2001 - Audit Report

U.S. Department of Labor
Office of Inspector General
Office of Audit

WAGE AND HOUR DIVISION ADMINISTRATION OF SPECIAL MINIMUM WAGES FOR WORKERS WITH DISABILITIES

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Incorrect Special Minimum Wages Are Being Paid to Workers with Disabilities

The Fair Labor Standards Act (Act) includes a provision for a special minimum wage (SMW) for workers with disabilities, who the Act defines as those whose earnings or productive capacity for the work to be performed is impaired by a physical or mental disability. Section 14(c) of the Act (14(c)) authorizes the Wage and Hour Division (WHD) to certify employers to pay workers with disabilities (workers) the SMW. For FY 1999, WHD reported about 8,580 certified employers and 400,000 workers participated in the program. The OIG conducted a performance audit of the 14(c) program to determine program outcomes and how effectively the program was managed.

The OIG is concerned that workers with disabilities are not receiving the correct special minimum wage. We identified several factors which diminish the effectiveness of WHD's administration of its 14(c) program and contributed to this condition. Most importantly, we found WHD placed a low priority on program activities, adopted inefficient policies, including one that could result in the assessment of back wages as low as 1 cent, and tolerated an inaccurate and unreliable management information system.

Our audit of the WHD national office found the majority of 14(c) program resources are devoted to conducting desk reviews of employer applications for certificates. The stated purpose of the desk review is to ensure employers comply with program requirements and to assess back wages when workers are underpaid. We found, however, the review process offers little assurance that employers are complying with program requirements, particularly regarding the payment of the correct SMW.

The majority of 14(c) employers are nonprofit organizations. However, both private-for-profit and other public sector employers, especially schools, hospitals, and institutions which provide employment to institutionalized individuals also participate. Our audit revealed a significant percentage of employers who either did not understand or were not following program requirements when determining the SMW. Accordingly, many workers were not receiving the correct SMW. Employers generally assumed they were in compliance with program requirements simply because they had been issued a certificate to participate in the program.

The OIG believes a proactive approach by WHD is needed to ensure employer compliance with program requirements, especially the payment of the correct SMW. While WHD has taken initial steps to correct program deficiencies identified by OIG, improvements are still needed in the areas of strategic planning, program management, monitoring and the provision of technical assistance. Accordingly, we recommend WHD:

Include a plan for on-site monitoring of employers and increased enforcement reviews of 14(c) program activities in ESA's Strategic Planning process.

Develop an "action plan" to improve its 14(c) program management and performance.

Increase its technical assistance activities with employers.

Consider methods to solicit recommendations from government officials, employers, employees and advocates on needed program guidance and legislative reforms.

The WHD agreed with the recommendations.

(Report No. 05-01-002-04-420, March 19, 2001)

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