Employment Standards Administration (ESA)

ESA Congressional Testimony

Department of Labor
Statement by
Victoria A. Lipnic
Assistant Secretary on
Fiscal Year 2004 Request for
Employment Standards Administration

Mr. Chairman and Members of the Committee:

I am pleased to appear before you today to discuss the fiscal year 2004 budget request for the Employment Standards Administration (ESA). ESA, the largest agency in the Department of Labor with over 4,000 employees located throughout the country, is composed of four major program activities: The Wage and Hour Division (WHD); the Office of Federal Contract Compliance Programs (OFCCP); the Office of Labor-Management Standards (OLMS), and the Office of Workers' Compensation Programs (OWCP). OWCP is further subdivided into four distinct workers' compensation programs: The Division of Federal Employees' Compensation; the Division of Longshore and Harbor Workers' Compensation; the Division of Coal Mine Workers' Compensation; and the Division of Energy Employees Occupational Illness Compensation Program (EEOICPA).

This year's request was ESA's, and the Department's, first integrated performance budget request. It represents a significant change in both the preparation and presentation of the budget that I hope you find useful. In the long run, this effort will prove beneficial by identifying the costs of doing business and the performance results obtained through those resources.

ESA's total budget request for FY 2004 is nearly $5.0 billion. This amount includes $533.2 million for administrative costs and $4.4 billion for workers' compensation benefit costs. Total funding for ESA in FY 2004 will decrease by $197.0 million compared with FY 2003 – from $5.2 billion to $5.0 billion. The reduction is mostly accounted for in the EEOICPA account due to the fact that the Department of Health and Human Services (HHS) spending for the Program did not materialize as quickly as anticipated. Therefore previous years’ funds will be available to meet the HHS funding requirements in FY 2004. The Department’s portion of administrative expenses for the energy program will stay approximately the same from FY 2003 to FY 2004 at $55.1 million. The expiration of the American Competitiveness in the Twenty-first Century Act of 2000 on September 30, 2003, accounts for the rest of the reduction.

Wage and Hour's overall funding availability will be $1.7 million less than FY 2003 due to the expiration of American Competitiveness in the Twenty-first Century Act of 2000 on September 30, 2003. Excluding current H-1B funding, Wage and Hour’s budget will actually increase by $5.4 million and 3 Full Time Equivalents (FTE). Wage and Hour will continue to target low-wage industries such as the garment manufacturing, health care, and agriculture for compliance assistance and enforcement activities and also enter into strategic partnerships with community, faith-based and other intermediary groups with direct access to low-wage workers to help them learn their rights.

ESA's proposed increases for FY 2004 include three FTE and related funding for the Wage and Hour Division to increase compliance assistance activities focused on employers of Hispanic and Asian employees as well as small businesses. One position would be dedicated solely to outreach with the small business community and the other two will be dedicated to employers and employees within the Spanish and Asian speaking communities. Currently, half of Wage and Hour Division investigators are multi-lingual: 343 investigators speak Spanish; and 53 speak Vietnamese, Chinese, Korean or Thai.

The budget submission also includes a legislative proposal to increase Wage and Hour’s civil money penalties for child labor violations that cause the death or serious injury of a young worker. The proposal would increase the maximum penalty from $11,000 to $50,000, for any type of child labor violation that leads to death or serious injury. We are also proposing to raise to $100,000 the maximum penalty for willful or repeat violations that lead to death or serious injury of a young worker.

The Office of Federal Contract Compliance Programs budget will increase by $2 million. OFCCP will continue its strong and balanced enforcement program. In addition to conducting traditional compliance evaluations of establishments, OFCCP will start reviewing the business units or business functions of contractors that have approved Functional Affirmative Action Program agreements. This process covers far more workers than traditional single establishment reviews and offers OFCCP efficiencies of scale. Enhancements to OFCCP’s case management process will improve the agency’s ability to investigate systemic discrimination and the program will continue to monitor corporate headquarters facilities for compensation discrimination against women and minorities through its Corporate Management Review process. OFCCP will also continue to promote voluntary best practices and equal employment opportunity programs through the Secretary’s Opportunity Award as well as its partnerships with nationwide Industry Liaison Groups.

The Office of Labor-Management Standards is requesting an increase that would enable a sustained level of grass roots outreach, oversight, and enforcement to advance the union financial integrity protections necessary to a secure workforce. The base funding increase sought is $5.3 million and 75 FTE. This increase will restore the substantial staffing decreases that occurred in this program during the early 1990s and allow OLMS to maintain a more visible compliance assistance and enforcement presence. The proposed increase would substantially assist the OLMS union audit efforts, which have declined in recent years. While audits of all unions have declined, in particular audits of the largest unions, which are the most resource-intensive, have dropped in number. Ten of the largest unions have never been audited.

New compliance assistance and liaison initiatives are planned to support all aspects of the Labor-Management Reporting and Disclosure Act program, particularly to assist union officials with new and planned LMRDA reporting changes, most specifically with respect to planned reform of union annual financial reporting forms. One or two staff positions would be dedicated to developing cooperative relationships with national and international union officials. Additionally, an increase equivalent to approximately five FTE’s would be devoted to outreach and compliance assistance for local union officials. New compliance assistance materials would be developed to support planned electronic reporting initiatives for employers, labor relations consultants, surety companies, and others required to file LMRDA reports.

The budget submission also includes a proposal to authorize OLMS to impose civil money penalties on unions, union officers, employers, consultants, and bonding companies that fail to file their required financial reports on a timely basis. Enabling OLMS to issue civil monetary penalties will encourage the regulated community to comply with the LMRDA filing deadlines. The intent is to improve compliance, not penalize inadvertent lapses in filing reports.

OWCP is requesting nearly $2.0 million through its FECA Fair Share account to cover projected cost increases for the medical bill-processing contract. This contract has great potential for increasing processing accuracy and quality and controlling costs. The contract will also improve the telephone responsiveness on medical treatment and billing questions to medical providers and reduce the additional workload that is generated when inquiries are not responded to quickly and accurately. It will also improve customer service and satisfaction.

ESA’s request also includes legislative proposals for the FECA program to promote benefit equity, reinstate an effective waiting period, and make other related reforms to the statute. Estimated savings over ten years through the enactment of these programs would be $404 million. ESA will also propose legislation to change the way the cost of administering the Federal Employees’ Compensation is funded. Rather than a direct appropriation, funding would be provided by a surcharge paid by other federal agencies based on their employees’ pro rata share of workers’ compensation benefits. This will increase each agency’s incentive to improve safety in the federal workplace and return workers to their jobs as quickly as possible. Nearly $88 million in workers compensation costs would be avoided over ten years under this proposal.

ESA also intends to submit legislation to restructure the Black Lung Disability Trust Fund, to ensure the continued availability of funding to provide benefits to the victims of black lung disease, avoid any increase in the current excise tax paid, and systematically retire the Trust Fund debt, which now exceeds $7.7 billion. Without this urgently needed legislation Trust Fund indebtedness will continue to grow and jeopardize our ability to achieve our objectives.

Program Assessment Rating Tool

The Administration developed the Program Assessment Rating Tool (PART) as a systematic way to evaluate and improve performance and management government-wide. Improving programs by focusing on results is an integral component of the President's budget and performance integration initiative. For 2004, the Administration rated effectiveness with the PART for approximately 20 percent of Federal programs. The Office of Federal Contract Compliance Programs and the Division of Federal Employees' Compensation were included in this rating. The results for both OFCCP and FECA were generally positive. FECA was recognized for having a clear purpose, rational design, ambitious and properly focused goals, and generally good performance. OFCCP was recognized for having strong quality controls, clear communication, and performance goals that are well targeted. The PART also found certain areas where improvement and more information are needed. More detailed information including, discussion of proposed reforms is presented in the OFCCP and FECA sections of the Congressional Budget Justification.

President’s Management Agenda Scorecard

ESA also shares the Department’s distinction of having the highest rated PMA scorecard results in the federal government. Our current status scores have improved in the areas of financial management and E-government, and our implementation progress scores are nearly all green.

Mr. Chairman, this concludes my comments on ESA's FY 2004 proposals. I will be happy to answer any questions you may have on ESA's FY 2004 budget request.