Employment:

Changes Needed To Deter Violations of Fair Labor Standards Act

HRD-81-60: Published: May 28, 1981. Publicly Released: May 28, 1981.

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The Fair Labor Standards Act (FLSA) sets standards for recordkeeping, minimum wage, overtime pay, and other protections for workers in establishments engaged in interstate and foreign commerce. Noncompliance with the act can severely harm low-wage workers.

While the act does protect employee wages when employers voluntarily comply, there are insufficient deterrents to discourage employers from violating the act. Administrative and statutory limitations can prevent the Department of Labor from fully recovering wages illegally withheld. GAO found extensive recordkeeping violations. However, there are no civil penalties for recordkeeping violations and, while criminal penalties exist, they are not used. There are also no civil money penalties for violating minimum wage and overtime violations. Although criminal and liquidated damage penalties exist for willful violations, they have not been used extensively. Many employers appear to have willfully violated the act. Labor officials rarely seek criminal sanctions because the Department of Justice is hesitant to prosecute them, and filing criminal suits reduces Labor's ability to recover employee back wages. Regional solicitors have seldom sought liquidated damage penalties against willful violators. As a result, habitual or flagrant violators receive no harsher treatment than do employers who inadvertently violate the act. The statute of limitations restricts an employer's obligation to repay employees back wages in such a manner that back wages are lost. Several administrative practices followed by Labor also limit the back wages that employees eventually recover.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: Congress should amend FLSA to give Labor the authority to assess civil money penalties large enough to deter recordkeeping violations. The legislation should provide for a formal administrative process to adjudicate cases when employers appeal Labor's assessments.

    Status: Closed - Not Implemented

    Comments: As of September 10, 1984, neither the 97th nor the 98th Congress had passed legislation to amend the FLSA as recommended by GAO. GAO will re-evaluate the recommendation in its followup report planned for issue in 1984.

    Matter: Congress should amend section 6 of the Portal-to-Portal Pay Act of 1947 so that the statute of limitations tolls when an FLSA violation is formally assessed by Labor.

    Status: Closed - Not Implemented

    Comments: As of September 10, 1984, neither the 97th nor the 98th Congress had passed legislation to amend the FLSA as recommended by GAO. GAO will re-evaluate the recommendation in its followup report planned for issue in 1984.

    Matter: Congress should amend FLSA to authorize Labor to formally assess a violation as well as the amount of illegally withheld back wages due, including interest.

    Status: Closed - Not Implemented

    Comments: As of September 10, 1984, neither the 97th nor the 98th Congress had passed legislation to amend the FLSA as recommended by GAO. GAO will re-evaluate the recommendation in its followup report planned for issue in 1984.

    Matter: Congress should amend FLSA to eliminate the section 16(c) liquidated damage provision of the act and, in its place, give Labor authority to assess civil money penalties large enough to deter minimum wage and overtime violations. The legislation should provide for an administrative system for adjudicating cases when employers appeal Labor's actions.

    Status: Closed - Not Implemented

    Comments: The followup review in 1983 disclosed that some Labor regional solicitors are more frequently seeking liquidated damage against FLSA violators. GAO believes that Labor needs to establish a policy providing for consistent use of the liquidated damages provisions by all 10 regional solicitors to determine whether section 16 can be an effective deterrent.

    Recommendations for Executive Action

    Recommendation: The Secretary of Labor should establish a program to systematically monitor firms found in violation of the act. All firms considered likely to again violate the act, and a sample of other firms that have violated the act should be reinvestigated within the 3-year statute of limitations period to assure that employers do not profit from continuing violations and that illegally withheld employee back wages are fully restored.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: Labor concurred with the recommendation, but it believes that if the recommendation is to be effectively implemented, more resources are needed. GAO will re-evaluate the recommendation in its followup report planned for issue in 1984.

    Recommendation: The Secretary of Labor should reinvestigate firms before settling cases referred to the regional solicitor's offices to assure that employers have come into compliance and to calculate any additional back wages owed to employees.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: Labor concurred with the recommendation but it believes that if the recommendation is to effectively implemented more resources are needed. GAO will re-evaluate the recommendation in its followup report planned for issue in 1984.

    Recommendation: The Secretary of Labor should issue instructions requiring compliance officers to compute the third year's back wages in willful violation cases.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: Labor does not concur if the recommendation applies to all willful violation cases. Labor said some courts have provided guidance on willful violations but the issue requires careful scrutiny where district courts have no prior precedent. Labor said the regional solicitors' input is needed on a case-by-case basis. GAO will reevaluate in its 1984 followup report.

    Recommendation: The Secretary of Labor should make more use of FLSA criminal sanctions for willful minimum wage and overtime violations, after consulting with Justice officials to coordinate criminal and civil litigation strategies.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: Labor did not concur with the recommendation and stated that regional solicitors have found that the resources of their offices are better devoted to seeking civil remedies which include restitution of back wages in the majority of cases. GAO will re-evaluate the recommendations in its followup report planned for issue in 1984.

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