious employer agreed to pay the back wages due and WHD
recorded the conciliation as successful, even when the complainant
notified the investigator that he had not been paid. In both cases, the
investigator told the employer he was required to submit proof of
payment, but only one of the investigators followed up when the
employer failed to provide the required proof. The complainant in both
cases later contacted the investigator to report he had not been paid.
The investigator attempted to negotiate with both fictitious employers,
but did not update the case entry in WHD's database to indicate that
the complainant never received back wages, making it appear as though
both cases were successfully resolved. These two cases cast doubt on
whether complainants whose conciliations are marked "agreed to pay" in
the WHD database actually received their back wages.
Poor Complaint Intake Process. We found that WHD's complaint intake
process is time-consuming and confusing, potentially discouraging
complainants from filing a complaint. Of the 115 phone calls we made
directly to WHD field offices, 87 (76 percent) went directly to
voice mail. While some offices have a policy of screening complainant
calls using voice mail, other offices have staff who answer the phone,
but may not able to respond to all incoming calls. In one case, WHD
failed to respond to seven messages from our fictitious complainant,
including four messages left in a single week. In other cases, WHD
delayed over 2 weeks in responding to phone calls or failed to return
phone calls from one of our fictitious employers. At least two WHD
offices have no voice mailbox for the office's main phone number,
preventing complainants from leaving a message when the office is
closed or investigators are unavailable to take calls. One of our
complainants received conflicting information about how to file a
complaint from two investigators in the same office, and one
investigator provided misinformation about the statute of limitations
in minimum wage cases. At one office, investigators told our fictitious
employee that they only accept complaints in writing by mail or fax, a
requirement that delays the start of a case and is potentially
discouraging to complainants. In addition, an investigator lied about
contacting IRS to determine the annual sales for our fictitious
employer, and then told our complainant that his employer was not
covered by the FLSA. FLSA applies to employees of enterprises that have
at least $500,000 in annual sales or business[Footnote 4]. Our
complainant in this case told the investigator that his employer had
sales of $1.5 million in 2007, but the investigator claimed that he had
obtained information about the business from an IRS database showing
that the fictitious business did not meet the gross revenue threshold
for coverage under federal law. Our fictitious business had not filed
tax returns and WHD officials told us that their investigators do not
have access to IRS databases. A review of the case file also shows that
no information from the IRS was reviewed by the investigator.
Information related to this case was referred to Labor's Office of the
Inspector General for further investigation.
WHD successfully investigated a business that had multiple complaints
filed against it by our fictitious complainants. WHD identified two
separate conciliations ongoing against the same fictitious business,
both originating from complaints filed by our fictitious complainants.
These conciliations were combined into an investigation, the correct
procedure for handling complaints affecting multiple employees. The
investigator continued the investigation after the fictitious employer
claimed that the business had filed for bankruptcy and attempted to
visit the business when the employer stopped returning phone calls. The
investigator did not use public records to verify that the employer had
filed for bankruptcy, but otherwise made reasonable efforts to locate
and investigate the business.
Case Studies Show That WHD Inadequately Investigated Complaints:
Similar to our 10 fictitious scenarios, we identified 20 cases
affecting at least 1,160 workers whose employers were inadequately
investigated by WHD. We performed data mining on the WHISARD database
to identify 20 inadequate cases closed during fiscal year 2007. For
several of these cases, WHD (1) did not respond to a complainant for
over a year, (2) did not verify information provided by the employer,
(3) did not fully investigate businesses with repeat violations, and
(4) dropped cases because the employer did not return telephone calls.
Ten of these case studies are presented in appendix II. Table 2
provides a summary of 10 case studies closed by WHD between October 1,
2006 and September 31, 2007.
Table 2: Case Studies of Inadequate WHD Investigations:
Case: 1;
Type of business/complainant occupation: Garment Manufacturer/Garment
Workers;
Type of alleged violation(s): Minimum Wage and Overtime (FLSA);
Employer location: Whittier, CA;
WHD actions, conclusions, and additional details:
* Two former employees alleged that the firm was not paying minimum
wage and overtime to employees;
* One WHD investigator visited establishment and took surveillance
photographs but did not speak with the employer;
* Almost 2 months later, another WHD investigator visited the
establishment and found that the employer had vacated the premises. A
realty broker informed WHD that he believed the employer had closed,
not relocated, causing WHD to close the case;
* Using public data, we confirmed that the employer was still active as
of January 2009 and made contact with an employee of the firm who told
us that the employer had moved from the location WHD visited.
Case: 2;
Type of business/complainant occupation: Fuel Tank /Mechanic;
Type of alleged violation(s): Overtime (FLSA);
Employer location: Fort Lauderdale, FL;
WHD actions, conclusions, and additional details:
* Complainant alleged he was due over $525 in overtime back wages, but
commented to WHD that he thought his employer was filing for
bankruptcy;
* WHD dropped the case stating that the employer declared bankruptcy;
* The employee was informed of his right to file a private lawsuit to
recover back wages;
* WHD received a fax from this employer after the case had been
concluded stating that the employee had been paid $245 in per diem,
however the documentation did not support that the overtime back wages
were paid; no further investigative action was taken;
* Bankruptcy court records show that the employer had not filed for
bankruptcy and we confirmed that the employer was still in business in
December 2008.
Case: 3;
Type of business/complainant occupation: Restaurant/Waitress;
Type of alleged violation(s): Minimum Wage; (FLSA);
Employer location: Hollywood, FL;
WHD actions, conclusions, and additional details:
* Employee alleged she was owed minimum wage for 145 hours of work;
* Employer stated that wages were due by the previous owner, but did
provide proof to substantiate or return subsequent telephone calls;
* WHD dropped the case and advised the employee of her right to file
private litigation.
Case: 4;
Type of business/complainant occupation: County Sheriff's Office
/Corrections Officer;
Type of alleged violation(s): Minimum Wage (FLSA);
Employer location: Key West, FL;
WHD actions, conclusions, and additional details:
* WHD attempted to contact the employer two times over a period of 2
days to discuss allegations;
* Case was dropped when no one from the employer, which was a Sheriff's
office, returned WHD's telephone calls;
* WHD informed the complainant that private litigation could be filed
in order to recover back wages.
Case: 5;
Type of business/complainant occupation:
Construction Contractor/Day Laborer; Type of alleged violation(s):
Minimum Wage and Overtime(FLSA);
Employer location: Miami, FL;
WHD actions, conclusions, and additional details:
* Employer denied knowing employee and stated that the employee worked
for a subcontractor, but refused to provide name of the company;
* WHD closed the case, recorded that the employer was in compliance
with labor laws, and informed the individual who filed the complaint on
behalf of the employee of his right to file a civil lawsuit;
* Employee filed a civil suit, during which the employer agreed he owed
back wages;
* The court ruled that the employee was due $1,500, the same amount
cited in the original complaint to WHD.
Case: 6;
Type of business/complainant occupation:
Construction/Anonymous; Type of alleged violation(s): Child Labor/
Minimum Wage (FLSA);
Employer location: Baltimore, MD;
WHD actions, conclusions, and additional details:
* The complainant alleged that the company employed 15 year old
children, failed to pay its employees minimum wage, and did not
properly report income to the Internal Revenue Service;
* The employer alleged that the company did not meet the income
requirement to be covered under federal labor law, but did not provide
documentary evidence;
* The employer failed to return WHD's telephone calls or attend the
site of the initial conference;
* WHD concluded this case with no further investigative action.
Case: 7;
Type of business/complainant occupation: Lawn Care Service/Laborer;
Type of alleged violation(s): Minimum Wage and Overtime (FLSA);
Employer location: Lakeview, MI;
WHD actions, conclusions, and additional details:
* WHD attempted to set up a meeting with the company, but it was
postponed so the owner could go deer hunting. Subsequent calls from WHD
were not answered;
* Almost 8 months later, WHD conducted an announced site visit and
closed the case, citing that the employer appeared to be out of
business because no employees were on site during the visit and phone
calls were unanswered;
* Public records show that the employer later signed and submitted an
annual statement 2 months after the case was closed and we successfully
contacted the employer in November 2008, who confirmed they were
located at the same address visited by WHD.
Case: 8;
Type of business/complainant occupation: Boarding School/Teen
Counselor;
Type of alleged violation(s): Overtime; (FLSA);
Employer location: Thompson Falls, MT;
WHD actions, conclusions, and additional details:
* Investigator assigned to case over 9 months after complaint was
received;
* Complaint handled as a self audit, allowing the employer to review
its own records for the alleged violations;
* WHD determined that the employer had begun paying correct overtime
based on the employer's verbal statements; no updated records were
reviewed;
* The employer found that it owed over $200,000 to 93 employees, but
delayed until the statute of limitations had almost expired before
offering to pay a total of only $1,000 in back wages;
* WHD did not accept this amount, closed the case, and informed the
complainant of the outcome.
Case: 9;
Type of business/complainant occupation: Ambulance Service Company/
Paramedic;
Type of alleged violation(s): Overtime (FLSA);
Employer location: Pawhuska, OK;
WHD actions, conclusions, and additional details:
* Employer refused to comply with the law throughout WHD's
investigation and took months to produce payroll records;
* WHD determined that over $66,000 in back wages was due to 21
employees and stated in the case file that this estimate was "probably
low";
* The employer generally agreed with WHD's findings and agreed to pay
back wages, but then later refused to respond to WHD or change payroll
practices;
* Over one year after the employer's agreement to pay, WHD decided not
to pursue litigation in part, because the case was considered
"significantly old";
* Employees were notified of their right to file private litigation in
order to recover back wages.
Case: 10;
Type of business/complainant occupation: Restaurant/Waitress;
Type of alleged violation(s): Child Labor/Minimum Wage/Overtime (FLSA);
Employer location: Lawrenceburg, TN;
WHD actions, conclusions, and additional details:
* Case assigned to an investigator over 22 months after the complaint
was received;
* WHD determined that the restaurant and related enterprises owed
approximately $230,000 to 438 employees for minimum wage and overtime
violations, and for depositing a percentage of employee tips into a
business account;
* Employer agreed to pay back wages for minimum wage and overtime
violations, but did not agree to pay back the collected tips;
* WHD did not accept partial back wage offer and closed the case with
no collection of back wages.
[End of table]
Source: GAO analysis.
* Case Study 1: Two garment factory workers filed complaints alleging
that their former employer did not pay minimum wage and overtime to its
workers. In early August 2006, an employee of the company informed WHD
that the company was forcing employees to sign a document stating that
they had been paid in compliance with the law before they could receive
their paychecks. One of the complainants also confirmed to the WHD
investigator that the employer was distributing this document. The next
day, an investigator traveled to the establishment to conduct
surveillance. The investigator took pictures of the establishment and
did not speak with anyone from the company. No additional investigative
work was done on this case until almost 2 months later when another
investigator visited the establishment and found that the company had
vacated the premises. A realty broker at the site informed the
investigator that he did not believe the firm had relocated. As a
result, WHD closed the investigation. Using publicly available
information, we found that the business was active as of January 2009
and located at a different address approximately 3 miles away from its
old location. We contacted the factory and spoke with an employee, who
told us that the business had moved from the address WHD visited.
* Case Study 4: In July 2007, WHD received a complaint from a former
corrections officer who alleged that a county Sheriff's office did not
pay $766 in minimum wage. The WHD investigator assigned to work on this
case made two calls to the Sheriff's office over a period of 2 days.
Two days after the second call, WHD dropped this case because no one
from the employer had returned the calls. WHD did not make additional
efforts to contact the employer or validate the allegations. WHD
informed the complainant that private litigation could be filed in
order to recover back wages. We successfully contacted the Sheriff's
office in November 2008.
* Case Study 5: In May 2007, a non-profit community worker center
contacted WHD on behalf of a day laborer alleging that his employer
owed him $1,500 for the previous three pay periods. WHD contacted the
employer, who stated that the complainant was actually an employee of a
subcontractor, but refused to provide the name of the subcontractor.
WHD closed the case without verifying the employer's statements and
informed the community worker center of the employee's right to file
private litigation. WHD's case file indicates that no violations were
found and the employer was in compliance with applicable labor laws.
According to the Executive Director of the worker center, approximately
2 weeks later, WHD contacted him and claimed that the employer in the
complaint had agreed to pay the back wages. When the employer did not
pay, the complainant sued the employer in small claims court. During
the course of the lawsuit the employer admitted that he owed the
employee back wages. The court ruled that the employer owed the
employee $1,500 for unpaid wages, the same amount in the original
complaint to WHD.
* Case Study 8: In November 2005, WHD's Salt Lake City District Office
received a complaint alleging that a boarding school in Montana was not
paying its employees proper overtime. Over 9 months after the complaint
was received, the case was assigned to an investigator and conducted as
an over the phone self-audit[Footnote 5]. According to the investigator
assigned to the case, WHD was unable to conduct a full investigation
because the boarding school was located over 600 miles from Salt Lake
City and WHD did not have the resources to conduct an on-site
investigation. The employer's self-audit found that 93 employees were
due over $200,000 in overtime back wages for hours worked between
September 2004 and June 2005. WHD determined that the firm began paying
overtime correctly in June 2006 based on statements made by the
employer, but did not verify the statements through document review.
After the employer's attorney initially indicated that they would agree
to pay the over $200,000 in back wages, WHD was unable to make contact
with the business for over 5 months. WHD records indicate that the
investigator believed that the firm was trying to find a loop hole to
avoid paying back wages. In June 2007, one week before the 2-year
statute of limitations on the entire back wage amount was to expire,
the employer agreed to pay $1,000 out of the $10,800 that had not yet
expired. The investigator refused to accept the $1,000 saying that it
would have been "like settling the case." WHD recorded the back wages
computed as over $10,800 rather than $200,000, greatly understating the
true amount owed to employees. WHD noted in the case file that the firm
refused to pay the more than $10,800 in back wages, but did not
recommend assessing penalties because they felt the firm was not a
repeat offender and there were no child labor violations. No further
investigative action was taken and the complainant was informed of the
outcome of the case.
* Case Study 10: In June 2003 and early 2005, WHD received complaints
against two restaurants owned by the same enterprise. One complaint
alleged that employees were working "off the clock" and servers were
being forced to give 2.25 percent of their tips to the employer. The
other complaint alleged off the clock work, illegal deductions, and
minimum wage violations. This case was not assigned to an investigator
until May 2005, over 22 months after the 2003 complaint was received.
The WHD investigator assigned to this case stated that the delay in the
case assignment was because of a backlog at the Nashville District
Office that has since been resolved. WHD conducted a full investigation
and found that 438 employees were due approximately $230,000 in back
wages for minimum wage and overtime violations and the required tip
pool. Although tip pools are not illegal, WHD determined that the
employer's tip pool was illegal because the company deposited the money
into its business account. Further, the firm violated child labor laws
by allowing a minor under 16 years old to work more than 3 hours on
school days. The employer disagreed that the tip pool was illegal and
stated that a previous WHD investigator had told him that it was
acceptable. The employer agreed to pay back wages due for the minimum
wage and overtime violations, but not the wages that were collected for
the tip pool. WHD informed the employer that partial back wages would
not be accepted and this case was closed.
Information on 10 additional case studies can be found in appendix II.
WHD's Complaint Intake Process, Conciliations, and Other Investigative
Tools Do Not Provide Assurance of a Timely and Thorough Response to
Wage Theft Complaints:
WHD's complaint intake processes, conciliations, and other
investigative tools are ineffective and often prevent WHD from
responding to wage theft complaints in a timely and thorough manner,
leaving thousands of low wage workers vulnerable to wage theft.
Specifically, we found that WHD often fails to record complaints in its
database and its poor complaint-intake process potentially discourages
employees from filing complaints. For example, 5 of our 10 undercover
wage theft complaints submitted to WHD were never recorded in the
database, including a complaint alleging that underage children were
operating hazardous machinery during school hours. WHD's conciliation
process is ineffective because in many cases, if the employer does not
immediately agree to pay, WHD does not investigate complaints further
or compel payment. In addition, WHD's poor record-keeping makes WHD
appear better at resolving conciliations than it actually is. For
example, WHD's southeast region, which handled 57 percent of
conciliations recorded by the agency in fiscal year 2007, has a policy
of not recording unsuccessful conciliations in the WHD database.
Finally, we found WHD's processes for handling investigations and other
non-conciliations were frequently ineffective because of significant
delays. Once complaints were recorded in WHD's database and assigned as
a case to an investigator, they were often adequately investigated.
WHD's Complaint-Intake Process Is Ineffective:
WHD's complaint intake process is seriously flawed, with both customer
service and record-keeping issues. With respect to customer service,
wage theft victims may file complaints with WHD in writing, over the
phone, or in person. However, our undercover tests showed that wage
theft victims can be discouraged to the extent that WHD never even
accepts their complaints. We found that in their efforts to screen
complaints some WHD staff actually deter callers from filing a
complaint by encouraging employees to resolve the issue themselves,
directing most calls to voice mail, not returning phone calls to both
employees and employers, accepting only written complaints at some
offices, and providing conflicting or misleading information about how
to file a complaint. For example, the pre-recorded voice message at one
office gives callers information on the laws WHD enforces, but when the
message ends there are 23 seconds of silence before the call is
directed to the voice message system that allows callers to file
complaints, creating the impression that the phone call has been
disconnected. WHD requires an investigator to speak with the employee
before an investigation can be initiated, but a real low wage worker
may not have the time to make multiple phone calls to WHD just to file
a complaint and may give up when call after call is directed to
voice mail and not returned. It is impossible to know how many
complainants attempt to file a complaint but are discouraged by WHD's
complaint intake process and eventually give up.
Regarding WHD's record-keeping failures, we found that WHD does not
have a consistent process for documenting and tracking complaints. This
has resulted in situations where WHD investigators lose track of the
complaints they have received. According to WHD policies, investigators
should enter complaints into WHD's database and either handle them
immediately as conciliations or refer them to management for possible
investigation. However, several of our undercover complaints were not
recorded in the database, even after the employee had spoken to an
investigator or filed a written complaint. This is particularly
troubling in the case of our child labor complaint, because it raises
the possibility that WHD is not recording or investigating complaints
concerning the well-being and safety of the most vulnerable employees.
Employees may believe that WHD is investigating their case, when in
fact the information they provided over the phone or even in writing
was never recorded. Since there is no record of these cases in WHD's
database, it is impossible to know how many complaints are reported but
never investigated.
WHD's Conciliation Process Is Ineffective:
According to several WHD District Directors, in conciliations where the
employer refuses to pay, their offices lack the resources to
investigate further or compel payment, contributing to the failures we
identified in our undercover tests, case studies, and statistical
sample. When an employer refuses to pay, investigators may recommend
that the case be elevated to a full investigation, but several WHD
District Directors and field staff told us WHD lacks the resources to
conduct an investigation of every complaint and focuses resources on
investigating complaints affecting large numbers of employees or
resulting in large dollar amounts of back wage collections. Conducting
a full investigation allows WHD to identify other violations or other
affected employees, attempt to negotiate back wage payment with the
employer and, if the employer continues to refuse, refer the case to
the Solicitor's Office for litigation. However, in some conciliations,
the employer is able to avoid paying back wages simply by refusing.
While WHD informs complainants of their right to file a lawsuit against
their employers to recover back wages, it is unlikely that most low
wage workers have the means to hire an attorney, leaving them with
little recourse to obtain their back wages.
WHD's conciliation policy also limits the actions staff may take to
resolve these cases. For example, WHD staff told us that complaints
handled as conciliations must be completed in under 15 days from the
time the complaint is assigned to an investigator, and at least one
office allows investigators only 10 days to resolve conciliations,
which may not allow time for additional follow-up work to be performed.
WHD staff in one field office told us they are limited to three
unanswered telephone calls to the employer before they are required to
drop the case and advise the complainant of his right to file a lawsuit
to recover back wages. Staff in several field offices told us that they
are not permitted to make site visits to employers for conciliations.
WHD investigators are allowed to drop conciliations when the employer
denies the allegations and WHD policy does not require that
investigators review employer records in conciliations. In one case
study, the employee stated that he thought the business was going
bankrupt. WHD dropped the case stating that the employer declared
bankruptcy and informed the employee of his right to file a private
lawsuit to recover back wages. Bankruptcy court records show that the
employer had not filed for bankruptcy, and we confirmed that the
employer was still in business in December 2008. One WHD investigator
told us that it is not necessary to verify bankruptcy records because
conciliations are dropped when the employer refuses to pay, regardless
of the reason for the refusal.
Our undercover tests and interviews with field staff also identified
serious record-keeping flaws in which make WHD appear better at
resolving conciliations than it actually is. For example, WHD's
southeast region, which handled 57 percent of conciliations recorded by
WHD in fiscal year 2007, has a policy of not recording investigative
work performed on unsuccessful conciliations in the database. WHD staff
told us that if employers do not agree to pay back wages, cannot be
located, or do not answer the telephone, the conciliation work
performed will not be recorded in the database[Footnote 6], making it
appear as though these offices are able to resolve nearly all
conciliations successfully. Inflated conciliation success rates are
problematic for WHD management, which uses this information to
determine the effectiveness of WHD's investigative efforts.
Our undercover tests and interviews with WHD staff also raise questions
about the reliability of conciliation information recorded in WHD's
database. As illustrated by our undercover tests, when an employer
initially agrees to pay in a conciliation but reneges on his promise,
WHD investigators did not change the outcome of the closed case in
WHISARD to show that the employee did not receive back wages. While
some investigators wait for proof of payment before closing the
conciliation, others told us that they close conciliations as soon as
the employer agrees to pay. Even if the employee later tells the
investigator that he has not been paid, investigators told us they do
not change the outcome of a closed case in the WHD database. WHD
publicly reports on the total back wages collected and the number of
employees receiving back wages, but these statistics are overstated
because an unknown number of conciliations recorded as successfully
resolved in the WHD database did not actually result in the complainant
receiving the back wages due.
These poor record-keeping practices represent a significant limitation
of the population we used to select our statistical sample because the
number of conciliations actually performed by WHD cannot be determined
and conciliations recorded as successfully resolved may not have
resulted in back wages for the employees. As a result, the percentage
of inadequate conciliations is likely higher than the failure rate
estimated in our sample. We found that 5.2 percent[Footnote 7] of
conciliations in our sample were inadequately conciliated because WHD
failed to verify the employer's claim that no violation occurred,
closed the case after the employer did not return phone calls, or
closed the case after the employer refused to pay back wages. However,
we found that many of the conciliations recorded in WHD's database were
adequately investigated. One example of a successful conciliation
involved a complaint alleging that a firm was not paying minimum wage.
The complaint was assigned to an investigator the same day it was filed
in September 2007. The WHD investigator contacted the owner, who
admitted the violation and agreed to pay back wages of $1,500. The case
was concluded the same day when the investigator obtained a copy of the
complainant's check from the employer and spoke to the complainant,
confirming that he was able to cash the check and had received his back
wages.
WHD's Investigation and Other Non-conciliation Processes Were Often
Ineffective, but Complaints Investigated Quickly Were Usually Resolved
Successfully:
We found WHD's process for handling investigations and other non-
conciliations was frequently ineffective because of significant delays.
However, once complaints were recorded in WHD's database and assigned
as a case to an investigator, they were often successfully
investigated. Almost 19 percent[Footnote 8] of non-conciliations in our
sample were inadequately investigated, including cases that were not
initiated until more than 6 months after the complaint was received,
cases closed after an employer refused to pay, and cases that took over
one year to complete. In addition, seven cases failed two of our tests.
Table 4: Number of Failures by Test for Sample of Non-conciliations:
Reason why non-conciliation was inadequate: Cases not initiated within
6 months of complaint;
Percent Point Estimate: 5.2;
95% Confidence Interval: [1.9, 11.1].
Reason why non-conciliation was inadequate: Case closed due to
employer's refusal to pay;
Percent Point Estimate: 6.2; 95%
Confidence Interval: [2.5, 12.3].
Reason why non-conciliation was inadequate: Cases with violations found
that were not referred to Labor's Office of the Solicitor for
litigation;
Percent Point Estimate: 4.6;
95% Confidence Interval: [1.5, 10.5].
Reason why non-conciliation was inadequate: Cases taking more than one
year to complete;
Percent Point Estimate: 6.6;
95% Confidence Interval: [2.8, 12.7].
Reason why non-conciliation was inadequate: Cases where WHD failed to
review employer records;
Percent Point Estimate: 3.1;
95% Confidence Interval: [.75, 8.1].
Reason why non-conciliation was inadequate: Estimate of Inadequate Non-
Conciliations;
Percent Point Estimate: 18.8;
95% Confidence Interval: [12.1, 27.1].
Source: GAO.
[End of table]
Six of the cases in our sample failed because they were not initiated
until over 6 months after the complaint was received. According to WHD
officials, non-conciliations should be initiated within 6 months of the
date the complaint is filed. Timely completion of investigations by WHD
is important because the statute of limitations for recovery of wages
under the FLSA is 2 years from the date of the employer's failure to
pay the correct wages.[Footnote 9] Specifically, this means that every
day that WHD delays an investigation, the complainant's risk of
becoming ineligible to collect back wages increases. In one of our
sample cases, WHD sent a letter to a complainant 6 months after his
overtime complaint was filed stating that, because of a backlog, no
action had been taken on his behalf. The letter requested that the
complainant inform WHD within 2 business days of whether he intended to
take private action. The case file shows no indication that the
complainant responded to WHD. One month later, WHD assigned the
complaint to an investigator and sent the complainant another letter
stating that if he did not respond within 9 business days, the case
would be closed. WHD closed the case on the same day the letter was
sent.
Our case studies discussed above and in appendix II also include
examples of complaints not investigated for over a year, cases closed
based on unverified information provided by the employer, businesses
with repeat violations that were not fully investigated, and cases
dropped because the employer did not return telephone calls. For
example, in one case study, WHD found that 21 employees were due at
least $66,000 in back wages for overtime violations. Throughout the
investigation, the employer was uncooperative and resisted providing
payroll records to WHD. At the end of the investigation, the firm
agreed with WHD's findings and promised to pay back wages, but then
stopped responding to WHD. The employees were never paid back wages and
over a year later, the Solicitor's Office decided not to pursue
litigation or any other action in part because the case was considered
"significantly old."
The failures we identified resulted, in part, from the large backlog of
cases in several WHD offices, investigators' failure to compel
cooperation from employers, and a lack of certain tools that would
facilitate verification of employer statements. In several district
offices, a large backlog prevents investigators from initiating cases
within 6 months. One office we visited has a backlog of 7 to 8 months,
while another office has a backlog of 13 months. Additionally, our
analysis of WHD's database shows that one district office did not
initiate an investigation of 12 percent of complaints until over one
year after the complaint was received, including a child labor
complaint affecting over 50 minors. Because the statue of limitations
to collect back wages under FLSA is 2 years, WHD is placing
complainants at risk of collecting only a fraction of the back wages
they would have been able to collect at the time of the complaint. WHD
also failed to compel records and other information from employers.
While WHD Regional Administrators are legally able to issue subpoenas,
WHD has not extended this ability to individual investigators, who
therefore depend on employers to provide records and other
documentation voluntarily. In cases where public records are available
to verify employer statements, WHD investigators do not have certain
tools that would facilitate access to these documents. For example, we
used a publicly-available online database, Public Access to Court
Electronic Records (PACER), to determine that an employer who claimed
to have filed for bankruptcy had not actually done so. However, there
is no evidence in the case file that the WHD investigator performed
this check. WHD officials told us that its investigators do not receive
training on how to use public document searches and do not have access
to databases containing this information such as PACER.
We found that, once complaints were recorded in WHD's database and
assigned as a case to an investigator in a timely manner, they were
often successfully investigated. As discussed above, WHD does not
record all complaints in its database and discourages employees from
filing complaints, some of which may be significant labor violations
suitable for investigation. In addition, many cases are delayed months
before WHD initiates an investigation. However, our sample identified
many cases that were adequately investigated once they were assigned to
an investigator. Specifically, 81.2 percent of the non-conciliations in
our sample were adequately investigated. One example of a successful
investigation involved a complaint alleging that a firm was not paying
proper overtime was assigned to an investigator the same day it was
filed in April 2007. The WHD investigator reviewed payroll records to
determine that the firm owed the complainant back wages. The case was
concluded within 3 months when the investigator obtained a copy of the
complainant's cashed check, proving that he had been paid his gross
back wages of $184.
Conclusions:
This investigation clearly shows that the Department of Labor has left
thousands of actual victims of wage theft who sought federal government
assistance with nowhere to turn. Our work has shown that when WHD
adequately investigates and follows through on cases they are often
successful; however, far too often many of America's most vulnerable
workers find themselves dealing with an agency concerned about resource
limitations, with ineffective processes, and without certain tools
necessary to perform timely and effective investigations of wage theft
complaints. Unfortunately, far too often the result is unscrupulous
employers taking advantage of our country's low wage workers.
Mr. Chairman and Members of the Committee, this concludes our
statement. We would be pleased to answer any questions that you or
other members of the committee may have at this time.
Contacts and Acknowledgments:
For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-6722 or kutzg@gao.gov or Jonathan Meyer at (214) 777-
5766 or meyerj@gao.gov. Individuals making key contributions to this
testimony included Erika Axelson, Christopher Backley, Carl Barden,
Shafee Carnegie, Randall Cole, Merton Hill, Jennifer Huffman, Barbara
Lewis, Jeffery McDermott, Andrew McIntosh, Sandra Moore, Andrew
O'Connell, Gloria Proa, Robert Rodgers, Ramon Rodriguez, Sidney
Schwartz, Kira Self, and Daniel Silva. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this testimony.
[End of section]
Appendix I: Scope and Methodology:
To review the effectiveness of WHD's complaint intake and conciliation
processes, GAO investigators attempted to file 11 complaints about 10
fictitious businesses to WHD district offices in Baltimore, Maryland;
Birmingham, Alabama; Dallas, Texas; Miami, Florida; San Jose,
California; and West Covina, California. These field offices handle 13
percent of all cases investigated by WHD. The complaints we filed with
WHD included minimum wage, last paycheck, overtime, and child labor
violations. GAO investigators obtained undercover addresses and phone
numbers to pose as both complainants and employers in these scenarios.
As part of our overall assessment of the effectiveness of
investigations conducted by WHD, we obtained and analyzed WHD's Wage
and Hour Investigative Support and Reporting Database (WHISARD), which
contained 32,323 cases concluded between October 1, 2006 and September
30, 2007. We analyzed WHD's WHISARD database and determined it was
sufficiently reliable for purposes of our audit and investigative work.
We analyzed a random probability sample of 115 conciliations and 115
non-conciliations to contribute to our overall assessment of whether
WHD's processes for investigating complaints are effective. Because we
followed a probability procedure based on random selections, our
samples are only one of a large number of samples that we might have
drawn. Since each sample could have provided different estimates, we
express our confidence in the precision of the particular sample's
results as a 95 percent confidence interval (e.g., plus or minus 5
percentage points). This is the interval that would contain the actual
population value for 95 percent of the samples we could have drawn.
To determine whether an investigation was inadequate, we reviewed case
files and confirmed details of selected cases with the investigator or
technician assigned to the case. In our sample tests, conciliations
were determined to be inadequate if WHD did not successfully initiate
investigative work within 3 months or did not complete investigative
work within 6 months. Non-conciliations were determined to be
inadequate if WHD did not successfully initiate investigative work
within 6 months, did not complete investigative work within 1 year or
did not refer cases in which the employer refused to pay to Labor's
Office of the Solicitor. Both conciliations and non-conciliations were
determined to be inadequate if WHD did not contact the employer, did
not correctly determine coverage under federal law, did not review
employer records, or did not compute and assess back wages when
appropriate.
We gathered additional information about WHD policies and procedures by
reviewing training materials and the WHD Field Operations Handbook,
conducting walk-throughs of investigative processes with management and
interviewing WHD officials. We gathered information about district
office policies and individual cases by conducting site visits at the
Miami and Tampa, Florida district offices, and conducting telephone
interviews with technicians, investigators and district directors in 23
field offices and headquarters officials in Washington, D.C. We also
spoke with Labor's Office of the Solicitor in Dallas, Texas and
Washington, D.C. To identify macro-level data on WHD complaints, we
analyzed data for cases closed between October 1, 2006 and September
30, 2007 by region, district office and case outcome.
To identify case studies of inadequate WHD responses to complaints, we
data-mined WHISARD to identify closed cases in which a significant
delay occurred in responding to a complaint (cases taking more than 6
months to initiate or 1 year to complete), an employer could not be
located, or the case was dropped when an employer refused to pay. We
obtained and analyzed WHD case files, interviewed WHD officials, and
reviewed publicly available data from online databases and the
Department of Treasury's Financial Crimes Enforcement Network to gather
additional information about these cases. We also interviewed
complainants who contacted GAO directly or were referred to us by labor
advocacy groups to gather information about WHD's investigation of
their complaints.
[End of section]
Appendix II: Additional Case Studies of Inadequate WHD Investigations:
Table 5 provides a summary of ten additional case studies of inadequate
Wage and Hour Division (WHD) investigations. These case studies include
instances where WHD dropped cases after (1) employers refused to
cooperate with an investigation, (2) WHD identified a violation but
failed to force employers to pay employees their owed wages, and (3) an
employer alleged it was bankrupt when in fact the employer was not.
Table 5: Additional Case Studies of Inadequate WHD Investigations:
Case: 11;
Type of business/employee occupation: Employment Agency/Carpenter;
Type of alleged violation: Minimum Wage (FLSA);
Employer location: Hollywood, FL; WHD actions, conclusions, and
additional details:
* Complainant alleged he was not paid minimum wage;
* WHD attempted to contact the employer to substantiate the claim, but
the employer did not return WHD's calls;
* Case was closed and the employee was informed of his right to file
private litigation;
* We were able to make contact with the employer in February 2009.
Case: 12;
Type of business/employee occupation: Telemarketing/Telemarketer;
Type of alleged violation: Minimum Wage (FLSA);
Employer location: Wellington, FL;
WHD actions, conclusions, and additional details:
* Employer would not make a commitment to WHD to pay $937 in back
wages;
* WHD closed the case and recorded that the employer was in compliance
with labor laws.
Case: 13;
Type of business/employee occupation: Plumbing/Plumber;
Type of alleged violation: Minimum Wage (FLSA);
Employer location: Alpharetta, GA;
WHD actions, conclusions, and additional details:
* Employer admitted owing wages but refused to pay because the employee
had been involved in a vehicular accident in a company vehicle;
* WHD requested that employer comply with labor laws in the future, but
employer refused;
* The WHD investigator stated that the case was closed and the employee
was informed of his right to file a private lawsuit.
Case: 14;
Type of business/employee occupation: Drywall Sub-Contractor/; N/A;
[Footnote 10]
Type of alleged violation: Failure to Overtime (FLSA);
Employer location: Biloxi, MS;
WHD actions, conclusions, and additional details:
* Employer admitted to WHD that employees were not paid overtime and he
did not know how much they were paid per hour;
* One employee told the investigator that the employees had been
threatened and another source informed the investigator that the
employer had threatened employees with a machete so they would lie
during WHD interviews, but the investigator still determined that the
employer's violations did not appear to be willful;
* Employer told WHD he did not keep payroll records, but his attorney
later said he had reviewed employer payroll records;
* Through information from the employer's pay register, WHD determined
that over $150,000 was due to 191 employees, but the employer's
attorney stated that the firm would be put out of business if the back
wages were paid;
* WHD agreed to reduce back wages as an administrative settlement to
resolve the case and the employer agreed to pay $78,228.
Case: 15;
Type of business/employee occupation: Trucking/Truck Drivers;
Type of alleged violation: Minimum Wage (FLSA);
Employer location: Doniphan, NE; WHD actions, conclusions, and
additional details:
* WHD received 4 complaints against a trucking company over a 7 month
period;
* The first three conciliations found that the employee's allegations
were substantiated and the employer agreed to pay back wages;
* WHD treated each complaint as a conciliation, cases generally set up
when a single employee is affected, even after violations were found in
the first three cases.
Case: 16;
Type of business/employee occupation: Sewing Contractor/Worker;
Type of alleged violation: Minimum Wage (FLSA);
Employer location: Passaic, NJ;
WHD actions, conclusions, and additional details:
* Complainant alleged 10 employees were due back wages for 3 to 7 weeks
of work;
* Employer failed to provide WHD payroll records for any of its
employees;
* WHD found that the complainant was owed over $800 in back wages, but
did not calculate back wages for any other employees;
* During the limited investigation, the employer stated it had filed
for Chapter 7 bankruptcy three days earlier and was no longer in
business;
* WHD closed the case and the complainant was notified of his right to
file private litigation;
* Our review of bankruptcy court documents showed no record of the
employer filing for Chapter 7 bankruptcy.
Case: 17;
Type of business/employee occupation: Construction/Anonymous Complaint;
Type of alleged violation: Overtime (FLSA);
Employer location: Brooklyn, NY;
WHD actions, conclusions, and additional details:
* A 2006 complainant alleged that the firm did not pay its employees
overtime;
* The employer had annual sales of over $2 million in 2005;
* WHD visited the employer's address and found a residence, but did not
speak with anyone;
* Complainant provided construction site locations, but WHD did not
visit these addresses until almost 6 months after the complaint was
recorded by WHD;
* WHD's case file states that the employer's accountant did not want
WHD to visit the work site and hung up on the investigator;
* WHD investigator closed the case because he was not able to gather
information.
Case: 18;
Type of business/employee occupation: Security Service/Security Guard;
Type of alleged violation: Overtime (FLSA);
Employer location: Del City, OK;
WHD actions, conclusions, and additional details:
* WHD was unable to determine coverage under federal law on three
previous self-audits of this company;
* In the fourth case, it was determined that the employer failed to pay
over $47,000 in overtime due to 98 employees;
* The employer agreed to pay the unpaid wages, but did not submit back
wage payment evidence to WHD;
* The back wages due were submitted for debt collection, however the
case file contains no information on whether any wages were
subsequently collected.
Case: 19;
Type of business/employee occupation: Gas Station/Manager;
Type of alleged violation: Overtime (FLSA);
Employer location: Ooltewah, TN;
WHD actions, conclusions, and additional details:
* Employee contacted WHD alleging that the employer did not pay
overtime;
* Employee was notified that WHD had a very large backlog and was
provided contact information for three attorney referral services;
* No investigative actions were conducted until over five months later,
when WHD contacted the complainant;
* The complainant stated that a new owner had purchased the business
approximately two weeks earlier;
* WHD did not calculate the back wages due to the complainant, recorded
that the employer was out of business, and recommended that the case be
closed with no further action.
Case: 20;
Type of business/employee occupation: Foundation Repair/Foreman;
Type of alleged violation: Overtime (FLSA);
Employer location: Houston, TX; WHD actions, conclusions, and
additional details:
* Investigation took nearly 2 years to complete;
* WHD believed that overtime violations and employees working off the
clock were systemic practices at over 20 of the firm's locations;
* The employer disagreed with WHD and insisted that he had not violated
labor laws;
* WHD estimated that the enterprise owed over $6 million in back wages;
according to the investigator assigned to this case, a precise amount
could not be computed because the employer refused to provide required
payroll documentation;
* WHD rejected the employer's offer to pay $50,000 in back wages, but
later attempted to settle with the employer by reducing back wages. No
settlement was reached;
* WHD had found the same violations approximately 20 months prior to
this investigation, but the employer would not agree to pay back wages
or comply with labor laws at that time;
* WHD determined that the employer had a good faith defense for
continuing the same pay practices because he had not been provided a
formal letter stating the outcome of the previous investigation;
* WHD did not refer this case for litigation because of the erosion of
the 2-year statute of limitations and did not recommend that the
employer pay penalties for its violations;
* WHD determined that the firm had come into compliance at all
locations nationwide based solely on the employer's verbal statements;
no supporting documentation was reviewed;
* WHD sent letters to the affected employees informing them that the
employer had refused to pay and notifying them of their right to file
private litigation.
Source: GAO analysis.
[End of table]
[End of section]
Footnotes:
[1] GAO, Department of Labor: Case Studies from Ongoing Work Show
Examples in Which Wage and Hour Division Did Not Adequately Pursue
Labor Violations, [hyperlink, http://www.gao.gov/products/GAO-08-973T],
(Washington, D.C.: July 15, 2008).
[2] In general, technicians focus primarily on conciliations but may
also work on self-audits and limited investigations in some offices.
Investigators work on non-conciliations, including full and limited
investigations and self-audits, but may also work on conciliations in
some offices. Unlike law enforcement officers, WHD investigators do not
have arrest authority. In this report, we use the term investigator to
refer to both investigators and technicians.
[3] In a self-audit, WHD determines which violations may exist and
allows the employer under investigation to conduct its own review of
records and calculate the back wages due to employees.
[4] The protections of the Fair Labor Standards Act apply to employees
engaged in interstate commerce or in the production of goods for
interstate commerce. The act also applies to all employees of an
enterprise that has at least $500,000 in annual sales or business and
has employees engaged in interstate commerce or in the production of
goods for interstate commerce, or that has employees handling, selling,
or otherwise working on goods or materials that have been moved in or
produced for interstate commerce by any person. 29 U.S.C. § 203. Even
though an enterprise may have separate locations, it is considered a
single enterprise for the $500,000 coverage determination if related
activities are performed through unified operation or common control by
any person or persons for a common business purpose.
[5] Self-audits allow the employers under investigation to conduct
their own review of records and calculate the back wages due to
employees.
[6] In some offices with this policy, the complaint that the
conciliation was based on would be recorded in WHD's database. However,
the complaint would appear as though it had never been investigated,
because the investigative work and the outcome of the conciliation
would not be recorded in the database. Other offices do not enter the
complaint into the database.
[7] Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that we
might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval (e.g., plus or
minus 5 percentage points). This is the interval that would contain the
actual population value for 95 percent of the samples we could have
drawn. The 95 percent confidence interval surrounding our sample of
inadequate investigations ranges from 206 to 1,195 failures in the
population.
[8] Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that we
might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval (e.g., plus or
minus 5 percentage points). This is the interval that would contain the
actual population value for 95 percent of the samples we could have
drawn. The 95 percent confidence interval surrounding our sample of
inadequate investigations ranges from 2,595 to 5,827 failures in the
population.
[9] The statute of limitations for recovery of wages under FLSA and the
Davis Bacon Act is 2 years from the employer's failure to pay the
correct wages. 29 U.S.C. § 255. For willful violations, in which the
employer knew its actions were illegal or acted recklessly in
determining the legality of its actions, the statute of limitations is
3 years. Federal courts have enforced the statute of limitations even
if Labor is investigating a complaint. Shandelman v. Schuman, 92 F.
Supp. 334 (E.D.Pa. 1950).
[10] This case was a directed investigation into the business based on
a tip received from a competitor, not the complaint of a single worker.
[End of section]
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[End of section]
Appendix II: Comments from the Department of Labor:
U.S. Department of Labor:
Assistant Secretary for Employment Standards:
Washington, D.C. 20210:
June 8, 2009:
Mr. Gregory D. Kutz:
Managing Director:
Forensic Audits and Special Investigations:
U.S. Government Accountability Office:
Washington, D.C. 20548:
Dear Mr. Kutz:
Thank you for the opportunity to respond to the Government
Accountability Office (GAO) audit report entitled "Department of Labor:
Wage and Hour Division Needs Improved Investigative Processes and
Ability to Suspend Statute of Limitations to Better Protect Workers
Against Wage Theft" (GAO-09-629). The summary results of the audit were
also presented in your testimony before the U. S. House of
Representatives, Committee on Education and Labor on March 25, 2009.
The testimony and report focus on the results of ten (10) undercover
calls alleging violations of laws enforced by the Wage and Hour
Division (WHD) and a review of concluded case files, including
conciliations and investigations. You cited inadequacies in 20 of the
230 concluded case files (115 conciliations and 115 investigations)
that you reviewed. Your report reveals serious problems with several
key aspects of our program. We agree with your recommendations and have
already begun implementing them. In this response, we discuss each of
your recommendations and the ways in which we are taking action to
address the problems you have identified.
We want to emphasize that we are not taking issue with the standards by
which you judged the adequacy of the investigation process, the
effectiveness of the complaint intake process, or the use of the
conciliation tool. However, we want to take this opportunity to add
some perspective to the findings. We think this is important in order
to arrive at an accurate appraisal of the agency's overall mission and
effectiveness.
First, the report identifies several differences between a
"conciliation" of an alleged violation and an "investigation." It does
not, however, point out the single most important difference between
the two methods of addressing alleged violations and the significance
of the conciliation tool. Unlike an "investigation," a "conciliation"
involves no finding of facts. In attempting to conciliate a complaint,
a WHD investigator or technician makes no determination that a
violation has actually occurred and makes no attempt to refute or
disprove an employer's dispute of the alleged violation. WHD does not
routinely take action to obtain proof of payment in a conciliation and,
instead, relies on the complainant to come back to WHD if he or she
does not receive the promised payment. WHD investigators (or in the
case of many conciliations, WHD technicians) do not interview other
workers, do not make on-site inspections, and do not review payroll
records, all of which are characteristic of an investigation. The
process is intended to resolve a single issue affecting one or a few
workers with a minimum expenditure of resources. WHD managers make
resource allocation determinations every day. The conciliation
technique provides those district managers with the chance to secure
back wages on behalf of approximately 12,000 workers every year. It has
a higher rate of return in terms of the number of workers helped per
enforcement hour expended than any of the other tools used by WHD. Many
workers would have far fewer opportunities to secure Federal assistance
if WHD did not attempt to conciliate the single issue or single
employee complaints that it receives each year.
WHD managers have a responsibility to decide whether to expand
unsuccessful attempts to conciliate an alleged violation to a full or
limited investigation or to simply notify an employee of his or her
"private right of action" under section 16(b) of the Fair Labor
Standards Act (FLSA). There are a number of factors that must be
weighed when deciding to broaden an unsuccessful conciliation effort to
an investigation. They would include, among others, a past history of
violations by the employer, a pattern of prior conciliations, and a
suggestion that the alleged violation may be systemic. Ultimately,
however, the decision is often governed by the particular office's
available resources, e.g., the number and skill level of the
investigators and technicians on board, the complaint backlog, the
balance of cases involving statutes other than the FLSA, and the need
to conduct directed cases in industries and among worker populations
where complaints are rare yet violations are known to exist. WHD
district office managers decide each day whether certain complaints
will be investigated by the agency. If, in their judgment, the workers
have a better opportunity to recover their back wages in a timely
manner through other means, then the office managers will often refer
the complainant to the State or to legal aid societies, or advise the
complainant of his or her right to pursue private legal action to
collect any back wage that may be due them. In all cases, complaints
are to be acknowledged by letter explaining that there may be delays in
investigating the allegations and that the employee has the right under
section 16(b) of FLSA to file suit for back wages, liquidated damages,
court costs, and legal fees.
Secondly, as you point out, WHD district offices, managers, and
investigators are responsible for enforcing the labor standards
provisions of the Family and Medical Leave Act, the Migrant and
Seasonal Agricultural Worker Protection Act, the H-2A and H-1B programs
of the Immigration and Nationality Act, the Davis-Bacon Act, the
Service Contract Act, as well as the special minimum wage and child
labor provisions of the FLSA. Investigations in some of these programs
areas, such as the H-1B, government contracts, and the FLSA special
minimum wage programs are extensive and time consuming. These cases
simply take longer to investigate and longer to resolve than the
standard FLSA wage payment case. Offices that have a high concentration
of investigations in these equally important program areas may likewise
refer FLSA complaints of non- or under-payments to State agencies that
have comparable or more protective minimum wage and overtime statutes.
In the agricultural industry and in child labor cases, the safety of
workers-not just their pay-is paramount, but very few farm workers and
few teens file complaints with WHD. Complaints are a priority for WHD,
but regional and district offices must balance their complaint
workloads with an effective and aggressive directed, i. e., non-
complaint, enforcement program in many industries to ensure that these
vulnerable workers are employed safely and legally. The report does not
provide a complete perspective of how these other statutory priorities
affect the resource allocation decisions made by WHD managers. We
believe it is necessary and important to point out that, even with the
much needed infusion of additional investigators and other field staff,
WHD will never be in a position to investigate every complaint, will
still have to rely on conciliation or similar tools to resolve limited
allegations of minor non-compliance, and will be unsuccessful in
resolving some conciliations and some investigations. WHD national,
regional, and district office managers and WHD investigators and
technicians will continue to make difficult decisions in attempting to
protect the rights of as many workers as possible. Congress,
recognizing that WHD may not be able to investigate and resolve all
complaints, included the FLSA provisions in section 16(b) to give
individuals the right to file lawsuits on their own behalf.
The handling of some of the fictitious complaints and the case examples
cited in the report and the testimony demonstrated significant
shortcomings in WHD's program, and WHD leadership takes the findings
seriously. As a third point of clarification, however, it is important
to examine the context of the examples given to gain an understanding
of the actions taken or not taken. The full picture of efforts made to
investigate or address allegations of violations often cannot be
obtained from reviewing the database records or the physical case file.
One of the scenarios cited in the report, in the Committee hearing, and
in the media surrounding the hearing concerned an alleged child labor
violation in a California meatpacking plant. This fictitious complaint
was not recorded in the agency's database, and the testimony, the draft
report, and many media reports assumed that WHD "failed to investigate"
those allegations. WHD's subsequent examination of the facts and
background, however, revealed the following:
* On Wednesday, October 28, 2008, the Sacramento district office
management team received an email notice from the then-San Jose
assistant district director forwarding a written summary of an
anonymous message retrieved from voice mail by an investigator in the
San Jose field office.
* The investigator had retrieved the message that same day. According
to the email, the anonymous caller had alleged that minors 15 and 16
years of age were working during school hours, cutting and grinding
meat, and doing jobs using heavy equipment. In the voice mail message,
the caller identified the employer as CP&D Meats in Modesto,
California.
* Using the Internet, the investigator identified a CP&D Meats located
at 819 W. Roseburg Ave., #141, Modesto, CA 95350, telephone 209-433-
0455. The physical address, however, was found and confirmed to be a
private mail box center.
* Before forwarding the information to the San Jose assistant district
director, the investigator also checked in the California business
portal, Hoovers, Dun & Bradstreet, Yahoo, and other Web sites only to
find that there was no other publicly available information on CP&D
Meats.
* Upon receipt of the email from the San Jose assistant district
director forwarding the investigator's preliminary research, the
Sacramento assistant district directors examined Reference USA and
other Internet sources to try to locate CP&D Meats. The office
identified six meat companies in the Modesto area from Reference USA,
but no CP&D Meats. In the interim, an investigator was put on standby
ready to go to the establishment to conduct an investigation once the
physical location was identified. The only location that the office
could find, however, was the mail box center.
* Both district office assistant district directors analyzed the
complaint, which involved an anonymous caller, a company with only a
mail box location, no other reputable sources that could identify CP&D
Meats, and a company with no known physical address. Although they made
every effort to determine the legitimacy of the complaint, the district
office managers believed that the complaint was not credible. The
office management determined that it did not warrant further action
unless the complainant made a second call. The complaint was not
entered into the agency's database because it was found to be suspect.
GAO Recommendations:
Recommendation 1: The Administrator should reassess current policies
and processes and revise them as appropriate to better ensure that
relevant case information is recorded in WHD's database, including all
complaints alleging applicable labor law violations, regardless of
whether the complaint was substantiated, and all investigative work
performed on conciliations, regardless of whether the conciliation was
successful.
WHD agrees with the recommendation. It is WHD's current policy to enter
all complaints into the Wage and Hour Investigator Support and
Reporting Database (WHISARD) and maintain a record of all such
complaints. WHD has consistently defined "complaints" as all
allegations for which there is sufficient information to indicate that
a wage and hour violation has occurred or may be occurring. Given the
demonstrated failure to follow existing policy, WHD staff will again be
trained on the policies and procedures, and the Field Operations
Handbook (FOH) will be rewritten to be more explicit on the proper
handling of WHD complaints.
Recommendation 2: To provide assurance that WHD personnel interacting
with complainants and employers appropriately capture and investigate
allegations of labor law violations, and provide appropriate customer
service, the Administrator should conduct an assessment of WHD's
complaint intake and resolutions processes and revise them as
appropriate.
WHD agrees with the recommendation and will reevaluate existing
complaint intake and customer service policies and procedures. WHD will
also reintroduce customer service goals and measures in its annual
performance plan and will examine whether it can reinstitute customer
satisfaction surveys relating to complaint handling.
Recommendation 3: To improve the efficiency and effectiveness of WHD
personnel handling wage theft complaints, the Administrator should
explore providing more automated research tools to WHD personnel that
would allow them to identify key information used in investigating
complaints such as bankruptcy filings, annual sales estimates for
businesses, and information on additional names and locations of
businesses and individuals under investigation.
WHD agrees with the recommendation to explore more automated research
tools and will look into costs and licensing requirements for a variety
of such data sources. WHD notes, however, that it already has a policy
for obtaining key information on issues such as bankruptcy filings;
annual sales, and the additional names and locations of businesses
during the course of an investigation-although it requires that
investigators obtain the information from more traditional sources.
For example, investigators are directed to obtain information from the
employer on the type of bankruptcy being filed, the case number
assigned to the bankruptcy action, the date of the filing, and the
court in which the bankruptcy was filed. (FOH section 52a06(e)) They
are to obtain information on the annual dollar volume of the employer
under investigation during their review of its records. (FOH section
52b00) Investigators are instructed to review the monthly, quarterly,
or annual operating statements, the profit and loss statements, the
sales tax returns, and the state and Federal income tax returns to
determine the amount of sales made or business done when they are
attempting to establish enterprise coverage or the applicability of
certain exemptions. (FOH section 52h01) If necessary and appropriate,
WHD can issue an administrative subpoena for the records required to be
kept by employers under 29 C.F.R. 516, which includes all of the
records discussed above.
Recommendation 4: To assist in the verification of information provided
by employers under investigation, the Administrator should explore
gaining access to information maintained by IRS and other agencies as
needed through voluntary consent from business being investigated.
Although WHD has had numerous contacts with Internal Revenue Service
(IRS) officials on many occasions about the possibility of obtaining
information on employers, the IRS has never indicated that it had a
voluntary consent form by which WHD could obtain information on
employers. WHD will again contact IRS and seek information about
gaining access to IRS information through voluntary consent of the
business under investigation. As noted above, WHD can issue an
administrative subpoena where records are not voluntarily produced.
Recommendation 5: To provide assurance that WHD has adequate human
capital and resources available to investigate wage theft complaints,
the Administrator should monitor the extent to which new investigators
and existing staff are able to handle the volume of wage theft
complaints, and if not, what additional resources may be needed.
As widely reported, WHD is in the process of hiring 250 new
investigators. We anticipate that these new employees will be on board
by the end of the calendar year. Investigators undergo an intensive on-
the-job training that lasts for their first few years of employment,
during which time they develop the experience, judgment, and skills of
more seasoned investigators to address violations of all the laws that
WHD enforces. This infusion of new staff does, however, provide the
agency with the opportunity to reinvigorate the existing staff and
reinforce WHD's commitment to the workers in this country.
As we have noted throughout our response, WHD is committed to
addressing the shortcomings and deficiencies highlighted in your report
and testimony. We appreciate the opportunity to provide the above
comments. In addition, we have enclosed technical corrections to the
text of the draft report. If you have any questions, please do not
hesitate to contact us.
Sincerely,
Signed by:
Shelby Hallmark:
Acting Assistant Secretary:
Enclosure:
Technical Corrections to the Draft Report, "Department of Labor: Wage
and Hour Division Needs Improved Investigative Processes and Ability to
Suspend Statute of Limitations to Better Protect Workers Against Wage
Theft" (GAO-09-629):
Page 2 of the cover letter implies that there is no distinction between
investigations and conciliations in the assessment of civil money
penalties (CMPs). WHD's policy as discussed in FOH section 52f 14(b)
clearly states that "CMPs shall not be assessed in any conciliation nor
as the result of a 'self-audit' by an employer."
Page 9 of the cover letter, footnote number 6 describes a two year
statute of limitations for recovery of wages in court under the Davis-
Bacon Act. That statute of limitation does not apply to administrative
actions to recover back wages under the Davis-Bacon Act.
Also on page 9 footnote number 6, the statement on the statute of
limitations is correct in that there is a two year statute of
limitations on most FLSA cases. The filing of a complaint in a court of
competent jurisdiction stops the running of the two-year statute of
limitations. In such cases, WHD can go back two years from the date of
the court filing in a court of competent jurisdiction. As an
administrative matter, however, the period for which back wages are
sought is two years from the date the investigation begins, regardless
of how long it may take to assign the case.
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Gregory D. Kutz, (202) 512-6722, kutzg@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, individuals making key
contributions to this report included Erika Axelson, Christopher
Backley, Carl Barden, Shafee Carnegie, Randall Cole, Merton Hill,
Jennifer Huffman, Barbara Lewis, Jeffery McDermott, Andrew McIntosh,
Sandra Moore, Andrew O'Connell, Gloria Proa, Robert Rodgers, Ramon
Rodriguez, Sidney Schwartz, Kira Self, and Daniel Silva.
[End of section]
Footnotes:
[1] GAO, Department of Labor: Wage and Hour Division's Complaint Intake
and Investigative Processes Leave Low Wage Workers Vulnerable to Wage
Theft, [hyperlink, http://www.gao.gov/products/GAO-09-458T]
(Washington, D.C.: Mar. 25, 2009).
[2] In general, technicians focus primarily on conciliations but may
also work on self-audits and limited investigations in some offices.
Investigators work on non-conciliations, including full and limited
investigations and self-audits, but may also work on conciliations in
some offices. Unlike law enforcement officers, WHD investigators do not
have arrest authority. In this report, we use the term investigator to
refer to both investigators and technicians.
[3] In a self-audit, WHD determines which violations may exist and
allows the employer under investigation to conduct its own review of
records and calculate the back wages due employees.
[4] In its written response to this report, WHD stated that our child
labor complaint was reviewed by two assistant district directors who
determined that the complaint was bogus. However, because WHD had no
record of this complaint, we could not confirm WHD's account of
investigative steps taken. See appendix II for more information.
[5] In some offices with this policy, the complaint that the
conciliation was based on would be recorded in WHD's database. However,
the complaint would appear as though it had never been investigated,
because the investigative work and the outcome of the conciliation
would not be recorded in the database. Other offices do not enter the
complaint into the database.
[6] Because we followed a probability procedure based on random
selections, our sample is only one of a large number of samples that we
might have drawn. Since each sample could have provided different
estimates, we express our confidence in the precision of our particular
sample's results as a 95 percent confidence interval (e.g., plus or
minus 5 percentage points). This is the interval that would contain the
actual population value for 95 percent of the samples we could have
drawn. The 95 percent confidence interval surrounding our sample of
inadequate investigations ranges from 206 to 1,195 failures in the
population.
[7] The statute of limitations for recovery of wages in an individual
civil action under FLSA and the Davis Bacon Act is 2 years from the
employer's failure to pay the correct wages. 29 U.S.C. § 255. For
willful violations, in which the employer knew its actions were illegal
or acted recklessly in determining the legality of its actions, the
statute of limitations is 3 years. Federal courts have enforced the
statute of limitations even if Labor is investigating a complaint.
Shandelman v. Schuman, 92 F. Supp. 334 (E.D.Pa. 1950).
[8] For example, the Clayton Antitrust Act suspends the statute of
limitations for private lawsuits when the government begins a criminal
or civil antitrust action. 15 U.S.C. § 16(i)
[End of section]
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