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entitled 'Department Of Labor: Wage and Hour Division's Complaint 
Intake and Investigative Processes Leave Low Wage Workers Vulnerable to 
Wage Theft' which was released on March 25, 2009. 

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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 
voicemail 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 
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[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 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[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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