Fair Labor Standards Act: Better Use of Available Resources and Consistent Reporting Could Improve Compliance
Published: 2008-07-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Over 130 million workers are protected from substandard wages and working conditions by the Fair Labor Standards Act (FLSA). This act contains specific provisions to ensure that workers are paid the federal minimum wage and for overtime, and that youth are protected from working too many hours and from hazardous conditions. The Department of Labor's Wage and Hour Division (WHD) is responsible for enforcing employer compliance with FLSA. To secure compliance, WHD uses enforcement actions, partnerships with external groups, and outreach activities. In response to a congressional request, we examined (1) the trends in FLSA compliance activities from fiscal years 1997 to 2007, (2) the effectiveness of WHD's efforts to plan and conduct these activities, and (3) the extent to which these activities have improved FLSA compliance.
section_title: What GAO Found
paragraphs: From fiscal years 1997 to 2007, the number of WHD's enforcement actions decreased by more than a third, from approximately 47,000 in 1997 to just under 30,000 in 2007. According to WHD, the total number of actions decreased over this period because of three factors: the increased use of more time-consuming comprehensive investigations, a decrease in the number of investigators, and screening of complaints to eliminate those that may not result in violations. Most of these actions (72 percent) were initiated from 1997 to 2007 in response to complaints from workers. The remaining enforcement actions, which were initiated by WHD, were concentrated in four industry groups: agriculture, accommodation and food services, manufacturing, and health care and social services. WHD's other two types of compliance activities--partnerships and outreach--constituted about 19 percent of WHD's staff time based on available data from 2000 to 2007. WHD did not effectively take advantage of available information and tools in planning and conducting its compliance activities. In planning these activities, WHD did not use available information, including key data on complaints and input from external groups such as employer and worker advocacy organizations, to inform its planning process. Also, in targeting businesses for investigation, WHD focused on the same industries from 1997 to 2007 despite information from its commissioned studies on low wage industries in which FLSA violations are likely to occur. As a result, WHD may not be addressing the needs of workers most vulnerable to FLSA violations. Finally, the agency does not sufficiently leverage its existing tools, such as tracking the use and collection of penalties and back wages, or using its hotlines and partnerships, to encourage employers to comply with FLSA and reach potential complainants. The extent to which WHD's activities have improved FLSA compliance is unknown because WHD frequently changes both how it measures and how it reports on its performance. When agencies provide trend data in their performance reports, decision makers can compare current and past progress in meeting long-term goals. While WHD's long-term goals and strategies generally remained the same from 1997 to 2007, WHD often changed how it measured its progress, keeping about 90 percent of its measures for 2 years or less. Moreover, WHD established a total of 131 performance measures throughout this period, but reported on 6 of these measures for more than 1 year. This lack of consistent information on WHD's progress in meeting its goals makes it difficult to assess how well WHD's efforts are improving compliance with FLSA.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of Labor’s  (Labor) Wage and Hour Division’s (WHD) efforts to enforce compliance  with the Fair Labor Standards Act (FLSA), as amended, which protects  over 130 million eligible workers from substandard wages and working  conditions. The act contains specific provisions designed to ensure that  workers are paid at least the federal minimum wage and for overtime, and  that youth are protected from working too many hours and from  hazardous conditions.
In response to your request, we examined WHD’s efforts from fiscal years  1997 to 2007 to ensure compliance with FLSA’s provisions for minimum  wage, overtime, and child labor. Accordingly, this statement provides  information on (1) the trends in WHD’s compliance activities from fiscal  years 1997 to 2007; (2) the effectiveness of WHD’s efforts to plan and  conduct these activities; and (3) the extent to which WHD’s activities have  improved FLSA compliance over this period.
To address these objectives, we obtained and analyzed data from WHD’s  Wage and Hour Investigator Support and Reporting Database (WHISARD)  on enforcement actions, back wages, penalties, partnerships, and outreach  activities from fiscal years 1997 to 2007, as available. All data we reported  were assessed for reliability and determined to be sufficiently reliable for  the purposes of this statement. We also analyzed annual performance  plans and reports in light of GAO’s work and guidance on strategic  planning and performance management for regulatory agencies, and  examined performance assessments conducted by outside experts at  WHD’s request. In addition, we reviewed relevant federal laws and  regulations. Finally, we interviewed WHD officials at the national and  regional level, and external organizations representing employers and  employees affected by WHD’s compliance activities and visited WHD and  state offices in California, Georgia, New Hampshire, Texas, and Wisconsin.  We conducted this performance audit from August 2007 through July 2008  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. For more information on our  scope and methodology, see attachment I.
subsections: section_title: Background
paragraphs: Since FLSA was enacted, Congress has amended it several times, including  recently increasing the federal minimum wage from $5.15 an hour, which it  has been since September 1997, to $7.25 an hour in three steps over a 2- year period ending in July 2009. In 2007, about 2 million workers were  earning at or below the federal minimum wage. FLSA also limits the  normal work week to 40 hours and requires that most employers pay 1½  times normal wages, or overtime pay, to eligible employees who work  longer hours. Furthermore, FLSA and its regulations limit the types of  jobs, number of hours, times of day, and types of equipment that youth can  work.
WHD’s headquarters office, 5 regional offices, and 74 district and field  offices with approximately 730 investigative staff are responsible for  enforcing employer compliance with labor laws. In 2007, WHD’s budget  was approximately $165 million.
WHD conducts several types of enforcement actions, ranging from  comprehensive investigations covering all laws under the agency’s  jurisdiction to conciliations, a quick remediation process generally limited  to a single alleged FLSA violation—such as a missed paycheck for a single  worker, in which a WHD investigator contacts the employer by phone to  try to resolve a complaint received from a worker.
WHD also initiates enforcement actions in an effort to target employers  likely to violate FLSA. For many years, WHD officials have considered low  wage workers to be most vulnerable to FLSA violations. In 2007, about 54  million workers were among this population. Furthermore, WHD officials,  researchers, and employee advocates have expressed concerns that  foreign born workers, although generally protected by FLSA to the same  extent as other workers, may be less likely than others to complain  because they may be unaware of federal laws or fear deportation if they  are undocumented. About 19 percent of low wage workers, as defined by  researchers in studies commissioned by WHD, were foreign born in 2007.
When WHD finds violations during enforcement actions, it computes and  attempts to collect back wages owed to workers and, where permitted by  law, imposes penalties and other remedies. Other remedies pertaining to  FLSA include the hot goods provision, which allows WHD to seize goods  created in violation of FLSA, and liquidated damages, which permit  workers to receive additional damages as a result of minimum wage or  overtime violations. If employers refuse to pay the back wages and/or  penalties assessed, WHD officials, with the assistance of attorneys from  Labor’s Office of the Solicitor, may pursue the cases in the courts.
WHD’s partnerships are formal written agreements with external groups— including states, foreign consulates, and employee and employer  associations—designed to improve compliance. Its outreach activities  include informational materials and seminars for employers and workers  designed to improve public awareness of the provisions of FLSA. WHD  holds seminars, provides training to employer associations, and distributes  materials on FLSA provisions to employers and workers. In addition, as  part of its outreach activities, WHD provides technical assistance to  employers through its local offices, national hotline, and Web site.
WHD, like other federal agencies, is required by the Government  Performance and Results Act of 1993 (GPRA) to establish a framework to  help align its activities with the agency’s mission and goals. It is also  required to develop long-term goals as well as establish performance  measures to use in assessing the success of its efforts. Furthermore, to  promote agency accountability, it is required to issue annual performance  reports on its progress in meeting these goals.
section_title: The Number of Enforcement Actions Has Decreased, although Enforcement Remained WHD’s Major Compliance Activity
paragraphs: From 1997 to 2007, the number of WHD’s enforcement actions decreased  by more than a third, from approximately 47,000 actions in 1997 to just  under 30,000 in 2007. According to WHD, although enforcement actions  have comprised the majority of its compliance activities, the total number  of actions decreased over this period because of three factors: the  increased use of more time-consuming comprehensive investigations, a  decrease in the number of investigators, and improved screening of  complaints to eliminate those that may not result in violations. Most of  these enforcement actions conducted from 1997 to 20007 were initiated by  complaints from workers. The remaining enforcement actions, which were  initiated by WHD, decreased 45 percent over the period, from  approximately 13,000 in 1997 to approximately 7,000 in 2007. WHD’s  partnerships and outreach activities constituted about 19 percent of its  total staff time.
subsections: section_title: Total Number of Enforcement Actions Has Decreased
paragraphs: From 1997 to 2007, the total number of FLSA enforcement actions WHD  conducted decreased, and lengthy, comprehensive investigations made up  an increasingly larger share of this total. Of WHD’s total resources, the  majority was spent ensuring compliance with FLSA, which covers more  workers than the other laws under WHD’s jurisdiction. Based on  available data from 2000 to 2007, the majority of staff time spent on FLSA  compliance activities—81 percent—was spent on enforcement. However,  the total number of enforcement actions, including investigations and  conciliations, declined from approximately 47,000 in 1997 to just under  30,000 in 2007, as shown in figure 1.
In addition, WHD attributed the decrease in the number of enforcement  actions to three factors. First, the proportion of comprehensive  investigations, which require more staff time than other types of  enforcement actions, increased over this period—from 39 percent of all  enforcement actions in 2000 to 51 percent in 2007. Agency officials said  that WHD emphasized comprehensive investigations in an effort to  increase future compliance because they provide an opportunity for WHD  to educate employers about the laws under its jurisdiction. Second,  officials cited the decrease in the agency’s investigative staff—and the loss  of experienced investigators in particular—as reasons for this trend. As  shown in figure 2, the number of investigators decreased over this period  by more than 20 percent, from 942 in 1997 to 732 in 2007. Finally, a senior  WHD official told us that the agency now screens out complaints that are  not likely to result in FLSA violations more effectively than it did  previously.
The majority (72 percent) of WHD’s enforcement actions were initiated in  response to complaints from workers. From 2000 to 2007, more than half  of these enforcement actions—approximately 52 percent—were  conciliations, which WHD conducted over the phone. Conciliations were  also the quickest type of enforcement action—taking 2½ hours, on  average, compared to nearly 35 hours, on average, for other types of  enforcement actions. However, conciliations are generally limited to a  complaint about a single violation involving only one worker. Although  this enforcement action allows initial complaints to be quickly closed, a  WHD-commissioned study found conciliations to be associated with an  increased probability of detecting violations in subsequent investigations  of a specific employer. Further information on complaints handled via  conciliations can be found in a companion GAO testimony being released  today for this hearing. Nearly all of the remaining enforcement actions  initiated by complaints from workers were comprehensive investigations  (38 percent) or limited investigations (7 percent). See figure 3 for the types  of enforcement actions WHD conducted in response to complaints from  2000 through 2007.
From 1997 to 2007, the number of WHD-initiated enforcement actions  declined by 45 percent, as shown in figure 4. As a proportion of all  enforcement actions, those initiated by WHD decreased slightly over the  period, from 28 percent of all actions in 1997 to 24 percent in 2007.
From 2000 to 2007, in planning and conducting WHD-initiated enforcement  actions, the agency primarily targeted four industry groups: agriculture,  accommodation and food services, manufacturing, and health care and  social services.  These four industries generally coincide with those for  which WHD had strategic initiatives for increasing compliance for several  years: agriculture, restaurants, garment manufacturing, and health care.  The agency conducted the largest proportion of WHD-initiated  enforcement actions—22 percent—in the accommodation and food  services industry. However, at the same time, WHD increased its focus on  the agriculture industry from 7 percent of WHD-initiated enforcement  actions in 2000 to 20 percent in 2007. The majority of enforcement actions  in the agriculture industry—82 percent—were initiated by WHD, while  actions in all other industries were usually initiated as a result of  complaints.
The number of enforcement actions and the proportion of WHD-initiated  enforcement actions varied among WHD’s five regions. For example,  WHD’s Southeastern region conducted the largest number of enforcement  actions—approximately 128,000 from 1997 to 2007. In contrast, the  Western region conducted the fewest—approximately 44,000. In addition,  because the Western region had a smaller workload of enforcement  actions initiated by complaints, nearly half of its enforcement actions  conducted from 1997 to 2007 were initiated by WHD, compared to only 14  percent for the Southeastern region. Agency officials said that when states  have no minimum wage or overtime standards, or weak enforcement of  such laws, WHD regions in which those states are located have heavier  complaint workloads. Across WHD’s five regions, regions with a greater  proportion of states with a minimum wage below the federal level also  had a greater proportion of enforcement actions that were initiated by  complaints.
section_title: Total Amount of Back Wages Assessed by WHD Have Increased, but the Use of Penalties is Limited
paragraphs: In the majority of its enforcement actions—approximately 75 percent from  2000 to 2007—WHD found employers in violation of FLSA, and most of  these violations were of the overtime provisions of FLSA. In 2007, for  example, nearly 85 percent of the FLSA violations WHD found were  related to overtime, while 14 percent were minimum wage violations, and  2 percent were violations of FLSA’s child labor provisions. When  violations were found, employers agreed to pay some amount of the back  wages owed to their workers approximately 90 percent of the time. In  addition, the total amount of back wages employers agreed to pay  increased by 41 percent, from approximately $164 million in 2000 to about  $230 million in 2007—the highest amount for this period. Furthermore,  the average amount of back wages per enforcement action nearly doubled,  increasing from approximately $5,400 per enforcement action in 2000 to  $10,500 in 2007. In those cases in which employers agreed to pay, most  (about 94 percent) resulted in employers agreeing to pay the full amount  they owed to workers. However, in 6 percent of the cases, employers  agreed to pay less than the amount they owed—an average of 24 cents for  each dollar owed. In addition, WHD could not provide us with data on the  amount of back wages assessed that were collected because WHD does  not track this information in their WHISARD database.
In addition to assessing back wages from employers found to be in  violation of FLSA, WHD may also assess penalties for repeated or willful  violations, or for child labor violations, but the agency made limited use of  these penalties from 2000 to 2007. WHD assessed penalties for 6 percent  of the enforcement actions conducted during this period in which it found  FLSA violations. This percentage increased to a peak of almost 9 percent  in 2001, before falling steadily to under 5 percent in 2006.
section_title: Partnerships and Outreach Activities Represent a Small Proportion of WHD’s Workload
paragraphs: Partnerships and outreach represent a small proportion of WHD’s  compliance activities, constituting about 19 percent of all WHD staff time  from 2000 to 2007. From 1999 to 2007, the agency established 78 formal  partnerships, 67 of which were still in place as of March 2008. Its earlier  partnerships were largely with state governments, while more recent  partnerships were primarily with employer groups. Other partnerships  included worker associations, foreign consulates, and other agencies  within the federal government. Overall, there was limited growth in the  number of partnerships that WHD established, with a peak of 15 in 2004.
According to its partnership agreements, WHD sought to utilize  partnerships in several ways to improve FLSA compliance. The most  common partnership activity was education, which was specified in 94  percent of partnership agreements. Education encompasses a number of  activities, including WHD attendance at seminars and training sessions  regarding wage and hour laws and the distribution of pamphlets and other  educational materials to workers and employers. The second most  common partnership activity was complaint referrals. More than half of  the partnership agreement documents contained language that encouraged  or provided guidelines for partners to refer relevant complaints to WHD  and, in the case of other governmental partners such as state labor  agencies, for WHD to refer cases to them.    monitoring agreements, which provided guidelines for employers to  use in monitoring themselves or their contractors for potential FLSA  violations and reporting violations to WHD;    sharing of enforcement information, mainly used in partnerships with  other federal or state enforcement agencies; and    bilingual assistance, which included the distribution of educational  materials in foreign languages and assistance with translation of wage  and hour regulations.
From 2000 to 2007, WHD conducted approximately 13,600 FLSA-related  outreach activities such as seminars, exhibits, media appearances, and  mailings. During this period, the percentage of staff time spent on  outreach events decreased, from approximately 22 percent in 2000 to 13  percent in 2007. From 2003 to 2007, the largest proportion of outreach  events targeted employers, although more diverse audiences have been  included in recent years. Over this period, employers were the intended  audience for 46 percent of the outreach events WHD conducted. In  contrast, workers were the intended audience for 14 percent of events.  However, over this period, WHD began to target more diverse groups of  non employer groups, including schools, governmental agencies, and  community-based organizations.
section_title: WHD Does Not Effectively Use Available Information and Tools in Planning and Conducting Its Compliance Activities
paragraphs: In planning and conducting its compliance activities, WHD does not  effectively use available information and tools. First, WHD does not use  information, such as data on the number of complaints each office  receives or the backlog of complaints for each office, or other information,  such as input from external groups. This information could help the  agency manage its workload and allocate its staff resources accordingly.  Second, in targeting employers for investigation, WHD focused on  employers in the same industries from 1997 to 2007, despite findings from  its commissioned studies intended to help it focus on low wage industries  in which FLSA violations are likely to occur. Finally, the agency may not  sufficiently leverage existing tools such as hotlines and partnerships to  improve compliance with FLSA.
subsections: section_title: WHD Does Not Use Available Information to Inform Its Planning Efforts
paragraphs: In planning its FLSA compliance activities, WHD does not use the  following information to focus its work:  Information on complaints received from workers. WHD does not  use key information regarding the complaints it receives from workers  that could help the agency manage its workload. First, WHD does not have  a consistent process for documenting the receipt of, or actions taken in  response to, complaints. According to guidance on GPRA planning,  understanding customers’ needs, such the demand for WHD’s services in  response to complaints, is important to help ensure that an agency aligns  its activities, processes, and resources to support its mission and help it  achieve its goals. Although WHD’s Field Operations Handbook provides  guidelines for recording complaints, and there is a complaint intake screen  in the agency’s WHISARD database, the handbook also states that, even if  a complaint indicates probable violations, it may be rejected by district  office managers based on factors such as the office’s workload or  available travel funds. Therefore, WHD staff usually enter a complaint into  the database only when it is likely to result in finding of violations. In  addition, although one office we visited maintained separate logs of all  complaints received, WHD does not require all complaints, including the  actions taken, to be recorded. As a result, WHD does not have a complete  picture of all of the complaints it receives and the agency cannot be held  accountable for the actions it takes in response to complaints.
Backlogs of complaints. Although the number of complaints each office  receives greatly affects its workload and ability to initiate investigations,  WHD does not have a consistent process for tracking information on  complaint backlogs across its offices. For data to be useful to GPRA  planning and an agency’s decision making, they must be complete,  accurate, and consistent. WHD officials told us that the agency’s offices  vary in how they track their backlogs of complaints. However,  headquarters officials said that they do not track the regional or district  offices’ backlogs, nor do they know how they are measured. Therefore,  WHD cannot consider these backlogs in its planning efforts, including its  allocation of staff resources to its regional and district offices.
Input from external groups such as employer and worker  advocacy organizations with an interest in WHD’s activities. In  the past, WHD held meetings with external stakeholders—organizations  with an interest in the agency’s activities—at a national level, but more  recently, the agency has relied on second-hand information from its  district offices to identify the concerns of these groups. GAO has reported  that it is important to involve external stakeholders in the planning  process, such as developing goals and performance measures. Agencies  that have involved these external groups report that this cooperation has  allowed them to more effectively use their resources. According to agency  headquarters officials, prior to 2000, WHD held meetings at a national level  with external organizations such as industry groups, advocates, unions,  and state officials. Around 2000, WHD began relying instead on its district  office staff to gather input on external stakeholders’ concerns and provide  this information at WHD’s annual planning meetings. However, these  planning meetings are not held until after the agency’s national and  regional priorities are set, thereby limiting external stakeholder input in  the early phases of the process. In addition, WHD headquarters officials  said its district offices report input from external stakeholders as part of  annual performance reports submitted to the regional offices. However,  we found little evidence of stakeholder recommendations in WHD’s  planning and reporting documents.
State labor regulations and levels of enforcement. In planning the  allocation of staff to its regional offices, WHD does not consider  information on state labor laws or the extent to which these laws are  enforced for the states covered by the district offices in each region.  According to GPRA guidance, understanding the external environment in  which its offices operate should be a key part of WHD’s strategic planning  process. Because WHD offices in states with weaker labor laws or  enforcement may receive more complaints, these factors may directly  affect the workload of WHD’s district offices. For example, according to  WHD officials, because the state of Georgia does not conduct  investigations of overtime or minimum wage violations, the Atlanta WHD  district office has a heavy workload of complaints regarding these issues.   Officials told us that WHD headquarters does not consider state laws or  enforcement in making allocations of investigators to its regions, and that  each region has been allocated approximately five investigators each year  for the past few years.
section_title: WHD Did Not Change How It Targets Its WHD- Initiated Investigations, despite Information from Its Studies of Low Wage Industries
paragraphs: From 1997 to 2007, in targeting employers for investigation, WHD focused  on employers in the same industries despite obtaining information from its  commissioned studies on low wage industries in which FLSA violations  are likely to occur. During its annual planning process, the agency  develops national and local initiatives that focus on selected industries in  which it will conduct investigations. Individual employers within these  industries are often selected for these WHD-initiated investigations in one  of two ways. WHD either obtains a statistical sample of employers or  selects them using the judgment of its staff—for example, by looking  through a telephone directory of local businesses.
Over this period, WHD considered low wage workers to be most  vulnerable to FLSA violations, but it did not clearly define who these  workers were or identify the industries in which they were concentrated  until 2004. Instead, according to WHD officials, the agency relied primarily  on its historical enforcement data—the majority of which consisted of  actions initiated by complaints—and observations from regional and  district officials to focus its compliance activities. WHD centered its work  on nine industries, and based many of its performance indicators on  garment manufacturing, nursing homes, and agriculture. However, district  officials told us that it was difficult to contribute to all of these national  goals because few of WHD’s offices are located in areas that have a  substantial number of employers in the garment manufacturing industry to  investigate.
To ensure that all of its offices could contribute to its national goals, and  that industries in which workers are less likely to complain were included  in its plans, WHD changed its focus to include more low wage industries.  In 2002, the agency commissioned a series of studies to define the  population of low wage workers, and to determine in which industries  these workers were most likely to experience minimum wage and  overtime violations. Researchers used data from the Bureau of Labor  Statistics to estimate how common and severe minimum wage and  overtime violations were throughout all industries. They found that 33  industries had a high potential for violations of the minimum wage and  overtime provisions of FLSA, including 9 that ranked highest nationally for  violation potential. However, since the completion of the studies in 2004,  WHD has not used this information to substantially refocus its efforts or  target its investigations. The proportion of WHD-initiated investigations  targeting these top 9 industries has risen by approximately 2 percent since  2004. Therefore, the investigations initiated by WHD may not have  addressed the needs of low wage workers most vulnerable to FLSA  violations.
Local WHD officials also told us that despite the results of these studies,  the focus of their investigations has not substantially changed. For  example, the agriculture industry, which is not on the national list of 33  priority industries, was the focus of 16 percent of WHD-initiated  investigations from 2005 to 2007. In addition, WHD headquarters officials  told us that the agency cannot regularly measure its progress in improving  compliance in the 33 industries because it does not have the resources  needed to conduct the investigations it uses to evaluate whether  compliance has improved. Finally, most district-level WHD officials told us  they were not aware of the specifics of these commissioned studies. For  example, at one WHD district office, the managers told us brief  presentations on some of the studies were provided at management  meetings, but copies of the full studies were not provided, and  investigators we spoke with at this office said they were not aware of the  studies and therefore could not incorporate the results of these studies  into planning their work.
section_title: WHD Does Not Sufficiently Leverage Existing Tools to Increase Compliance
paragraphs: WHD does not sufficiently leverage its existing tools to increase  compliance. These include the following:  Use of penalties for willful and repeat violations. WHD does not  know the extent to which it has leveraged its statutory penalty authority  because it does not track how often willful or repeat violations are found.  WHD can assess penalties when employers willfully or repeatedly violate  FLSA but WHD does not track how often it finds repeated or willful  violations or when penalties are not assessed for such violations. In  addition, a study commissioned by WHD showed that, when employers are  assessed penalties, they are more likely to comply in the future and other  employers in the same region—regardless of industry—are also more  likely to comply. Although the agency has occasionally addressed the use  of penalties in its performance plans—for example, by including a  measure for increasing the use of penalties and other remedies in its 2007  plan–WHD managers did not emphasize the importance of these tools by  including them in the agency’s performance reports, which are used by  external groups to hold the agency accountable. Furthermore, there was  no quantifiable goal associated with the measure in the 2007 plan, and  officials told us that it was intended only as a reminder to staff that  penalties were one tool they could use to encourage compliance.
Collection of back wages and penalties. WHD began collecting more  data on its enforcement actions in 2000 with the introduction of its  WHISARD database. However, the agency does not use information on  whether back wages and penalties assessed are collected to determine  whether it is fulfilling its mission of ensuring that workers receive the  wages they are owed or verify that employers are being penalized for  violating FLSA, respectively. WHD headquarters officials in charge of  strategic planning told us they do not know whether back wages or  penalties are collected from employers, although this information is  tracked in its financial accounting systems. They also could not provide  information on how long it takes the agency to collect back wages or  penalties.
Hotlines and office telephone lines. WHD is not fully utilizing its  hotlines or its regular office telephone lines to reach potential  complainants. WHD has set up some hotlines through partnerships, but  these hotlines are not always effective. For example, one partnership set  up a hotline targeted toward Latino workers and hosted by the Mexican  Consulate. One member of the partnership said that she tested the hotline  repeatedly over 6-month period but the phone was never answered. When  we made test calls to this hotline asking about wage-related issues, staff  either did not refer us to WHD or other government agencies or did not  return our calls. Phone systems also vary among WHD’s offices, and only  some have the capacity to take messages outside of office hours, when  workers with complaints may be more likely to call. For example, at one  district office, we were told that they did not have an answering machine  on which callers could leave messages after hours because they had no  one to return these calls during the day. In addition, state officials and  advocates said that some local WHD offices are not always available by  phone to help callers with detailed questions. At one district office we  visited, investigators said that calls went straight to a voice mail system,  where callers were instructed to leave a message and wait for a return call  from WHD staff.
Partnerships. Although partnerships can help WHD leverage resources  and reach potential complainants, some of WHD’s partners, including state  labor agency officials, told us that WHD does not always provide adequate  support to its partnerships. First, some state officials said that WHD does  not notify them of the status of complaints or of actions taken. For  example, one state official told us about a case in which an employer  violated state and federal labor laws, but WHD settled with the employer  without consulting state officials. The state officials said they were  unhappy with the settlement, mainly because it resulted in the employer  paying less in back wages. Second, WHD has not allowed its investigators  to take part in some joint investigations with state labor agencies or send  investigators to events intended to help educate the worker community.  Third, several of WHD’s partners told us that the agency has not provided  adequate financial support for outreach events, leaving the funding to  nonprofit organizations. For example, WHD officials in Houston told us  that, although one of its partnership’s billboards advertising a hotline for  Latino workers needed to be replaced, the office was unable to provide  any funding to replace them because WHD headquarters had not approved  the funds. In California, WHD officials told us they do not support  expanding the agency’s Employment, Education, and Outreach (EMPLEO)  partnership—which received an award from Harvard University’s Kennedy  School of Government for successful innovation—to other areas of the  state or hold certain outreach events because these efforts would generate  more referrals than the agency could handle.
section_title: The Extent to Which WHD’s Activities Have Improved FLSA Compliance Is Unknown
paragraphs: The extent to which WHD’s activities have improved FLSA compliance is  unknown, because WHD frequently changes both how it measures and  how it reports on its performance. When agencies provide trend data in  their performance reports, decision makers can compare current and past  progress in meeting long-term goals. While WHD’s long-term goals and  strategies have generally remained the same since 1997, WHD often  changes how it measures its progress, keeping about 90 percent of its  measures for 2 years or less. According to WHD officials, the agency  decided to discontinue some of its measures either because they had been  met or because WHD realized they were not appropriate. In addition, while  WHD specified a number of performance measures each year in its  planning documents, it included less than one-third of them in its annual  performance reports. Moreover, although WHD established a total of 131  performance measures throughout the period from 1997 to 2007, it  reported on 6 of them for more than 1 year. This lack of consistent  information on WHD’s progress in meeting its goals makes it difficult to  assess how well WHD’s efforts are improving compliance with FLSA.
Since the first time Labor was required to report on it performance in  1999, WHD has included similar performance goals and strategies related  to its FLSA compliance activities in its annual performance reports. For  1999 to 2006, WHD had the general outcome goal of increasing compliance  with worker protection laws and, by 2002, also had a more program- specific goal of ensuring that American workplaces legally, fairly, and  safely employed and compensated their workers. For 2007, the agency  reported on the program-specific goal of ensuring workers received the  wages due. Also, from 1999 to 2007, the agency reported on how it used its  three types of compliance activities—enforcement, outreach, and  partnerships—to reach its goals.
While its goals and strategies did not change, WHD often changed how it  measured its progress. From 1997 to 2007, WHD included 131 FLSA-related  performance measures in its plans but kept about 90 percent of these for 2  years or less. A majority of these measures—67 percent—were reported  for only 1 year. Furthermore, for most of the period from 1997 to 2007,  WHD had strategic initiatives for improving compliance in its targeted  industries—agriculture, garment, and health care—as well as a strategic  initiative designed to measure and reduce recidivism by re-investigating  employers it had previously investigated and found in violation of FLSA.  However, the agency also frequently changed how it measured progress in  both of these areas. For example, although WHD had 10 performance  measures for improving compliance in agriculture from 1997 to 2007, it  kept only 1 of them for more than a year. These frequent changes to its  performance measures have affected the ability of agency officials and  outside observers to understand WHD’s progress and for agency officials  to make decisions for future strategic planning. In a recently issued study  WHD commissioned to obtain recommendations for future performance  measures for reducing recidivism, researchers found that they could not  assess the agency’s progress to date because of the frequent changes in its  measures.
According to WHD officials, the agency discontinued some of its  performance measures because they had been met or were not  appropriate. Specifically, WHD officials stated that during their annual  planning process, they make ongoing refinements to their performance  measures. Throughout the years, the agency has decided to discontinue  measures for several reasons, including (1) the agency data it used to  assess its progress in meeting the measure were not reliable; (2) agency  staff did not understand how the measures related to their work; (3) staff  did not believe the agency could influence the measure through its work;  (4) the issue the measure was attempting to address was no longer  relevant; and (5) the agency had met the targets for the measure  repeatedly. For example, although growers typically rotate their crops  annually, WHD’s performance measures for the agriculture industry  focused on compliance among growers of specific crops, such as lettuce  and tomatoes. After 4 years of using various performance measures based  on crops, WHD realized that because growers often change crops, this  approach was not measuring compliance for the same group of growers  over time and discontinued using these measures.
In addition to frequently changing its performance measures, WHD does  not report on many of the measures. While WHD specified a number of  performance measures each year in its planning documents, it included  less than one-third of them in its annual performance reports. Of the 131  FLSA-related performance measures, WHD reported on 40 of them (29  percent) in its annual performance reports. WHD officials attributed this  lack of reporting to departmental space limitations in annual reports.
Moreover, although WHD reported on 40 of its performance measures  from 1999 to 2007, it reported on only 6 of them for more than 1 year. The  agency met 30 of its goals (75 percent) for the measures on which it  reported, and meeting the goals was among the reasons WHD officials  cited for discontinuing the use of some measures. However, nearly half of  the measures WHD met were designed to establish baselines for  understanding the current state of compliance or an agency process; they  were not meant to measure agency progress. Overall, the lack of  consistent reporting further complicates the ability of those within and  outside the agency to assess how well WHD’s efforts have improved  compliance with FLSA.
section_title: Conclusions
paragraphs: While WHD is responsible for protecting some of the basic rights of U.S.  workers by enforcing FLSA, it does not know how effectively it is doing  so. As with all government agencies, WHD must determine how to  strategically manage its limited resources to help ensure the most efficient  and effective outcomes. Although WHD has been challenged by reductions  in its investigative staff, it has not used all available information to  promote compliance, such as the studies in which it has invested that  could inform how it targets employers for WHD-initiated investigations. In  addition, it has not fully leveraged available tools, such as hotlines, office  phone lines, and partnerships, that could extend its reach or tracked  penalties and collection of back wages to know their impact on  compliance. Furthermore, by not consistently measuring and reporting its  progress in meeting the unchanging goal of ensuring FLSA compliance, the  agency is unable to account for its progress more than a decade after  GPRA implementation.
section_title: Recommendations for Executive Action
paragraphs: To more effectively plan and conduct its compliance activities, we  recommend that the Secretary of Labor direct the Administrator of WHD  to    enter all complaints and actions taken in response to complaints in its  WHISARD database, and use this information as part of its resource  allocation process;    establish a process to help ensure that input from external  stakeholders, such as employer associations and worker advocacy  groups, is obtained and incorporated as appropriate into its planning  process;  incorporate information from its commissioned studies in its strategic  planning process to improve targeting of employers for investigation;  and  identify ways to leverage its existing tools by improving services  provided through hotlines, office phone lines, and partnerships, and  improving its tracking of whether penalties are assessed when repeat  or willful violations are found and whether back wages and penalties  assessed are collected.
To provide better accountability in meeting its goal of improving employer  compliance, we recommend that the Secretary of Labor direct the  Administrator of WHD to establish, consistently maintain, and report on its  performance measures for FLSA.
section_title: Agency Comments
paragraphs: We held a meeting with WHD officials on June 20, 2008, in which we  discussed our findings and recommendations in detail. At that meeting,  they provided comments on our recommendation regarding obtaining  input from external stakeholders. We adjusted the recommendation to  indicate that they consider stakeholder input only as appropriate. They  also indicated that their priorities do not currently include entering  information on all complaints received from workers. However, their  database would allow them to enter this information. In addition, we  provided a copy of our draft statement to WHD, but the agency declined to  comment on it prior to the hearing.
Mr. Chairman, this completes my prepared statement. I would be pleased  to respond to any questions you or other members of the Committee may  have.
section_title: GAO Contacts
paragraphs: For further information, please contact Anne-Marie Lasowski at   (202) 512-7215. Individuals making key contributions to this testimony  include Revae Moran, Danielle Giese, Amy Sweet, Miles Ingram,   Susan Aschoff, Sheila McCoy, John G. Smale, Jr., Jerome Sandau,   and Olivia Lopez.
section_title: Attachment I: Scope and Methodology
paragraphs: To identify the trends in WHD’s FLSA investigations and other compliance  activities from fiscal year 1997 to 2007, we obtained and analyzed data  from WHD’s Wage and Hour Investigator Support and Reporting Database  (WHISARD). The data included information on WHD’s enforcement  actions, back wages, penalties, partnerships, and outreach activities. All  data we reported were assessed for reliability and determined to be  sufficiently reliable for the purposes of this statement. In addition, we  gathered quantitative and qualitative information from agency officials on  factors that may have influenced these trends, including staff resources.  To assess the effectiveness of WHD’s planning and implementation of  compliance activities and whether these activities led to improvements in  FLSA compliance, we analyzed WHD’s annual performance plans and  reports in light of GAO’s work and guidance on strategic planning and  performance management for regulatory agencies. In addition, we  examined performance assessments conducted by outside experts at  WHD’s request.
Finally, for all of these research objectives, we interviewed WHD officials  at the national and regional level and external organizations representing  employers and employees affected by WHD’s compliance activities and  visited WHD and state offices in California, Georgia, New Hampshire,  Texas, and Wisconsin. We selected these states using several criteria that  would provide a mix of characteristics, including the concentration of  hourly workers earning at or below the federal minimum wage in each  state; the number of formal agreements between WHD and state or local  organizations; and geographic diversity. We also made test calls to WHD’s  local and national hotlines. In addition, we reviewed all relevant laws and  regulations. We conducted this performance audit from August 2007  through July 2008 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.
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