DOL Wage and Hour Division Targeted Enforcement – How Vulnerable Are You?
In July, I wrote “Wage and Hour is Increasing its Visibility and Ramping up FLSA Enforcement.” This month’s article concentrates on the Wage and Hour Division (WHD) component of the DOL strategic plan. Some employers are much more affected than others.
Wage and Hour Division strategic planning invariably involves enforcement initiatives in targeted industries. Employers of “low-wage” employees are always
given a high priority, because
- violations are common,
- employees are less likely to know how to file a complaint with the WHD, and
- employees are reluctant to file a complaint or to seek out a plaintiffs’ attorney.
Many employers considered to employ vulnerable workers treat the workers as “independent contractors,” subcontract the work, or utilize
third parties to pay the wages. These employers are targeted for investigation under the portion of the strategic plan that deals with “fissured industries.” By applying the broad FLSA employment relationship concepts, the WHD is usually able to establish that the principal is an employer (i.e., that the “independent contractors” are actually
employees). If there are legitimate subcontractors, the WHD develops evidence to establish that the principal (or prime contractor) and the subcontractors are joint employers. When a third party pays the wages (e.g., a staffing or temporary help firm, professional employer organization, or contract administrator), there are usually two or more joint employers. All responsible entities and individuals are obligated to achieve and maintain compliance.
Examples of fissured industries mentioned in the strategic plan:
- Transportation and Warehousing
- Home Health Care
- Child Care
- Meat and Poultry Processing
- Personnel Services (including temporary help and
Other examples of fissured industries based on DOL press releases regarding investigation and litigation activity:
- Cable/Satellite Television
- High-Speed Internet
- Retail Floor Covering
- Apparel Manufacturing
- Forestry and Logging
Two other categories of vulnerable workers mentioned in the strategic plan are:
- Individuals with disabilities employed by certificate holders under Section 14(c) of the FLSA
- Employees in statutory programs for which there is no private right of action
Consequently, it appears that work centers utilizing § 14(c) certificates and federal contractors (service and construction) are included in
the targeted investigation program.
Child labor enforcement is a priority, based on this statement in the strategic plan: “As stated previously, vulnerable workers are those who are at risk of exploitation at work, such as young workers —.” See “FLSA Child Labor Provisions – Even Inadvertent Violations Can Be Expensive” in the June 2012 BizKeys BIZWatch newsletter.
Additional industries that employ vulnerable workers and that are often included when targeted enforcement is planned:
- Restaurant and/or Catering
- Guard Services
- Health Care Facilities
Employers of homeworkers are often targeted for several reasons:
- Employees who work at home are vulnerable workers
- Homeworkers are often not paid overtime wages
- Inadequate piece rates may result in minimum wage violations
- Expenses (e.g., equipment investment and maintenance) cause minimum wage violations
- Poor hours worked records (specific FLSA record keeping requirements apply)
- Fissured industries (homeworkers are often incorrectly classified as “independent contractors”)
- Family members may assist, resulting in record keeping, monetary, and/or child labor violations
The DOL strategic plan for fiscal years 2011 through 2016 may be viewed at http://www.dol.gov/_sec/stratplan/StrategicPlan.pdf.
Pages 55 through 57 discuss plans for DOL outreach to vulnerable workers. Pages 30 through 32 include several WHD plans and goals. These excerpts will be of interest to most employers:
Protecting Vulnerable Workers
By concentrating its enforcement resources on increasing the percentage of vulnerable workers employed in compliance with the laws that the agency
enforces, WHD can ensure that workers receive the wages and overtime that they have legally earned – fair compensation. As stated previously, vulnerable
workers are those who are at risk of exploitation at work, such as young workers and workers who are reluctant to file complaints when they are subject
to violations at work. Vulnerable workers also include those that are employed in fissured industries – those sectors that increasing rely on a wide
variety of organizational methods that have redefined employment relationships: subcontracting; third-party management; franchising; independent contracting;
and other contractual forms that alter who is the employer of record or make the worker-employer relationship tenuous and less transparent. 12 These
are industries in which the employment relationship is splintered and the beneficiary of the labor is distanced from the workers who are providing the labor.
Employers in these industries often fail to recognize or classify such workers as employees, which leave the workers subject to unfair treatment and disparate
wages. Other vulnerable workers include individuals with disabilities and those employed in statutory programs for which there is no private right of action
and for whom the government offers the only remedy. WHD’s focus on workers employed in these programs and industries contributes to the Department’s
efforts to ensure fair compensation.
Targeting Fissured Industries
WHD’s enforcement program is guided by several key strategic principles. WHD’s directed investigations will be concentrated in high-risk fissured industries
that employ vulnerable workers or in program areas in which workers are at a higher risk of exploitation. High-risk industries include the agricultural,
janitorial, construction, and hotel/motel industries. WHD has begun measuring compliance levels and the severity of violations in these industries by
conducting baseline investigation-based compliance evaluations. These evaluations, in addition to providing measures of compliance, inform WHD on the
likely causes of violative behavior and point to strategies for addressing high violation rates industry-wide. WHD will continue to conduct investigation-based
compliance evaluations to determine the percent of prior violators who come into and stay in compliance with the provisions of the FLSA.
The Wage and Hour Division FY 2013 Congressional Budget Justification (http://www.dol.gov/dol/budget/2013/PDF/CBJ-2013-V2-09.pdf)
includes indications of the WHD’s priorities. Relevant portions of that document state:
WHD’s enforcement priorities are to ensure that the most vulnerable workers are employed in compliance with wage and hour laws.
Vulnerable workers are most frequently employed in high-risk industries, specifically industries with subcontracting, franchising, temporary employment, independent
contracting, and other contingent workforce characteristics. The employment relationship in these industries is often splintered and the beneficiary of the
labor is distanced from the workers who actually provide the labor by multiple layers of contracting. Vulnerable workers also include young workers,
agricultural workers, workers with disabilities, and those workers employed in statutory programs for which there is no private right of action. Employers
fail to classify such workers as employees leaving them without critical benefits, protections and disparate wages. The common thread among vulnerable
workers is a reluctance to complain of unfair or illegal treatment and the lack of opportunities to or knowledge about exercising their rights in the workplace.
Page WHD – 17
Vulnerable Workers: By concentrating its enforcement resources on increasing the percent of vulnerable workers employed in compliance with the laws that the agency
enforces, WHD can ensure that workplaces are safe and healthy and that workers receive fair compensation. Vulnerable workers are those who are at risk of
exploitation at work, such as workers who are reluctant to complain when they are subject to violations for fear of retaliation. WHD’s efforts to increase compliance
in the agricultural industry and among agricultural and young worker populations to whom additional safety and health standards apply specifically contribute to this outcome.
Vulnerable workers also include those that are employed in industries with subcontracting, independent contracting, and other contingent workforce characteristics.
Employers often fail to classify such workers as employees leaving them subject to unfair treatment and disparate wages. In FY 2012, WHD is focusing on industries
where independent contracting is just emerging as a business practice. The focus on independent contracting and the misclassification of employees as
independent contractors will continue in FY 2013. Other vulnerable workers include individuals with disabilities and those employed in statutory programs
for which there is no private right of action. The results of a FY 2010 survey of the compliance level of Community Rehabilitation Program certificate holders
under Section 14(c) of the FLSA showed a low level of compliance necessitating a reenergized commitment by WHD to these vulnerable workers.
WHD – 18
WHD’s focus on workers employed in these programs and in these industries contributes to the Department’s outcome effort to ensure fair compensation.
Worker Protection Strategies: In FY 2013, WHD will continue to employ resource-leveraging strategies and technologies to affect compliance with the
labor laws within its enforcement jurisdiction. The agency will continue to use its directed investigations to increase WHD presence in high risk industries,
i.e., those industries with high minimum wage and overtime violations and among vulnerable worker populations where complaints are not common. Obtaining
corporate-wide compliance, securing future compliance, and deterring future violations in industry sectors and among employers also supports the
Department’s outcome goal of securing fair compensation.
Penalties, sanctions, the FLSA hot goods provision, and similar strategies will be used as appropriate to ensure future compliance among violators and to deter violations
among other employers. WHD will pursue corporate-wide compliance strategies designed to ensure that employers take responsibility for their compliance
behavior. Public awareness and outreach to workers will be targeted to worker populations and industries in which workers are reluctant to report violations.
Outreach will be designed to reduce the perceived risk of filing a complaint with WHD and to increase the benefit to employees and their co-workers of
reporting violations. Employees and the worker advocate groups will be encouraged to report violations of WHD laws through a variety of means. The
newly-implemented ABA-referral system provides a valuable service to employees and allows WHD to shift resources to program areas that have no private right
WHD – 19
WHD will leverage its partnership arrangements with other federal, state and local agencies, and with worker and community-based organizations to satisfy the
following criteria: the partnership should benefit the overall workforce, be a means for disseminating information on rights and/or obligations, and mitigate
the fear of retaliation among workers who seek assistance in remedying violations. Stakeholder coordination will provide avenues for information gathering on compliance issues and will provide opportunities to develop meaningful compliance assistance tools. Public information releases, issued through various news media and new technologies will be used to inform the public of WHD laws, compliance actions taken, and penalties assessed. Press releases, in turn, have the potential of deterring violations among employers in a given geographic area.
As a synopsis, this is an alphabetical list of the
industries and employment scenarios that, in my opinion, are most likely to be targeted for investigation by the Wage and Hour Division:
Employers of Homeworkers
Employers of Minors (child labor enforcement)
Federal Contractors (service and construction)
Forestry and Logging
Health Care (e.g., nursing homes and hospitals)
Home Health Care
Meat and Poultry Processing
Personnel Services (including temporary help and staffing firms)
Restaurant and/or Catering
Retail Floor Covering (e.g., carpet and tile installation)
Telephone systems installation and maintenance
Transportation and Warehousing (especially courier and
Work Centers (§ 14(c) certification)
Limited resources of the WHD will not allow all of the above to receive national priority, but regional and
local enforcement initiatives will include some of them.
How vulnerable are you? If you are included in the above list, there is a much higher probability that your organization will be scheduled for
investigation. Even without “targeting,” investigations of these types of employment are common, and they generally yield violation findings. If the WHD district
office that serves your area selects your industry as a part of its local strategic plan, the probability of investigation more than doubles, in my opinion.
All employers are encouraged to maintain compliance with the FLSA and other WHD statutes. However, if you are included in one of the probable targeted industries or scenarios, I encourage you to take steps to “get your house in order” before the WHD pays a visit. The Wage & Hour Self-Audit Guide, in the Self Auditing area of www.BizKeys.com, will be helpful.
I am an employee, DOL, WHD Investigator is not familiar with SCA INVESTIGATION process, nor her boss. we have a federal contract agreement, project meet $2500 excess amt. the principal purpose is to provide a service utilizing service employees( archaeological survey) they,(WHI) will not proceed with the investigation, Help! can you advise?