Department of Labor: Wage and Hour Division's Complaint Intake and Investigative Processes Leave Low Wage Workers Vulnerable To Wage Theft
Released: 2009-03-25T00:00:00

Letter

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 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.

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 voicemail. While some offices have a policy of screening complainant calls using voicemail, 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. 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.

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. 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 voicemail, 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 voicemail 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, 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 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 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.

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. 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.

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.

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.