WHD Stats Tell Mixed Story on Enforcement Success

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By Ben Penn

Jan. 26 — The Labor Department's Wage and Hour Division has tried to improve efficiency and expand its impact by transforming investigative tactics in the current administration, but the latest enforcement statistics reveal equivocal progress, observers told Bloomberg BNA.

Through enforcement of the Fair Labor Standards Act and other statutes, the WHD recovered back wages totaling $246.8 million in fiscal year 2015, a slight increase from $240.8 million a year earlier, according to annual figures the agency released Dec. 22 (30 LRW 18, 1/6/16)(10 WIR 01, 1/4/16)(14 WLR 1, 1/1/16)(241 CBEM, 12/23/15)(245 DLR A-4, 12/22/15). In a jointly issued fact sheet, the division touted its recovery of earnings for more than 240,000 workers in FY 2015. This represented “another year of meaningful progress toward our goal of ensuring a fair day's pay for a fair day's work,” the division said.

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And while the annual total has soared by 43 percent since FY 2009, compared with FY 2012's $280.7 million, recoveries are down 12 percent, an analysis of the data shows.

The decline, followed by a relatively flat pace over 2012-2015, has caused some wage and hour practitioners to scratch their heads about the WHD's recent performance, while others attributed the numbers to inadequate congressional funding and new initiatives yet to return results.

David Weil, administrator of the WHD since 2014 and a former economics professor, told Bloomberg BNA in a Dec. 17 interview that he measures success by examining more nuanced data, rather than just yearly back wage recoveries. The administrator has said that his ultimate mission is to raise compliance—partly from voluntary outreach—rather than playing “gotcha” (217 DLR C-2, 11/10/14).

Multiple variables can skew the figures, meaning an analysis that just looks at the data without considering underlying trends would be misleading, sources said. Still, the statistics can lend credence to a few narratives about the WHD enforcement regime, as the administration's final year unfolds.

Back Wages Rise With Investigators

Weil told Bloomberg BNA Jan. 19 that while he's pleased with the strides his investigative team has made in certain areas, he's concerned about staffing. “If we have fewer investigators, the absolute amount of work that we can do is diminished, and that's a concern,” he said.

The omnibus package for the current fiscal year inked in December (243 DLR A-7, 12/18/15) didn't fund the president's request for 300 additional WHD investigators, keeping the total at about 1,000 investigators in the field this year.

The staffing level's importance comes to light when considering that the entire gain in annual recoveries since the prior administration occurred in Obama's first term, when the WHD expanded its investigative team, a Bloomberg BNA analysis of the agency statistics reveals. The second-term retreat in wage collections took place as the number of investigators plateaued, and it then took a modest dip (as shown in the accompanying graphic).

Over the 12 months of FY 2009, which spanned most of the president's first year, the division had already added 163 investigators, before bringing on an additional 141 in FY 2010. With the new staff in place, the amount recovered the following year, FY 2011, leaped by $48.8 million, and by $55.9 million the following year.

As the staff leveled off—hovering between 1,067 and 976 investigators between FY 2010 and FY 2015, the total back wages collected over the past three years held within a range of $240.8 million to $250.0 million.

This pattern, according to Ross Eisenbrey, vice president of the Economic Policy Institute, illustrates a major reason for the statistical slowdown. The department's commitment to finding remedies for workers in need is clear, but without proper staffing, “you're going to get fewer cases and less back pay … and that's a choice Congress makes,” Eisenbrey told Bloomberg BNA Jan. 5.

EPI conducts research on labor economics and endorses “public policies that protect and improve the economic conditions of low- and middle-income workers,” the left-leaning think tank says on its website.

Former WHD Chief: Funding Level Not Low

Even though Congress didn't allocate the funding hike the president requested, the WHD still receives far greater investments lately than during the prior administration, pointed out Tammy McCutchen, who was WHD administrator from 2001 to 2004.

The budget inched up incrementally each year under President George W. Bush, from $152.6 million in 2001 to $175.7 million in 2008. In the current Democratic administration, Congress appropriated $193.1 million to WHD in 2009, which then increased to $227.6 million in 2010, before leveling off for the most part in the subsequent five years.

In a Jan. 22 e-mail to Bloomberg BNA, McCutchen pointed to back wages as a percentage of the WHD budget as evidence that the division could be squeezing more out of its investigations.

For instance, in 2003, the WHD had a budget of $155.9 million and recovered $212.5 million in back wages, meaning the agency collected back wages at a rate of 136.3 percent of its budget. The 2015 ratio was 108.9 percent.

“Today, the WHD could be doing more with the greater resources that they have,” said McCutchen, now a principal at Littler Mendelson P.C. in Washington.

‘Greater Deliberation’ on Fissured Industries

Not all management side wage and hour attorneys said they felt the FY 2015 data reflected poorly on the department's performance.

The statistics don't suggest “that there is a lackluster drive to enforce the FLSA” and other laws regulated by the WHD, Brett Bartlett, a partner in the wage and hour litigation department at Seyfarth Shaw LLP in Atlanta, told Bloomberg BNA Jan. 22.

“What I think is actually happening is there has been a greater deliberation and careful strategy setting by the department to, actually in 2016 and beyond, focus on those” fissured industries that Weil has targeted, Bartlett said. “But I still believe that we'll continue to see proactive and aggressive investigation” by the WHD, Bartlett added.

Prior to joining the agency, Weil researched and wrote a book on what he dubbed the fissured workplace—or companies shedding their own workers in favor of temporary staff or other contracted labor for functions that fall outside of core competencies.

Since taking office, Weil has ordered enforcement efforts that consider the possibility that multiple employers may be responsible for compliance at a single workplace. This initiative formed the basis of an administrator's interpretation on joint employment published Jan. 20 (12 DLR C-1, 1/20/16). Six months earlier, the WHD issued an AI on independent contractor misclassification (135 DLR AA-1, 7/15/15), another investigative focal point of late.

Several sources, including McCutchen, agreed with Bartlett's assessment that the complex nature of Weil's enforcement priorities could be contributing to an abatement in overall wage recoveries.

Wage and hour practitioners observed a higher concentration of cases that place the employer-employee relationship under a microscope. But those investigations aren't necessarily suited for a quick receipt of unpaid wages that swiftly correspond on a stats page.

Attempts to target nontraditional workplace structures “are very complex investigations,” Karen Dulaney Smith, a WHD investigator from 1987-1999, told Bloomberg BNA Jan. 15. “If you go into an establishment where the employer knows there's an employee relationship, then it's a matter of” whether “the employer is paying minimum wage and overtime” and keeping proper records.

“[But] if you have to go in and establish, first of all, that the industry is covered by the law and the people working for the employer are actually employees, that is time consuming,” added Dulaney Smith, now an independent wage and hour consultant based in Austin, Texas.

When asked in a follow-up interview Jan. 19 if he thinks the complexity around his enforcement approach might be preventing greater wage recoveries, Weil said these cases are “definitely a more complicated kind of investigation to do,” and require more homework before an investigation begins. This involves spending a lot of time evaluating the results of previous cases, he said.

The division's pursuit of more H-2B investigations could also be stalling the wage recovery numbers, because those are “extremely time consuming and may not recover the same level of back wages,” Dulaney Smith said.

Progress Seen in Other Areas

Though some look to annual wage recovery as a sign of progress, the WHD fact sheet page highlights enforcement achievements in other areas. For instance, the agency notes, “In fiscal year 2015, more than 42% of our investigations were agency-initiated, up from 35% just 6 years ago.”

Agency-initiated, also called targeted or directed, refers to one of the major changes undertaken by the WHD in recent years. Under this approach, the agency has placed greater attention on proactively scouring workplaces deemed more likely to yield violations, while investigations in response to worker complaints have taken a back seat.

Yet a year-by-year comparison shows the percentage of investigations that were agency-initiated has actually fallen the past two years, after reaching an administration peak of nearly 45 percent in FY 2013.

A drop by a few percentage points in the past few years isn't a sign of failure, Seth Harris, deputy labor secretary from 2009-2014, told Bloomberg BNA Jan. 4. The targeted investigation percentage is “still up substantially from where it was at the beginning of the Obama administration,” said Harris, who now practices law at Dentons in Washington, D.C., and teaches at Cornell University.

The WHD has shifted enforcement tactics since 2009 in two other key ways: responding to complaints by prioritizing them based on substance and potential impact and targeting investigations to benefit employees who don't feel they have a voice in the workplace.

In carrying out this transformation, the WHD “has been tremendously successful,” Harris said. “They're really focusing on the places where the biggest, most serious problems exist for the workers who are most disempowered.”

Weil Sees Success

The fruits of the new strategies are borne out in the latest statistics in a few areas, Weil said. “Probably the best measure” of whether the directed investigations are “going to the right places” is the percentage of those cases that find or don't find violations.

The share of targeted cases that don't uncover a violation dropped 14 percentage points from FY 2009 to FY 2015, evidence to Weil that “we are more and more playing the game that we want, to achieve our overall mission.”

The administrator said he was also pleased with the significant rise in the amount recovered per worker—$1,027 in FY 2015, up from $890 in FY 2014.

Further, Weil warned observers not to read too much into the lack of major growth in overall back wages recovered because he said his investigators are spending a tremendous amount of time in low-wage industries, where the amount collected in settlements has a lower ceiling.

Investigator Tactics

Seyfarth Shaw's Bartlett, in recounting what he's heard from clients and attorney peers, said he has witnessed how the current enforcement strategy could be translating into delayed results.

For instance, he has observed investigators increasingly working autonomously, while also telling employers that they're part of a broader initiative that covers affiliated companies in other WHD regions. Investigators are also asking businesses that are part of a multistate operation how they function in relation to other locations within a corporation—by demanding copies of franchise agreements, for example, Bartlett said.

Further, although there have been a fair number of retirements and the initiatives are still relatively new, “without question there is greater savyness” now among investigators “around this enforcement policy,” he said. At the same time, though, he said he feels there's still “a sense of confusion” on the part of some investigators about why they're “asking for this sort of information in the first place.”

Another strategy prolonging investigations, both McCutchen and Bartlett observed, is for the WHD to seek the maximum recovery available—three years of back wages for willful violations, liquidated damages (double the amount of unpaid wages) and civil monetary penalties. By “routinely” taking this approach, reasonable settlements become less likely, McCutchen said. “It makes more sense for clients to fight the findings” in court “than to settle,” she said. “That could be a significant cause of the slowdown in growth” in the statistics, she said.

The WHD figures only cover concluded cases, indicating the agency's information doesn't track cases still being litigated.

McCutchen's theory is borne out in an analysis conducted by Seyfarth Shaw last November, which found that federal courts saw 8,761 FLSA lawsuits in FY 2015, a 7.6 percent hike from the previous year (227 DLR A-8, 11/25/15).

But the uptick in private FLSA cases doesn't mean WHD investigators won't be counted on to play a greater role in the overall enforcement landscape in the coming year. Weil said Dec. 17 that even with the progress he's witnessed, he won't get complacent. The 1,000 investigators in place, must “keep pushing hard … on getting our approach better and better so we can bring more and more workers what they deserve, which is a fair pay for what they do every day at the workplace,” Weil said.

To Bartlett, the latest enforcement numbers depict “the calm before the storm,” as investigators prepare for a new overtime regulation and continue to receive training on recent initiatives.

“We've got the joint employer AI, new exemption rules, the independent contractor stuff—and all these investigators have to be trained to deal with these changes,” he said. “I kind of envision these guys sitting around on their hands a little bit, waiting to be trained on the new laws that are coming out, and once they come out, they're going to jump.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information 
The WHD statistics page can be accessed at http://www.dol.gov/whd/statistics/statstables.htm