[Senate Hearing 111-151]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-151
 
                    PREVENTING WORKER EXPLOITATION:
                PROTECTING INDIVIDUALS WITH DISABILITIES
                    AND OTHER VULNERABLE POPULATIONS

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   ON

   EXAMINING PREVENTING WORKER EXPLOITATION, FOCUSING ON PROTECTING 
     INDIVIDUALS WITH DISABILITIES AND OTHER VULNERABLE POPULATIONS

                               __________

                             MARCH 9, 2009

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions


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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

               EDWARD M. KENNEDY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut     MICHAEL B. ENZI, Wyoming,
TOM HARKIN, Iowa                     JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland        LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico            RICHARD BURR, North Carolina
PATTY MURRAY, Washington             JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island              JOHN McCAIN, Arizona
BERNARD SANDERS (I), Vermont         ORRIN G. HATCH, Utah
SHERROD BROWN, Ohio                  LISA MURKOWSKI, Alaska
ROBERT P. CASEY, JR., Pennsylvania   TOM COBURN, M.D., Oklahoma
KAY R. HAGAN, North Carolina         PAT ROBERTS, Kansas
JEFF MERKLEY, Oregon

           J. Michael Myers, Staff Director and Chief Counsel

     Frank Macchiarola, Republican Staff Director and Chief Counsel

                                  (ii)

  




                            C O N T E N T S

                               __________

                               STATEMENTS

                         MONDAY, MARCH 9, 2009

                                                                   Page
Harkin, Hon. Tom, a U.S. Senator from the State of Iowa, opening 
  statement......................................................     1
McKeon, John L., Deputy Administrator for Enforcement, Wage and 
  Hour Division, U.S. Department of Labor, Washington, DC........     3
    Prepared statement...........................................     5
Decker, Curtis, Executive Director, National Disability Rights 
  Network, Washington, DC........................................    18
    Prepared statement...........................................    20
Bender, Joyce, President and CEO, Bender Consulting Services, 
  Inc., Pittsburgh, PA...........................................    22
    Prepared statement...........................................    23
Leonard, James B., Former Attorney, U.S. Department of Labor, 
  Arlington, VA..................................................    24
    Prepared statement...........................................    27
 Bobo, Kim, Executive Director, Interfaith Worker Justice, 
  Chicago, IL....................................................    31
    Prepared statement...........................................    32

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Murray, Hon. Patty, a U.S. Senator from the State of 
      Washington.................................................    47
    NISH (formerly known as the National Institute for the 
      Severely 
      Handicapped)...............................................    47

                                 (iii)

  


      PREVENTING WORKER EXPLOITATION: PROTECTING INDIVIDUALS WITH 
             DISABILITIES AND OTHER VULNERABLE POPULATIONS

                              ----------                              


                         MONDAY, MARCH 9, 2009

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:38 p.m., in 
Room SD-430, Dirksen Senate Office Building, Hon. Tom Harkin 
presiding.
    Present: Senator Harkin.

                  Opening Statement of Senator Harkin

    Senator Harkin. The Senate Committee on Health, Education, 
Labor, and Pensions will come to order.
    For too long, we have been complacent about the potential 
for abuse and exploitation of people with disabilities as well 
as other vulnerable populations in the workplace. We got a rude 
wake-up call last month with revelations about a shocking case 
of exploitation in the small town of Atalissa, IA.
    We learned that Henry's Turkey Service, a firm based in 
Texas, has employed 21 men with intellectual disabilities at a 
turkey processing facility in eastern Iowa, near Atalissa. The 
firm has been accused of paying these workers less than the 
minimum wage and then taking their wages and Supplemental 
Security Income in exchange for room, board, and caretaking at 
a company bunkhouse. That bunkhouse is actually an abandoned 
schoolhouse with boarded-up windows and out-of-control 
cockroach infestation and no central heat.
    The workers were reportedly provided only about $60 a month 
for working in the turkey processing plant full time, or near 
full time. According to media reports, some of these workers 
may have been employed at this site in this situation for 
perhaps as long as 20, maybe even 30 years.
    Needless to say, the abuses exposed at Atalissa shocked the 
conscience.
    Currently, there are no fewer than 11 Federal, State, and 
local investigations looking into what went wrong, as there 
should be. All of those responsible for exploiting these 
employees with disabilities and violating law must be brought 
to justice promptly and punished to the fullest extent of that 
law.
    In order to avoid interfering with these on-going 
investigations, today's hearing will not delve into the 
specific facts and circumstances in the Atalissa case. Instead, 
our hearing today will have a broader focus. I want to 
reexamine the Federal laws that may have inadvertently 
contributed to or enabled what happened in Atalissa--the 14(c) 
program, which allows employers to pay less than minimum wage, 
and the 3(m) program, which allows employers to deduct the 
``reasonable costs of providing food, lodging, and other 
services' to workers from those employees'' paychecks.
    Now since the Fair Labor Standards Act was signed into law, 
section 14(c) has permitted employers to pay workers with 
disabilities less than their nondisabled coworkers, if their 
disability hinders their job productivity. According to a 2001 
GAO report, more than 5,600 employers pay the special minimum 
wages to approximately 424,000 workers with disabilities.
    The Atalissa case and others like it raise significant 
questions about how these wages are determined, how accurately 
these subminimum wages reflect the productivity of these 
workers, and who is actually checking to make sure that workers 
with disabilities are being compensated fairly and correctly.
    Now equally outrageous is the fact that what little these 
men did earn was being taken from them. Now, again, I am only 
going on press accounts. They show that between $28,000 and 
$40,000 was taken every month from these 21 men out of their 
pay for this room and board at this place.
    Now how much was the company paying for this place? Six 
hundred bucks a month. They are paying 600 bucks a month for 
the entire place, and yet they are collecting between $28,000 
and $40,000 a month for people to live there.
    Section 3(m) of the Fair Labor Standards Act prohibits 
employers from deducting more than the cost to the employer. 
Six hundred bucks a month for the whole building, not for each 
employee.
    Again, I think this particular case shows there are too 
many glaring loopholes in this provision. We need to find a way 
to hold employers making these deductions more accountable, 
both through better enforcement of the law and by narrowing the 
circumstances under which employers can take money from any 
low-income worker.
    As we will hear, these kinds of deductions happen to 
vulnerable, low-wage workers all the time and are often abused. 
We will have an opportunity today to hear, of course, from a 
representative of the Wage and Hour Division about the 
department's enforcement.
    Now the stated intention behind the 14(c) program is ``to 
prevent the curtailment of employment opportunities for 
individuals with disabilities.'' A very laudable goal.
    There are many individuals with significant disabilities 
who are employed under this program who may not otherwise have 
found employment. There are also many workers with significant 
disabilities who are every bit as productive as the workers 
without disabilities, and our laws must be tightened to ensure 
that employers cannot use programs like 14(c) to take advantage 
of this.
    As a longtime advocate for the rights of individuals with 
disabilities, I feel strongly that the Federal Government 
should do all it can to promote employment for persons with 
disabilities. Next year is the 20th anniversary of the 
Americans with Disabilities Act, a bill that has my name as the 
chief cosponsor. Twenty years later, we still have over 60 
percent of people with disabilities unemployed. It is a 
national disgrace.
    We have to do all we can to promote employment for persons 
with disabilities. People with disabilities who are working 
have dignity and purpose. It helps them achieve economic self-
sufficiency, one of the four stated goals of the Americans with 
Disabilities Act.
    However, in our efforts to ensure that individuals with 
disabilities find employment and economic self-sufficiency, we 
obviously must draw a bright line in prohibiting and preventing 
employers from taking advantage of these vulnerable workers. 
That is what we are here to discuss today.
    If people have observations on the case in Atalissa, we 
will listen to that. I just want to find out just what is 
happening nationally and what we need to do to prevent this 
from happening in the future.
    We have two panels. Our first panel will start off with Mr. 
John McKeon. I hope I pronounced that correctly.
    Mr. McKeon. Close enough.
    Senator Harkin. McKeon.
    Mr. McKeon. McKeon is the Anglo way, yes, sir.
    Senator Harkin. OK. Mr. John McKeon is the deputy 
administrator for enforcement for the U.S. Department of Labor, 
Wage and Hour Division. Mr. McKeon is a 33-year veteran of the 
Wage and Hour Division and began his career as an entry-level 
compliance specialist in Providence, RI.
    Since then, he has held positions of increasing 
responsibility, including district director and regional 
administrator. Currently, as deputy administrator for 
enforcement, he oversees the enforcement activities in the five 
regions, the Office of Enforcement Policy, and the Office of 
Interpretation and Regulatory Interpretation.
    Mr. McKeon, welcome to the committee. You, along with the 
other panelists who will be coming up on the second panel, your 
statements will be made a part of the record in their entirety. 
If you could sum it up in several minutes, I would be most 
appreciative.
    Mr. McKeon, welcome. Thank you. Please proceed.

       STATEMENT OF JOHN L. McKEON, DEPUTY ADMINISTRATOR 
         FOR ENFORCEMENT, WAGE AND HOUR DIVISION, U.S. 
              DEPARTMENT OF LABOR, WASHINGTON, DC

    Mr. McKeon. Thank you, Senator.
    Thank you for the opportunity to discuss the provisions of 
the Fair Labor Standards Act that have applications for workers 
with disabilities. The FLSA, since its enactment in 1938, has 
contained provisions designed to prevent the curtailment of 
opportunities for employment of workers with disabilities by 
authorizing employers after receiving certification from the 
Department of Labor to pay wage rates less than the Federal 
minimum wage to employees' whose earnings and productive 
capacities are impaired by disability.
    Like all regulatory enforcement agencies, Wage and Hour 
employs a variety of tools and activities to enforce the law 
and achieve compliance. The agency mission is to promote and 
achieve compliance, not just to identify violations after they 
occur, but to prevent violations in the first instance, 
particularly where workers may be at risk, may not be aware of 
their rights, or are unable to assert their rights.
    Section 14(c) permits the payment of special minimum wage, 
one that is less than the Federal minimum wage, to workers who 
have disabilities that impair their earning and productive 
capacity for the work being performed. I cannot stress strongly 
enough that the payment of special minimum wage is not an 
option solely because a worker has a disability. The disability 
must impair the worker's productivity for the job he or she 
actually performs.
    Prior to paying a special minimum wage and at periodic 
intervals depending on the nature of the establishment, the 
employer must apply and receive a certificate issued by the 
Department of Labor. In 1994, the Wage and Hour Division 
centralized all processing of applications to pay special 
minimum wages in Chicago. Applications for certification are 
denied if the application is incomplete, in error, or reflects 
noncompliance with any of the provisions enforced by Wage and 
Hour.
    All section 14 certificates expire. Each certificate is 
issued with an expiration date. Approximately 90 days before 
the expiration date, the certification team will forward to the 
employer a renewal package, pre-populating the application 
data. Reminder notices are forwarded to the employer 60 days 
before the certificate expires and again 30 days before 
expiration.
    If the renewal application is not received prior to the 
expiration date, the certificate team will advise the employer 
by letter that the certificate has expired, and it no longer 
has authority to pay workers with disabilities a special 
minimum wage. The certificate team does follow up on 
approximately 250 employers that do not respond to our renewal 
notices each year.
    It has been our experience that about 100 of the former 
certificate holders may be removed from the database as a 
result of a telephone call. Often employers are no longer in 
business or have merged with other certificate holders. The 
remaining 150 employers who do not renew receive letters 
inquiring as to whether it is their intention to allow the 
certificate to expire.
    Of that number, approximately 45 contact Wage and Hour 
stating the certificate is no longer needed. About 60 reply and 
indicate they wish to renew their certificate and reapply. The 
remaining 45 never respond to our inquiry.
    The agency's special minimum wage activities and 
initiatives are far too numerous to list individually. I will 
point out our key efforts and accomplishments over the past 
several years.
    For each of the past several years, each Wage and Hour 
region has conducted a 14(c) enforcement initiative as part of 
the agency's strategic plan. On average, Wage and Hour conducts 
approximately 135 14(c) investigations per year.
    The GAO made several recommendations for improving Wage and 
Hour's oversight of 14(c) in its 2001 report. Those 
recommendations have all been implemented. In addition, Wage 
and Hour has reinstituted the regional section 14(c) team 
leader position, and Wage and Hour has partnered with several 
organizations, including NISH, to educate the regulated 
community about the requirements of section 14(c).
    Section 3(m) of the FLSA provides the statutory definition 
of the term ``wage.'' This provision is not an exemption or an 
exception to the applicable minimum wage or overtime 
requirements. Rather, it provides the statutory parameters for 
making determinations of the reasonable costs to employers of 
furnishing the employees with board, lodging, or other 
facilities that may be credited toward meeting the FLSA's 
monetary obligations.
    All investigations conducted by Wage and Hour, whether 
initiated on complaint or as a directed, targeted enforcement 
initiative, should include an evaluation of the appropriateness 
of any claim by the employer for credit toward wages for 
furnishing board, lodging, or facilities.
    Mr. Chairman, this concludes my prepared remarks. I will be 
happy to answer any questions you or members of the 
subcommittee have.
    [The prepared statement of Mr. McKeon follows:]

                  Prepared Statement of John L. McKeon

    Thank you for the opportunity to discuss the provisions of the Fair 
Labor Standards Act (FLSA) that have application to workers with 
disabilities. I will address two specific provisions, the Special 
Minimum Wage program contained in section 14(c) of the FLSA and the 
definition of ``wages'' contained in section 3(m).
    The FLSA, since its enactment in 1938, has contained provisions 
designed to prevent the curtailment of opportunities for employment of 
workers with disabilities by authorizing employers, after receiving 
certification from the Department of Labor, to pay wage rates less than 
the Federal minimum wage to employees whose earnings and productive 
capacities are impaired by a disability. Let me begin by saying that 
while the Wage and Hour Division (WHD) is committed to enforcement of 
all the laws under the WHD's jurisdiction, the staff of the agency are 
particularly committed to ensuring that vulnerable populations, such as 
workers with disabilities and youth, are protected from exploitation. 
As I will highlight, our accomplishments in clarifying the requirements 
of section 14(c), increasing both staff and staff knowledge within this 
program, providing ongoing compliance assistance to all stakeholders, 
and conducting targeted enforcement initiatives have contributed to 
more compliant workplaces for workers with disabilities.
    Like all regulatory enforcement agencies, WHD employs a variety of 
tools and activities to enforce the law and achieve compliance. The 
agency's mission is to promote and achieve compliance--not just to 
identify violations after they occur, but to prevent the violations in 
the first instance, particularly when workers may be at risk, may not 
be aware of their rights or are unable to assert those rights,. Before 
I address this agency's enforcement of the special minimum wage 
program, I will discuss the certification process and the statutory and 
regulatory requirements of section 14(c).

                 CERTIFICATION UNDER FLSA SECTION 14(C)

    The Department's regulations administering section 14(c) are 
contained at 29 CFR Part 525. Section 14(c) permits the payment of a 
special minimum wage--one that is less than the Federal minimum wage--
to workers who have disabilities that impair their earning and 
productive capacities for the work being performed. Most workers in 
this country who have disabilities are not and should not be receiving 
a special minimum wage because their on-the-job productivity is the 
same as other workers through training, workplace accommodations and 
their own ability and determination. I cannot stress strongly enough 
that payment of a special minimum wage is not an option solely because 
a worker has a disability. The disability must impair the worker's 
productivity for the job he or she is actually performing. A WHD 
investigator, when conducting an investigation, routinely reviews 
medical documentation, production records, and supervisor notes to 
ensure that each worker receiving a special minimum wage under section 
14(c) not only has a disability, but that disability impairs his or her 
production.
    Prior to paying a special minimum wage, and at periodic intervals 
depending upon the nature of establishment, the employer must apply for 
and receive a certificate issued by WHD. The employer must complete and 
submit the Application for Authority to Employ Workers with 
Disabilities at Special Minimum Wages (Form WH-226), and in the case of 
renewal applications where special minimum wages have been paid in the 
recent past, the employer must also complete and submit the 
Supplemental Data Sheet for Application for Authority to Employ Workers 
with Disabilities at Special Minimum Wages (WH-226A). The latter form, 
which must be submitted for every establishment or worksite where 
workers with disabilities were employed at special minimum wages during 
the employer's last completed fiscal quarter, requires information 
about each worker who received a special minimum wage, including the 
name, primary disability of the worker, the type of work performed, and 
the average earnings per hour of the worker. Both forms may be 
downloaded from the WHD Web page.
    In 1994, the WHD centralized all processing of applications to pay 
special minimum wages in Chicago. The portion of the WHD National 
Certification Team that processes applications under section 14(c) is 
composed of three WHD Compliance Specialists trained in the 
requirements of section 14(c), the certification process, and customer 
service; one clerical support staff, and a supervisor. The Compliance 
Specialists review applications for completeness, accuracy, and 
compliance. If there are deficiencies or errors in the application, the 
Compliance Officer will contact the employer in order to correct those 
deficiencies or errors. An important aspect of both the section 14(c) 
certification and enforcement processes is the statutorily required 
employer representations and written assurances included on the WH-
226A. These statements constitute a written acknowledgement by the 
employer that it not only understands the requirements of section 14(c) 
but will comply with those requirements. Applications for certification 
are denied if the applications are incomplete, in error, or reflect 
noncompliance with the provisions enforced by WHD.
    Once the National Certification Team approves the application, a 
certificate authorizing the payment of special minimum wages will be 
issued (Form WH-228-MIS). Approximately 2,050 applications are reviewed 
each year. The WHD issues four different types of certificates under 
section 14(c):

     Community Rehabilitation Center (CRP) certificates, which 
are issued for a 2-year period. CRPs (formerly known as sheltered 
workshops and also known as work centers) are establishments that 
specialize in the employment of workers with disabilities and normally 
provide rehabilitation, life-skill, therapeutic, and recreation 
services for clients.
     Hospitals and residential care facilities may also employ 
their patients as patient workers. These Patient Worker certificates 
are also issued for 2-year periods.
     For-profit business establishments (such as fast food 
establishments, retail stores, and mail distribution centers) may also 
receive certificates. These certificates are issued for a 1-year 
period.
     School Work Experience Program (SWEP) certificates are 
issued to schools, allowing them to place their students with 
disabilities with employers in a ``joint employment'' situation. If all 
the conditions of section 14(c) are met, the employer may pay the 
student with a disability, that impairs his or her production for the 
work being performed, a special minimum wage under the SWEP certificate 
issued to the school.

    All section 14(c) certificates expire. Each certificate is issued 
with an expiration date. Approximately 90 days before the expiration 
date, the National Certification Team will forward to the employer a 
renewal package pre-populated with application data. If the application 
is not received by the National Certification Team, reminder notices 
are forwarded to the employer 60 days before the certificate expiration 
date and again 30 days before the expiration date if necessary. If the 
renewal application is not received prior to the expiration date, the 
National Certification Team will advise the employer, by letter, that 
the certificate has expired and it no longer has authority to pay 
workers with disabilities a special minimum wage.
    Some firms advise the National Certification Team that they no 
longer require certification. Employer reasons for non-renewal vary, 
but as the Department advised the Government Accountability Office when 
responding to its 2001 Report, those reasons include:

     The productivity of employees with disabilities may 
increase to the point where earnings exceed the Federal minimum wage 
and thus subminimum wage authority may not be needed until newer, less 
productive employees come to the work center.
     Employment opportunities may not be available for workers 
with disabilities at certain times during the 2-year certification 
period as contracts end and start throughout the period.
     Participation in many State and private programs--and the 
accompanying funding critical to the viability of the work centers--
often requires a current certificate authorizing the payment of special 
minimum wages. In some circumstances the funding enables the work 
centers to raise the pay of some workers with disabilities to the full 
Federal minimum wage, even though the worker's productivity would 
justify the payment of a subminimum wage.

    The National Certification Team does follow-up on the approximately 
250 employers that do not respond to our renewal notices each year. It 
has been our experience that about 100 of the former certificate 
holders may be removed from the data base as a result of records checks 
or phone calls. Often employers are no longer in business or have 
merged with other certificate holders. The remaining 150 employers who 
did not renew, receive letters inquiring as to whether it was their 
intention to allow the certificate to expire. Of that number, about 45 
employers contact the WHD stating the certificate authority is no 
longer required or desired. About 60 employers each year reply that 
they wish to renew their authority and submit an application. The 
remaining 45 employers never respond to our letter of inquiry.
    Once the employer receives a certificate, it must inform each 
worker with a disability who will be receiving special minimum wages, 
or his or her parent or guardian if appropriate, both orally and in 
writing, of the terms of the certificate. This may be accomplished by 
posting or making copies of the certificate available. In addition, 
employers paying special minimum wages must display, or make available 
to workers, the WHD Poster Employee Rights for Workers with 
Disabilities Paid at Special Minimum Wage Rates (Form WH-1284).

         STATUTORY AND REGULATORY REQUIREMENTS OF SECTION 14(C)

    The FLSA requires that a special minimum wage under section 14(c) 
be a commensurate wage rate; one that is based on the worker's 
individual productivity in proportion to the wage and productivity of 
experienced nondisabled workers performing essentially the same type, 
quality, and quantity of work in the vicinity in which the individual 
is employed (see 29 CFR Sec. 525.525.3(i)). This requires that the 
employer identify and define the job that will be performed by the 
worker who will be receiving the special minimum wage, establish 
detailed standards for the job in terms of quality and quantity of 
production, and accurately determine the productivity of workers who do 
not have disabilities that impact their productivity when performing 
that job using an acceptable industrial work measurement process. These 
steps, which establish the standard for the job, must be performed for 
every job that will be performed by a worker paid a special minimum 
wage. This process must be performed again when any aspect of the job 
is changed--such as when the type of equipment or materials being used 
are changed, the number of items being handled in a production cycle is 
altered, or when production methods are reorganized.
    The employer would then normally measure the productivity of each 
worker with a disability who will be employed to perform the work, in 
order to compare the performance of the worker with a disability in 
terms of quality and quantity of production, and establish a 
commensurate rate. For workers who will be paid on an hourly basis, the 
regulations require that his or her productivity be measured within the 
first 30 days of employment and at least every 6 months thereafter. New 
measurements must be conducted when an employee changes jobs. Employers 
are not required to conduct work measurements of workers who are paid 
on a piece rate basis as once the standard for the job has been 
accurately established, every worker's productivity, whether the worker 
has a disability or not, will be determined by the number of pieces he 
or she completed.
    The employer must also determine the prevailing wage paid to 
experienced workers performing that job in the same vicinity as the 
workers with disabilities who will be paid under the authority of 
section 14(c). In most cases, employers will be required to annually 
survey a representative number of employers who employ experienced 
workers performing the same type of work in the area to determine the 
prevailing wage. Additional reviews of prevailing wages are required 
when State or Federal minimum wages are increased. Surveys are not 
necessary if the work is subject to the McNamara-O'Hara Service 
Contract Act (SCA), as the contract will normally provide the 
prevailing wage rate for each job; or when the employer's workforce is 
comprised mostly of experienced workers who do not have disabilities 
performing the same work as those paid under the terms of the section 
14(c) certificate. Employers are required to submit samples of actual 
work measurements and prevailing wage surveys when submitting Form WH-
226 to renew a section 14(c) certificate.
    The FLSA and regulation also require that an employer paying 
special minimum wages under section 14(c) create and retain certain 
records in addition to those normally maintained by employers. These 
records include documentation of each employee's disability and how 
that disability impairs the employee's productive and earning 
capacities for the job being performed. Records detailing the work 
measurements conducted for each job, the prevailing wage rates 
determined, and individual worker productivity must also be preserved.

       WHD'S ENFORCEMENT AND ADMINISTRATION OF FLSA SECTION 14(C)

    The agency's special minimum wage activities and initiatives are 
far too numerous to list individually, so I will point out our key 
efforts and accomplishments over the past several years.
    The WHD has spent considerable resources re-invigorating its 
section 14(c) program since 1994. It is important to note that 
certified employers represent less than .07 percent of the 
approximately 7 million FLSA covered work places in the United States. 
Workers with disabilities receiving special minimum wages account for 
less than .04 percent of the estimated 130 million workers covered by 
the FLSA.
    For each of the past several years, each WHD regional has conducted 
a section 14(c) enforcement initiative as part of the agency's 
strategic plan. Building on a National Compliance Baseline Survey that 
was conducted by WHD in 2002, the regions have targeted certificated 
employers with larger numbers of workers paid special minimum wages. On 
average, WHD has concluded approximately 135 section 14(c) 
investigations a year over the last 5 years, and collected $600,000 in 
back wages for 3,000 workers on average each year over the 5-year 
period.
    The Government Accountability Office (GAO) made several 
recommendations for improving WHD's oversight of section 14(c) in its 
2001 Report Characteristics of Workers with Disabilities and Their 
Employers, and Labor's Management, Which Needs to Be Improved, GAO-01-
886, dated September 4, 2001. Those recommendations, which included 
improving the database of certificate actions, tracking staff hours 
devoted to the 14(c) Program, conducting directed investigations, 
training staff, and posting the Field Operation Handbook, among other 
recommendations, have all been implemented. Many of those I have 
discussed in my testimony today. Several of these recommendations were 
developed in conjunction with WHD and were actually implemented prior 
to the publication of the report. The WHD not only implemented all of 
the GAO recommendations but took additional steps to improve the 
program.
    WHD re-instituted the Regional Section 14 Team Leader position. 
Each of five regions has a senior Compliance Specialist, trained in the 
FLSA and section 14(c), who coordinates and oversees the enforcement 
and technical assistance activities of the Region. With the WHD 
National Office Child Labor and Special Employment Team, through 
monthly teleconferences, the Regional Section 14 Team Leaders form the 
Section 14 Working Group, an important advisory body for the program 
that provides both direction and oversight. The Team Leaders work with 
the National Certification Team to ensure the certification process is 
in sync with the enforcement and technical assistance aspects of the 
program.
    In addition, WHD has created a wide assortment of compliance 
assistance materials to help employers attain, understand, and maintain 
compliance with section 14(c). All of these tools are available on the 
WHD Web page, and many are included with the periodic compliance mass 
mailings that are sent to certificate holders. For example:

     The WHD Field Operations Handbook chapter dealing with 
section 14 has been available to all stakeholders on the WHD Web page 
since at least 2003.
     The Section 14(c) e-laws Advisor, an electronic 
interactive compliance tool that allows interested parties to learn 
about the program and research specific areas of section 14(c) has also 
been operational for several years.&
     WHD has developed a series of seven fact sheets that 
provide specific information about various compliance requirements of 
section 14(c). Several of these fact sheets are routinely mailed to 
certificate holders during the certificate renewal process.
     The section 14(c) Working Group has developed and 
continues to deliver specialized WHD Investigator section 14(c) 
training to improve both the enforcement and compliance assistance 
aspects of the program. &
     WHD has partnered with several organizations, including 
NISH (formerly known as the National Institute for the Severely 
Handicapped), to educate the regulated community about the requirements 
of the section 14(c) program.

    WHD regional and local district offices will continue to develop 
enforcement and education initiative to promote compliance with section 
14(c).

       DEFINITION OF ``WAGE'' UNDER THE FAIR LABOR STANDARDS ACT

    The FLSA defines the term ``wage'' in section 3(m) of the Act to 
include ``the reasonable cost . . . to the employer of furnishing [an] 
employee with board, lodging, or other facilities, if such board, 
lodging, or other facilities are customarily furnished by such employer 
to [its] employees.'' The implementing regulations codified at 29 CFR 
Part 531 interpret generally the provisions of section 3(m) of the Act. 
These provisions apply to special minimum wages under section 14(c) in 
the same manner as they apply under all other applicable FLSA minimum 
wage requirements.
    Under section 531.3 of the regulations, ``[t]he term reasonable 
cost as used in section 3(m) of the Act is hereby determined to be not 
more than the actual cost to the employer of the board, lodging, or 
other facilities customarily furnished . . . to . . . employees [and] 
does not include a profit to the employer or to any affiliated 
person.'' In addition, ``the `reasonable cost' to the employer of 
furnishing the employee with board, lodging, or other facilities 
(including housing) is the cost of operation and maintenance including 
adequate depreciation . . . arrived at under good accounting 
practices.'' Furthermore, ``[t]he cost of furnishing `facilities' found 
by the Administrator to be primarily for the benefit or convenience of 
the employer will not be recognized as reasonable and may not therefore 
be included in computing wages.'' See 29 CFR 531.3(a), (b), (c), and 
(d).
    The FLSA recordkeeping regulations at 29 CFR 516.27 govern the 
information and data that employers must keep with respect to any 
deductions from and additions to wages for board, lodging, or other 
facilities furnished to employees. Such records must include itemized 
accounts showing the nature and amount of any expenditures entering 
into the computation of the reasonable cost that is claimed by an 
employer. While no particular degree of itemization is prescribed, the 
amount of detail required must show, consistent with good accounting 
practices, sufficient information to enable the Wage and Hour Division 
to verify the nature and amounts of expenditures claimed by an employer 
as the reasonable cost of furnishing employees with board, lodging, or 
other facilities.
    Section 3(m) of the FLSA provides a statutory definition of the 
term ``wage.'' This provision is not an exemption or exception to the 
applicable minimum wage or overtime requirements. Rather, it provides 
the statutory parameters for making determinations of the reasonable 
costs to employers of furnishing employees with board, lodging, or 
other facilities that may be credited towards meeting the FLSA's 
monetary obligations. All investigations conducted by WHD, whether 
initiated by complaints or as part of a directed, targeted enforcement 
initiative, should include an evaluation of the appropriateness of an 
employer's claim for credit against wages for furnishing board, 
lodging, or other facilities to employees pursuant to the requirements 
of section 3(m) of the FLSA.
    Mister Chairman, this concludes my prepared remarks. I will be 
happy to answer any questions that you or the members of the 
subcommittee may have.

    Senator Harkin. Mr. McKeon, thank you very much.
    Let me just go through some steps here just so I understand 
it better.
    The employer has to be the moving party? I mean, if they 
are going to hire someone with a disability, they have to 
request or file a 14(c) application?
    Mr. McKeon. Correct.
    Senator Harkin. And that goes to where, Chicago?
    Mr. McKeon. It goes to Chicago.
    Senator Harkin. To Chicago. Now who reviews the 
application, and how many staff are assigned this task?
    Mr. McKeon. The Chicago certification team on 14(c) has 
three compliance specialists who are assigned to it, plus a 
support staff and a supervisor.
    Senator Harkin. They have three people. Say that again, how 
many people?
    Mr. McKeon. There are three compliance specialists who 
review it--these are people who are specifically trained in 
14(c) and customer service--and one support staff. That is 
clerical work. And a supervisor.
    Senator Harkin. And one supervisor?
    Mr. McKeon. One supervisor.
    Senator Harkin. One supervisor for three people?
    Mr. McKeon. Well, there are other aspects of the 
certification team with other people doing it, such as patient 
workers and student learners.
    Senator Harkin. Really, there are three people?
    Mr. McKeon. There are three people that do 14(c).
    Senator Harkin. For 5,000-some employers?
    Mr. McKeon. Yes, sir. They only apply--most 14(c) 
certificates are renewed every 2 years, and they are not all 
renewed at once. They come in----
    Senator Harkin. Oh, sure. Sure. Still, though, for 5,000 to 
be coming through.
    Mr. McKeon. They renew about 2,500 a year, sir.
    Senator Harkin. Three people working on that, huh?
    Mr. McKeon. About 800 a piece.
    Senator Harkin. Eight hundred each. I suppose they just 
come in week by week by week?
    Mr. McKeon. Correct.
    Senator Harkin. What do these three--when an application 
comes in or a renewal--these would be renewals?
    Mr. McKeon. Yes.
    Senator Harkin. When a renewal comes in, what would a 
person look for? They would just look as to when they first 
applied? I mean, what----
    Mr. McKeon. Well, the renewal of the application contains 
some additional back-up material. The initial application 
doesn't contain information about workers because there are no 
workers yet. The renewals contain information about individual 
workers, and it will show their productivity. It will show 
their disability. It will show their earning rate and how the 
rates are set.
    Individual team members will look at how the rates are set 
to make sure that they are in compliance with paying the 
appropriate, proportionate prevailing rate.
    Senator Harkin. Let me ask you this. Are 14(c) applications 
ever denied?
    Mr. McKeon. Yes, sir.
    Senator Harkin. Why?
    Mr. McKeon. Well, they may be denied because the employer 
hasn't properly filled out the document.
    Senator Harkin. Probably just the paperwork hadn't been 
filled out because there is no--
    Mr. McKeon. Or they indicate that they are not paying the 
correct prevailing rate or they are not paying the 
proportionate rate.
    Senator Harkin. Well, this is the first application. They 
don't have anybody.
    Mr. McKeon. First application, I don't know whether any 
have ever been denied.
    Senator Harkin. But the renewals you say are sometimes 
denied?
    Mr. McKeon. Yes. The renewals sometimes result in----
    Senator Harkin. Do you have any idea how many? There are 
800 a year--no, there is----
    Mr. McKeon. Twenty-five hundred.
    Senator Harkin [continuing]. Two thousand, five hundred a 
year coming in. Do we have any idea how many?
    Mr. McKeon. I have no idea. I can get back to you on that.
    Senator Harkin. I would like to know, just if there is any 
data on how many are ever denied. Mostly, that would be 
something that would show up on a piece of paper?
    Mr. McKeon. Yes, sir.
    Senator Harkin. 14(c) applications have to be renewed every 
2 years. Is that what you said?
    Mr. McKeon. It depends on what the 14(c) is for. If it is 
for a CRP, it would be renewed every 2 years. If it is a 
private, for-profit firm, it would be renewed every year.
    Senator Harkin. I see. Again, I think in your testimony--my 
question has to do with, so you get paperwork in. There are 
only three people doing this. Is there ever any personal 
contact with these employers, or you just look at the 
paperwork?
    Mr. McKeon. No, there are----
    Senator Harkin. How many did you say a year, 250 or 
something like that? Didn't you say there were----
    Mr. McKeon. The certification team will be either in 
correspondence or by telephone talking to an employer if there 
are questions about the application. We investigate about 100 
and----
    Senator Harkin. Oh, 250 employers you say that do not 
respond?
    Mr. McKeon. Right. That don't renew on time.
    Senator Harkin. I see.
    Mr. McKeon. And if they don't renew on time, there are 
attempts to contact them.
    Senator Harkin. Telephone?
    Mr. McKeon. Telephone, by letter. Yes.
    Senator Harkin. Are there ever any worksite visits at all?
    Mr. McKeon. Yes, sir.
    Senator Harkin. By whom?
    Mr. McKeon. By investigators in the field.
    Senator Harkin. Not by these three people?
    Mr. McKeon. I don't believe so.
    Senator Harkin. No. Who would--do you have any idea how 
many onsite visits are made every year to check on compliance?
    Mr. McKeon. We have averaged over about the last 5 years 
135 investigations a year.
    Senator Harkin. One hundred thirty-five. That would be 135 
site visits a year?
    Mr. McKeon. Correct.
    Senator Harkin. Out of 5,000.
    Mr. McKeon. That is correct, sir.
    Senator Harkin. Would these site visits, would they be the 
ones made if there is indication of any problems or something 
like that? I assume that is what would--
    Mr. McKeon. There might be. Each region and, within each 
region, each district office has, as part of their strategic 
plan, an initiative to stress enforcement in section 14(c). 
There are a number of directed investigations conducted. Those 
are cases where there is no outward indication of a violation.
    Senator Harkin. There are some of those?
    Mr. McKeon. Most of them are that----
    Senator Harkin. They are unannounced?
    Mr. McKeon. We get very few complaints in this field.
    Senator Harkin. OK. Are these 135 site visits then, are 
they sort of unannounced visits where inspectors show up and 
say, ``I am with the Wage and Hour Division? ''
    Mr. McKeon. They can be, but they don't have to. There may 
be a letter sent. I believe in most cases, a letter is sent. I 
can remember way back when, when I did them, we sent a letter 
because the records required to be reviewed aren't always kept 
onsite.
    Senator Harkin. Yes.
    Mr. McKeon. We would tell them what records we wanted to 
see.
    Senator Harkin. In your testimony, you said that the 
supplemental data sheet contains information about each 
worker----
    Mr. McKeon. Correct.
    Senator Harkin [continuing]. Who receives a special minimum 
wage. Over the weekend, I looked at those papers and how they 
fill them in. They put the name and everything down there. Do 
employers only file this information when they seek to renew 
their certificates?
    Mr. McKeon. They only submit that information when they 
seek to renew. However, they are required to have that on 
file----
    Senator Harkin. On file.
    Mr. McKeon [continuing]. When we visit.
    Senator Harkin. If everything seems to be in order, they 
still could have a spot check, right?
    Mr. McKeon. Yes, sir.
    Senator Harkin. Do you think----
    Mr. McKeon. This is an industry where we get--as I said 
before, we get very, very few complaints. We--because of the 
vulnerability of the workers--we have, I can only say, for 33 
years. For 33 years, we have had a directed program where we go 
out and do investigations with or without a complaint.
    Senator Harkin. Do you have any idea how many investigators 
we are talking about? We still don't know.
    Mr. McKeon. How many investigators?
    Senator Harkin. Yes.
    Mr. McKeon. Every journeyman-level investigator should be 
able to conduct a section 14(c) investigation, although I will 
tell you that in most offices, there are typically a handful--
two, three, four--who are, we don't like to say ``specialize'' 
because we don't consider our investigators specialists in any 
one field, but who tend to do them.
    When I was an investigator in Providence, when I was 
actually a trainee, the district director took me by the hand 
and taught me how to do section 14 investigations. I became one 
of the two or three people in the office who typically would do 
the section 14 cases.
    However, if I were busy with something else and the other 
two or three people were busy with something else, and a 
section 14 came up that had to be done right now, any other 
senior investigator in the office would be able to do it.
    Senator Harkin. OK. These investigators are not just 
dedicated to 14(c)?
    Mr. McKeon. No.
    Senator Harkin. Is the Department of Labor more likely to 
investigate particular worksites or particular industries?
    Mr. McKeon. In 14(c)s, Senator.
    Senator Harkin. Yes.
    Mr. McKeon. I would say probably more likely to indicate 
worksites.
    Senator Harkin. Worksites.
    Mr. McKeon. Because a worksite may have multiple industries 
at it.
    Senator Harkin. Do we have any data on what percentage of 
investigations result in penalties to the employer?
    Mr. McKeon. I don't have that, but I could get that for 
you.
    Senator Harkin. I would like if you have that, that would 
be good.
    Does DOL keep track of how many people with disabilities 
are employed under a 14(c) application for a particular 
employer?
    Mr. McKeon. I believe they would, but I would have to check 
on that.
    Senator Harkin. I just wonder how they track it, too. Yes. 
Does DOL keep track of how many people with disabilities are 
employed under a 14(c) application because a 14(c) 
application--correct me if I am wrong, Mr. McKeon--but they 
don't have to absolutely list everybody, do they?
    Mr. McKeon. Not on the initial application.
    Senator Harkin. No. Just, but on the renewal, they do?
    Mr. McKeon. On the renewal, they do.
    Senator Harkin. They have to list everybody.
    Mr. McKeon. Yes. Everybody that was employed in the last 
calendar quarter of the fiscal year.
    Senator Harkin. Last----
    Mr. McKeon. Last quarter of the fiscal year.
    Senator Harkin. Right.
    Mr. McKeon. It still may not be a complete list.
    Senator Harkin. Is any of this information routinely shared 
with State labor enforcement entities?
    Mr. McKeon. I don't know that, sir. I could check.
    Senator Harkin. Well, the reason----
    Mr. McKeon. I mean, I know, as an investigator, we used to 
get calls from the Rhode Island State Department of Labor 
wanting to know if a particular entity had a 14(c) certificate, 
and we used to, quite frankly, chuckle because they have a 
certificate that they have to post.
    Senator Harkin. The reason I ask that is that it is my 
understanding that the Iowa Workforce Development requested 
information about the number of 14(c) employees in the State of 
Iowa--not just here, but in the State--and where they were 
employed, and they were told they had to file a Freedom of 
Information Act request.
    That is why I just wondered, do these routinely go back and 
forth to the State or not if they request it?
    Mr. McKeon. I don't know whether they are routinely shared, 
but I also don't know whether they are protected under privacy. 
So----
    Senator Harkin. Find out about that.
    Mr. McKeon [continuing]. It is kind of a tough area.
    Senator Harkin. Let us shift to 3(m). 3(m) is the provision 
that allows them to deduct certain things, like room and board 
and stuff. What information about 3(m) deductions is filed with 
the Department of Labor? What do they have to give as 
information to you?
    Mr. McKeon. The employer doesn't give information. They 
must have information when we come. When we come to do an 
investigation, they must be able to account for all of the 
costs that are incurred, that are allegedly incurred that the 
employer is taking credit for.
    If we don't do an investigation, they don't--there is no 
clearinghouse for 3(m) information.
    Senator Harkin. The only way you would ever find out about 
a 3(m)--so when they file the renewal for 14(c), they don't 
have to file 3(m)?
    Mr. McKeon. I don't know whether they do or not, Senator.
    Senator Harkin. They don't. All they have to do----
    Mr. McKeon. No, I suspect not. But, I can't tell you that 
for sure.
    Senator Harkin. They have just got to keep it on file. The 
only way DOL would ever find out about that would be through a 
site inspection and asking to see the records, right?
    Mr. McKeon. Yes.
    Senator Harkin. Or I suppose you could ask them to send it 
to you, I suppose.
    Mr. McKeon. We go to the site on these.
    Senator Harkin. How do you prove that someone even wants 
the food or housing that is being deducted from their paycheck? 
Maybe they don't even want it.
    Mr. McKeon. I can tell you from my experience, Senator, 
that under 14(c), the use of 3(m) is very, very rare. I don't 
remember running into it as an investigator ever. I ran into 
3(m) a lot as an investigator, but not on a 14(c) case.
    Senator Harkin. Say that again. I misunderstood. You ran 
into 3(m) deductions.
    Mr. McKeon. In the normal course of my work, I ran into 
3(m) fairly regularly.
    Senator Harkin. Yes.
    Mr. McKeon. I don't ever remember running into 3(m) in a 
14(c) situation.
    Senator Harkin. You could have a 3(m) deduction but not 
have a 14(c) exemption? I don't understand how you do that.
    Mr. McKeon. Well, no. In a non-14(c) investigation, I am 
investigating a restaurant, for example.
    Senator Harkin. Yes.
    Mr. McKeon. I would find on the record that they were 
deducting for meals, as an example. That would be fairly 
normal. We see that regularly. 14(c), I would say in my 15 
years as an investigator and 7 years as a district director, I 
never saw one where 3(m) was applied. That doesn't mean----
    Senator Harkin. I am told that 3(m) is basically used for 
migrant workers a lot?
    Mr. McKeon. 3(m) may be used for migrant workers, but it is 
used in many industries. Under 14(c), this is the first 
instance in my career that I have heard of it. That doesn't 
mean anything. I mean, I am just--my vision is fairly narrow.
    Senator Harkin. I just wonder, is there criteria, and if 
there is, what would that criteria be for determining if 
housing or food or other deductions are primarily for the 
benefit of the worker? How do you determine that?
    Mr. McKeon. We have to look at all of the facts in the 
situation. Now, in the case, as your staff mentioned, migrant 
workers, if that is the housing that the migrant workers want 
to live in and the employer or farm labor contractor is 
deducting or taking credit for that and it meets the safety and 
health standards, then it can be taken. But, they have to prove 
the value. What is the reasonable cost?
    Senator Harkin. Mr. McKeon, I said I wasn't going to get 
specifically into Atalissa. Are you aware of this Atalissa 
case?
    Mr. McKeon. I am aware of it, but I am also not really 
prepared to talk about it, sir.
    Senator Harkin. Well, just hypothetically, I am just saying 
how could it be that for going on 30 years, they had this 
situation like this bunkhouse here, the old abandoned school 
where these people lived, and no one from DOL or whatever 
checked to see if 3(m) was being appropriately used?
    I mean, how could that just go on year after year after 
year? Wouldn't something pop up some place? Wouldn't there be 
an inspection? How could that go on? How could something like 
that exist for so many years?
    Mr. McKeon. I would tell you, Senator, that I suspect there 
are a lot of 14(c) employers that have never seen a Wage and 
Hour investigator. It is a resource issue.
    Senator Harkin. Well, you have got investigators. I still 
don't know how many investigators there are out there.
    Mr. McKeon. There are somewhere between 730 and 750 
currently.
    Senator Harkin. Seven hundred fifty?
    Mr. McKeon. Yes.
    Senator Harkin. For the entire United States?
    Mr. McKeon. Correct. When I started----
    Senator Harkin. They do more than just--these are----
    Mr. McKeon. They do. They do the full range and scope.
    Senator Harkin. Yes.
    Mr. McKeon. When I started, there were 1,500. That was 
1975.
    Senator Harkin. Whoa. Tell me that again.
    Mr. McKeon. When I started in Wage and Hour, 1975, there 
were 1,500 investigators.
    Senator Harkin. Fifteen?
    Mr. McKeon. Fifteen--one, five.
    Senator Harkin. What?
    Mr. McKeon. One, five.
    Senator Harkin. One thousand five hundred investigators in 
Wage and Hour?
    Mr. McKeon. Correct. Yes, sir.
    Senator Harkin. In 19, what, 50?
    Mr. McKeon. 1975. Come on. I am not that old.
    [Laughter.]
    Senator Harkin. No, no, no, no.
    Mr. McKeon. Just because it says ``Mister,'' it is not my 
father.
    Senator Harkin. 19----
    Mr. McKeon. '75.
    Senator Harkin. 1975.
    Mr. McKeon. That was about our peak.
    Senator Harkin. How many are there now?
    Mr. McKeon. There are around 740, something under 750.
    Senator Harkin. Half as many?
    Mr. McKeon. Yes, sir.
    Senator Harkin. There are not half as many employers out 
there?
    Mr. McKeon. I would think not. There are about 7 million 
employers.
    Senator Harkin. Seven hundred fifty. Well, yes, I see that. 
My, my, I did not know that. Because I have just often wondered 
how that could go on for so many years, and nobody would ever 
check on something like this. Although there were reports in 
the newspapers, and there are things popping up all the time 
that some people were kind of warned about it.
    Again, I don't know. I am still trying to get to the 
bottom. Is this just one isolated little case in the United 
States? I am going to ask the panel that. Are there more that 
we don't know about out there like this? I don't know.
    Mr. McKeon. I don't either, sir.
    Senator Harkin. I was surprised, Mr. McKeon, to find out 
that there is a contract agency in Texas, this Henry's Turkey 
Service, they hired these men. They applied for the 14(c). They 
put them on a bus, and they drive them up to Iowa. They put 
them in this bunkhouse, and they go to work at this turkey 
plant. And the turkey plant doesn't pay them. They pay Henry's 
Turkey Service in Texas.
    Henry's Turkey Service deducts all the 3(m) and all that 
kind of stuff. They pay the 600 bucks a month, and I think, if 
I am not mistaken, they give the men some spending money.
    Mr. McKeon. That is what the press accounts indicate.
    Senator Harkin. That is what I heard. It wasn't until, I 
think, a sister of one of the men that was there found out that 
after all these years, he had nothing to show for it. I am 
still wondering is this commonplace? Have you ever seen this 
kind of arrangement anywhere?
    Mr. McKeon. The number of 14(c) for-profit employers is 
very small.
    Senator Harkin. Yes.
    Mr. McKeon. I mean, I don't know what that number is, but 
it is a very small number, I am told. Most are nonprofit 
organizations.
    Senator Harkin. Yes. Yes, I am going to try----
    Mr. McKeon. I will be honest with you. This is the first 
situation like this I have ever heard of, and it is 
disconcerting.
    Senator Harkin. Well, it is pretty bad, and I am still 
trying to get to the bottom of just what we need to do with 
14(c) and 3(m) and tightening up on those and just making sure 
that, first of all, under 14(c) there has to be determination 
of your productivity.
    Mr. McKeon. Correct.
    Senator Harkin. I am not certain how much of that is being 
done, how much you are being paid.
    Mr. McKeon. Every investigation, and that is a big part 
of--the 14(c) investigation takes considerably longer, about 
twice as long, as a normal FLSA investigation because that is 
one of the criteria that we have the investigators look at, 
which is the individual. The individual may be disabled, but 
not disabled for their work.
    Senator Harkin. That is right.
    Mr. McKeon. That is something that we have to be very 
careful that we don't just take a look and say, ``Oh, that 
person is disabled so I will move on.'' ``Is that individual 
disabled for the work that they are doing? ''
    Senator Harkin. Mr. McKeon, thank you very much.
    Mr. McKeon. You are welcome.
    Senator Harkin. You get me some of that information I asked 
about, I would sure appreciate it very much.
    Mr. McKeon. Yes, sir. I will get that.
    Senator Harkin. Thank you, Mr. McKeon.
    Mr. McKeon. Thank you, sir.
    Senator Harkin. Next we will turn to our second panel. Our 
second panel is Mr. Curt Decker, affiliated with the National 
Disability Rights Network since its inception in 1982. As 
executive director of the Nation's largest nongovernmental 
enforcer of disability rights, Mr. Decker oversees activities 
related to training and technical assistance and legislative 
advocacy.
    Then we have Ms. Bobo. Kim Bobo founded the Interfaith 
Worker Justice in 1996 and has since provided leadership and 
vision for building the organization and the movement for 
worker justice.
    Joyce Bender is the CEO and founder of Bender Consulting 
Services, Inc., a firm that provides competitive employment 
opportunities for people with disabilities who are trained in 
the information technology, engineering, finance, accounting, 
human resources, and general business areas. She has 
successfully employed and placed more than 400 persons with 
significant disabilities in competitive employment.
    James Leonard was an attorney for the U.S. Department of 
Labor from 1973 to 1995, where he handled trial, appellate, 
regulatory, and opinion work under the Fair Labor Standards Act 
and also supervised trial litigation under various other laws 
as well. He now does volunteer legal work for Farm Worker 
Justice and the Child Labor Coalition and is on the advisory 
board of the National Wage and Hour Clearinghouse.
    Well, thank you all very much for being here and for your 
testimonies. Like I said, they will be made a part of the 
record in their entirety. If you could just sum it up in 
several minutes, I would certainly appreciate it so we could 
get into a question and answer period.
    First, we will start with Mr. Curtis Decker, of course, a 
longtime friend of this committee and done a lot of work on 
disability rights for a long time. Welcome, Mr. Decker, and 
please proceed.

   STATEMENT OF CURTIS DECKER, EXECUTIVE DIRECTOR, NATIONAL 
           DISABILITY RIGHTS NETWORK, WASHINGTON, DC

    Mr. Decker. Good afternoon, Senator, and thank you for 
holding this important and timely hearing.
    The National Disability Rights Network is a voluntary 
membership organization of the federally mandated Protection 
and Advocacy and Client Assistance Programs that were created 
by Congress in 1970 to protect the rights of children, adults 
with disabilities, and their families.
    We have an agency in every State, U.S. territory, and the 
District of Columbia, and we offer a legal voice to individuals 
with disabilities and aim to uncover and eliminate maltreatment 
and ensure compliance with the laws designed to protect the 
rights of individuals with disabilities.
    The concept that individuals with disabilities should be 
earning less than other workers is an out-moded concept, with 
its origins in the creation of the Fair Labor Standards Act of 
the 1930s, a time when veterans and people with physical 
disabilities were seeking factory jobs in the manufacturing 
industry. But our world has changed significantly since the 
1930s, along with our expectations of people with disabilities.
    Services and supports for individuals with a disability 
that were only a dream in the 1930s are now a reality. The 
creation of assistive technology devices, advances in 
supportive employment services, experience in the use of 
behavioral supports, and the concept of reasonable 
accommodation were not even considered in the 1930s or for many 
decades later.
    Subsequent amendments to the 14(c) provisions in 1966 and 
in 1986 failed to take into consideration these advancements. 
It is inappropriate to single out and stigmatize workers with 
disabilities in an era of demonstrated progress and thinking 
about disabilities through passage of such landmark 
legislation, thanks to your leadership, of the Americans with 
Disabilities Act, the Assistive Technology Act, the Ticket to 
Work and Work Incentives Improvement Act, and strengthening of 
Section 504 of the Rehabilitation Act.
    People with disabilities can and should be integrated into 
the workplace. Employers such as Hyatt Hotels and Walgreens 
continually prove that individuals with a disability can meet 
the productivity and quality standards required of these 
businesses and, thus, earn the minimum wage or prevailing wage 
for that position.
    From a public policy perspective, if we ask the question 
whether if Congress and the disability community today would 
create a program like 14(c) if it didn't exist, I think the 
answer would be a resounding no.
    That said, we do have to be cognizant of the consequences 
an immediate abolishment of 14(c) would have on current 
employees and employers, as well as individuals with 
significant disabilities. We must work together in the short 
term to improve section 14(c) provisions, while Congress, the 
Department of Labor, disability service providers, disability 
advocates, and other employment experts evaluate the efficacy 
of the section 14(c) provision program.
    Now NDRN is working in conjunction with our affiliates in 
Iowa, Texas, Missouri, Illinois, and South Carolina regarding 
the recent discovery of the frightful work and living 
conditions for employees at Henry's Turkey Service in Atalissa. 
Prior to this event, we have also worked with programs in 
Hawaii, Kansas, Louisiana, Nebraska, North Dakota, Oregon, and 
Washington State on past wage and hour violations. Some of them 
sounding very similar to the situation that was uncovered in 
Atalissa.
    The weaknesses of the 14(c) program and the lack of 
oversight enabled Henry's Turkey Service to exploit the labor 
of individuals with disabilities in order to increase the 
profit of the business. This is outrageous and cannot be 
continued.
    Updating Federal employment legislation and regulations for 
individuals with disabilities is long overdue. Now you heard 
this is not a new issue. Both the GAO and the IG conducted 
investigations of how the Wage and Hour Division oversees the 
wage certificates and offered very specific recommendations. 
While we would acknowledge that the Wage and Hour Division has 
made some progress, there is still much more to be done.
    We believe the following recommendations ought to be taken 
into consideration--that guidelines for employee evaluations 
must be more explicit and standardized; there needs to be a 
system of transparency as current data is not accessible, as 
you stated; we also have to use a FOIA request in order to get 
basic information. This is very cumbersome, time consuming, and 
not very timely.
    The critical information on the 14(c) program needs to be 
on the Department of Labor's Web site and presented with 
clarity in such a detail that red flags can be detailed. 
Current regulations require that employers maintain records. 
Assuring better accessibility would not present an additional 
burden.
    Clearly, enforcement of the 14(c) program needs to improve. 
However, only just increasing enforcement of these provisions 
by the Department of Labor is not enough. There has to be 
independent oversight that could be provided by programs such 
as mine, both the Protection and Advocacy system and the Client 
Assistance Program.
    Another concern that has been mentioned of the employees 
with disabilities is the deduction from cash wages to cover 
room and board provided by the employer. While this is allowed 
under the Fair Labor Standards Act, exposing those violations 
is critical to make sure that people are not subject to 
exploitation.
    This would reduce the disincentive of these exploitative 
room and board charges and would allow us to have a better 
handle on what is going on in some of these places that are so 
obviously out of the way and in very rural areas.
    And last, we would also like to see the role of the Office 
of Disability Employment Policy, ODEP, made more clear on its 
role in working with the Wage and Hour Division. Right now, 
ODEP is not authorized. It ought to be authorized with some 
very clear mandates on how they can contribute to this process.
    We also believe that there are not enough sufficient 
penalties to go after the bad actors. While there is the 
ability to get back wages, there ought to be increased 
penalties to make sure that private employers, in particular, 
do not use this program and abuse people with disabilities.
    Last, I would say that this is a pretty complex problem, 
and it is not just looking at the wage and hour issue. We need 
to look at the role of Social Security. Obviously, one of the 
issues here was the fact that the Atalissa people were also the 
representative payee. This has happened in many situations 
where it has all been combined into one group. As a result, it 
is very hard to get a handle on what is going on.
    We would like the review of this issue to include the full 
range of issues from both the Department of Labor and Social 
Security and the range of supports and services that people 
with disabilities need.
    Thank you again for holding this hearing. I will be glad to 
answer any questions.
    [The prepared statement of Mr. Decker follows:]

                  Prepared Statement of Curtis Decker

    I would like to thank Senator Harkin and the other Senators here 
today for holding this important and timely hearing.
    NDRN is a nonprofit membership organization for the federally 
mandated Client Assistance Program (CAP) and Protection and Advocacy 
(P&A) systems, created by Congress in the 1970's to protect the rights 
of children and adults with disabilities and their families. With a 
presence in every State and U.S. territory, and the District of 
Colombia, the CAP and P&A systems offer an advocacy and legal voice to 
individuals with disabilities, and aims to uncover and eliminate 
maltreatment and ensure compliance with laws designed to protect the 
rights of individuals with disabilities.
    The concept that individuals with disabilities should be earning 
less than other workers is an out-moded concept with its origins in the 
creation of the Fair Labor Standards Act of the 1930's, a time when 
veterans and other people with physical disabilities were seeking 
factory jobs in the manufacturing industry. But our world has changed 
significantly since the 1930's. Services and supports for individuals 
with a disability that were only a dream in the 1930's are now a 
reality. The creation of assistive technology devices, advances in 
supported employment services, experience in the use of behavioral 
supports, and the concept of reasonable accommodation were not 
considered in the 1930's. Subsequent amendments to the Sec. 14(c) 
provision in 1966 and 1986 failed to take into consideration these 
advancements.
    It is inappropriate to single out and stigmatize workers with 
disabilities, especially in an era of demonstrated progression in 
thinking about disability through passage of such legislation as the 
Assistive Technology Act, the Americans with Disabilities Act, the 
Ticket to Work and Work Incentives Improvement Act, and the 
strengthening of Section 504 of the Rehabilitation Act. Employers such 
as Hyatt Hotels and Walgreens continually prove that individuals with a 
disability can meet the productivity and quality standards required of 
these businesses, and thus earn the minimum-wage or prevailing wage for 
their position.
    From a public policy perspective, we should ask the question: if 
the Sec. 14(c) waiver did not exist, is it something Congress and the 
disability community would devise today? I believe the answer to that 
question is ``no.'' That said, we must be cognizant of the consequences 
an immediate abolishment of section Sec. 14(c) would have on current 
employees and employers, as well as individuals with significant 
disabilities. We must work together in the short term to improve the 
Sec. 14(c) provision while Congress, the Department of Labor, 
disability service providers, disability advocates such as the P&A/CAP 
network, and others evaluate the efficacy of the Sec. 14(c) provision.
    NDRN has been working in conjunction with our affiliates, the 
Client Assistance Program and Protection and Advocacy systems in Iowa, 
Texas, Illinois, Indiana, Georgia, Missouri, South Carolina, and 
Wisconsin regarding the recent discovery of frightful work and living 
conditions for employees at Henry's Turkey Farm in Atalissa, IA. We 
have also worked closely with Client Assistance Program and Protection 
and Advocacy systems such as Hawaii, Kansas, Louisiana, Nebraska, North 
Dakota, Oregon, and Washington in the past on wage and hour violations.
    While the exact facts surrounding the Atalissa incident are still 
unclear, it's impossible to ignore the systemic flaws that have been 
uncovered. In Atalissa, the weaknesses of Sec. 14(c) and a lack of 
oversight enabled Henry's Turkey Service to exploit the labor of 
individuals with disabilities in order to increase the profit of the 
business. This is outrageous.
    Henry's Turkey Service is certainly the catalyst for this hearing, 
but updating employment regulations for individuals with disabilities 
is long-overdue. This is not a new issue. A Government Accountability 
Office report in 2001 highlighted many shortcomings in the Sec. 14(c) 
waiver provision. The same year, the Department of Labor Inspector 
General also conducted a review of how the Wage and Hour Division 
issues and oversees the wage certificates allowed under Sec. 14(c) and 
offered specific recommendations. Since then, some progress has been 
made to improve oversight of the certificates.
    Among other improvements, the Department of Labor has worked to 
eliminate redundancies in their Sec. 14(c) records and better verify 
accuracy. The Wage and Hour Division is now tracking the number of 
staff hours their investigators devote to the special minimum wage 
provision and use this information to better manage employers who 
possess the Sec. 14(c) wage certificate. Additionally, employers are 
now provided with written guidance for Sec. 14(c) requirements and 
other technical assistance.
    While the Department of Labor took positive steps to improve 
Sec. 14(c), Henry's Turkey Service lingers as an ugly reminder that 
more is still required. Inadequate oversight and compliance at 
worksites covered by a Sec. 14(c) certificate still continues. To 
address this, NDRN offers the following recommendations:

     The guidelines for employee evaluations must be more 
explicit and standardized.
     A system of transparency must be enacted. Current data is 
not easily accessible, and making a FOIA request is a lengthy process 
and requested information cannot be received in a useful time frame or 
fashion.
     Critical information about the Sec. 14(c) program should 
be on the Department of Labor's Web site, and presented with clarity 
and in such detail that red flags can be detected. For example, for 
worksites operating with a Sec. 14(c) certificate the percentage of 
employers operating under the certificate, the productivity level of 
these individuals, and the dates for which the certificate renewed must 
be easily accessible. Current regulations require the employer to 
maintain these records so assuring better accessibility would not 
represent an additional burden. Information about employers which held 
a Sec. 14(c) certificate that has been revoked, not renewed, or expired 
should also be made easily available.
     Clearly enforcement of the Sec. 14(c) program needs to 
improve. However, just increasing enforcement of these provisions by 
the Department of Labor is not enough. Independent oversight of the 
program provided by the Client Assistance Program and Protection and 
Advocacy network is warranted. Specifically, CAPs and P&As should be 
allowed access to Sec. 14(c) sites to ensure individuals with 
disabilities are being treated fairly, without having to maneuver 
difficult hurdles.
     Another concern for employees with disabilities is the 
deduction from cash wages to cover room and board provided by an 
employer. Though allowed under the FLSA, to expose violations for 
individuals with disabilities who could be subject to exploitation, 
intent to make deductions should be noted on Sec. 14(c) applications. 
Deductions for room and board should not be handled by the same entity. 
This would disincentivise exploitative room and board charges which re-
claim most of or all wages paid to employees, a practice that should 
have expired alongside sharecrop-
ping and indentured servitude.
     The role of the Office of Disability Employment Policy 
(ODEP) is currently vague. The role of ODEP should be clarified through 
statute and include a mandate to work with the Wage and Hour Division 
to oversee enforcement of Sec. 14(c) wage certificates. ODEP's 
experience working on disability and employment issues could be better 
utilized to assure the proper implementation and enforcement of Federal 
employment laws under Department of Labor's jurisdiction which impact 
individuals with disabilities, such as Sec. 14(c). In fact, ODEP has 
already funded an analysis of the Sec. 14(c) wage certificates in terms 
of Community Rehabilitation Providers, a training assistance center on 
sub-minimum wage, and expansion of the role of the office to assist 
with enforcement is a logical means to address the shortfall in 
oversight by DOL.
     Lastly, for employers to take their responsibilities more 
seriously, stiffer penalties must be enacted. Though Department of 
Labor statute allows for revocation of a Sec. 14(c) certificate as far 
back as the date of issuance or date of a violation, there is no clear 
provision to obtain liquidated damages for violations of section 
Sec. 14(c).

    The section Sec. 14(c) waiver program is just one piece of the 
puzzle of employment for individuals with disabilities. In order to 
reach a comprehensive solution, we need to ultimately examine a number 
of issues including access to supports and services, disincentives to 
work within the Social Security program, and archaic attitudes by some 
service providers.
    Thank you again for holding this hearing. I look forward to working 
with you and your colleagues in the House and Senate to address this 
issue.

    Senator Harkin. Curt, thank you very much.
    Now we go to Joyce Bender. Ms. Bender, welcome. Please 
proceed.

STATEMENT OF JOYCE BENDER, PRESIDENT AND CEO, BENDER CONSULTING 
                 SERVICES, INC., PITTSBURGH, PA

    Ms. Bender. Thank you very much, Senator Harkin.
    I want to begin by telling you not only how honored I am to 
be here, but this is so outrageous, this discussion today, that 
it seems as if you are always there, always there helping us 
helping people with disabilities to not be taken advantage of. 
I want to start by thanking you for that.
    Senator Harkin. Well, you can't imagine how embarrassing 
isn't the right word, embarrassment. Just how badly I feel that 
this has taken place in my own State.
    Ms. Bender. I do believe that----
    Senator Harkin. Under my own nose. Didn't even know about 
it.
    Ms. Bender. But you are doing something about it. You 
always do something about it.
    Senator Harkin. We are going to do something about it. I 
just don't know exactly what. That is why we have got you here.
    [Laughter.]
    Ms. Bender. I know you will, though. I can count on you.
    As you mentioned, I am Joyce Bender. I am the founder and 
CEO of Bender Consulting Services, which is a company that 
focuses on competitive employment for Americans with 
significant disabilities. In addition, I am a woman with 
epilepsy and a hearing loss. I am also very excited to tell 
you, Senator Harkin, that I will be the chairman of the board 
of the National Epilepsy Foundation this May, a great honor to 
me.
    A great honor to me because my life changed 24 years ago. 
What I did for a living is employment. My specialty is 
employment and disability. That is what I have done my whole 
life. I was in executive search at my company in Pittsburgh, 
PA, where I am headquartered. In the midst of my career, there 
was a misdiagnosis of my fainting spells.
    One evening, I went to the movie theater with my husband. 
At intermission, I went to get a Diet Coke, and I had a tonic 
seizure and hit the floor so hard I fractured my skull, broke 
all the bones in my inner ear. That is why I have the hearing 
loss. I was rushed to the hospital in a coma.
    Thank God, against all odds, I had lifesaving brain 
surgery. That is when I heard the news. ``You have epilepsy.'' 
What I did 2\1/2\ months later, when I got back to work, I said 
to myself, ``You know, I am placing all these people with all 
these skills. Now why the heck can't people with disabilities 
do these jobs? ''
    I knew very well that they can do these jobs. That is when 
I founded Bender Consulting Services. I also want to point out 
to you, Senator Harkin, that I noticed one other thing--that 
they were paid at a lower rate than other people when they did 
find employment.
    Due to this experience, I founded Bender in 1995. We are 
now located in 18 States and 2 provinces of Canada. We are a 
for-profit company. We pay competitive wages, which include, I 
am proud to say, family benefits coverage.
    I want to tell you the main reason we have been successful. 
It really has nothing to do with me. It has to do with my 
employees. These are people with significant disabilities that 
go to work every day on time, early, and compete at such a high 
level. That is the reason we have been successful.
    We have partnered with people such as Highmark, Bayer 
Corporation, CSC, WellPoint, the MGM Mirage, and Federal 
agencies such as the NSA, the FAA, and the Naval Supply Systems 
Command. These are just a few of the companies I have partnered 
with that seem to realize that talent is really the only 
discriminator.
    I want to tell you, Senator Harkin, I just came back this 
Saturday from a job fair at the CityCenter in Las Vegas, where 
they interviewed 50 people with significant disabilities for 
competitive wages, equal to everyone else.
    Before I close, I am going to give you just two examples. 
One is Jamie. This is a young man that I hired, who now works 
for Highmark, who has cerebral palsy. He has a very significant 
disability. Therefore, you cannot understand him when he 
speaks. Jamie uses augmentative communication. He types with a 
stick in his mouth.
    Jamie, when I met him, had on his resume--this is what it 
said. It said, ``I will take a very low salary because of my 
disability.'' Of course, I told him to take that off of his 
resume. And you know, I hired Jamie, and he works at Highmark. 
Since then, he has been promoted several times and is paid a 
very high salary.
    Justin, a person with Down Syndrome, an intellectual 
disability. When I met him, he was told he should just work as 
a lawn service person. He works in their mail service 
operation, and he is paid a very competitive salary.
    I would just close by telling you that when I founded 
Bender, I did not want our motto to be ``jobs mean freedom.'' I 
wanted it to be ``competitive jobs mean freedom,'' because 
without equal pay, without that great treasure of employment, 
you are never free in this country.
    On behalf of all those Americans with disabilities, thank 
you again for always being there, Senator Harkin.
    [The prepared statement of Ms. Bender follows:]

                   Prepared Statement of Joyce Bender

    Esteemed members of Congress, I would like to thank you for not 
only giving me the opportunity to speak today, but also for your care 
and concern for quality of life and equality of opportunity for all 
Americans with disabilities.
    My name is Joyce Bender; I am the CEO and founder of Bender 
Consulting Services, a company that focuses on competitive employment 
for Americans with disabilities. I am a person who is living with 
epilepsy and a hearing loss and am the chair-elect of the national 
Epilepsy Foundation's board of directors.
    Twenty four years ago, in the midst of my career in executive 
search, I had an almost fatal accident. One evening, my husband and I 
went to see Amadeus, and at the intermission, I had a seizure at the 
concession stand, fractured my skull and broke all of the bones in my 
right ear--all of this happened, due to a misdiagnosis of epilepsy. 
After having brain surgery and spending 2 months in rehabilitation, I 
started thinking about what happens with people with disabilities. For 
the next 10 years of my life, in addition to getting back to work in 
executive search, I also did volunteer work, trying to find competitive 
employment for Americans with significant disabilities. I learned that 
people with the most significant disabilities, including those with 
intellectual disabilities couldn't get good jobs. I also didn't 
understand why many had sub-minimum wage jobs.
    Due to this experience, I decided to focus on this effort and 
founded Bender Consulting in 1995, a for-profit company that aligns 
talented people with disabilities with great career opportunities in 
information technology, finance/accounting, human resources and other 
general business areas. Today, Bender Consulting operates in 18 States, 
and in 2 provinces in Canada, through Bender of Canada. We have hired 
over 400 people with significant disabilities and have paid them 
competitive wages, including family benefits coverage. The primary 
reason for Bender Consulting's success is due to the outstanding 
performance and efforts of my employees, people with significant 
disabilities, who go to work every day, early, with a great attitude.
    Many employers believe that people with disabilities are inferior 
and not able to do the job at the same level as their non-disabled 
counterpart. We know that is not true. I work in partnership with great 
corporations such as Highmark, Inc., Bayer Corporation, CSC, WellPoint, 
MGM MIRAGE and Federal agencies including the NSA, the FAA, and the 
Naval Supply Systems Command. These are companies and government 
agencies that look at talent as the only discriminator, and provide 
competitive jobs with competitive wages. In reference to MGM MIRAGE, I 
just returned from Las Vegas. On Saturday, 52 people with disabilities 
were interviewed by CityCenter managers through our Bender partnership.
    Although I have many examples of success, I would like to share 
with you the career success stories of Jamie and Justin, both of whom 
were aligned with freedom through competitive employment because of my 
partnership with Highmark, Inc.
    Jamie is a young man who has cerebral palsy that is so significant 
that he uses a wheelchair, keeps his arms behind his back, due to the 
spasticity, types with a stick in his mouth and is very difficult to 
understand so he uses augmentative communication. When I met Jamie at a 
job fair, his resume indicated that he had a master's degree in 
rehabilitation science and technology and would accept $12,000 a year 
due to his significant disability. Through the Bender/Highmark 
partnership, Jamie landed a job as a computer programmer. Within 2 
months on the job, his manager called me to tell me that Jamie was 
``out-programming'' his non-disabled colleagues. Jamie is seen 
frequently on evenings and weekends attending sporting events, concerts 
and cultural activities. He has worked at Highmark for over 7 years, 
has recently been promoted, and is paid competitively.
    Justin, another individual who Highmark hired through our 
partnership is a young man who has an intellectual disability, Down 
Syndrome. Justin works for Highmark in the mail service operations 
area. He has a full-time job and is competitively compensated with a 
great benefits package. More important, Justin has become one of the 
top employees, among those who have disabilities and not, and is used 
to train new employees that Highmark hires in his area. Every time he 
sees me, he reminds me that having a competitive salary and a career 
has changed his life. When Justin was first referred to me by a person 
in social services, I was told he could only be successful in a lawn 
mowing or maintenance job. I often think how different his life would 
be today, if he had been referred to another company who took the 
advice of that social services person, who lowered the bar for Justin. 
He may not be living the way he is living today--purchasing goods and 
services, paying taxes and making a difference for Highmark.
    When I chose the corporate motto for Bender Consulting, I did not 
choose ``jobs mean freedom,'' I chose ``competitive jobs mean 
freedom.'' Without competitive employment and pay, people with 
disabilities will never, ever be free in this country.
    Thank you for the opportunity to speak today.

    Senator Harkin. Well, thank you very much, Ms. Bender, for 
being here and thanks for your testimony and all the great work 
that you have done. I appreciate it very much. We will have 
more to talk to you about on this situation here.
    Now we turn to James Leonard, former U.S. Department of 
Labor attorney. Mr. Leonard, welcome, and please proceed.

        STATEMENT OF JAMES B. LEONARD, FORMER ATTORNEY, 
            U.S. DEPARTMENT OF LABOR, ARLINGTON, VA

    Mr. Leonard. Thank you, Senator, and thank you for inviting 
me to testify.
    I would like to talk to you a little bit today about the 
U.S. Department of Labor's enforcement of section 14(c) and 
section 3(m) and make suggestions about how its procedures as 
well as perhaps regulations and the text of the statute itself 
could be amended.
    In addition, I would like to tell you about some of the 
problems that the Department of Labor is facing more generally 
in enforcing this law because of severe staff shortages. 
Finally, I will try to make some suggestions about how it could 
operate even in the face of these staff shortages.
    Now Mr. McKeon talked about the application procedure, 
where an employer who wants to hire handicapped workers has to 
file an application with the Department of Labor. Here is what 
I see is one big problem with that process. The application 
does not have to have any information which shows how the 
employer computed the productivity of the handicapped workers 
in comparison with nonhandicapped workers who are doing 
essentially the same work.
    The only time the employer has to submit that information 
is when it is up for a renewal of its 14(c) certificate. Now 
Mr. McKeon mentioned that in the case of competitive 
employment, such as Henry's Turkey Service, the period of that 
certificate is only a year. It has to be renewed every year. 
For other forms of employment, such as sheltered workshops or 
patients who are working in an old folk's home, say, or some 
care facility, applications for those 14(c) certificates only 
have to be renewed every 2 years.
    The result of that is the Department of Labor knows that 
these employers are hiring and have on the payroll handicapped 
workers, but it has no information from them for 1 year or 2 
years that shows the detailed information that is really 
necessary in order for the Department of Labor to try to figure 
out whether the wages that are being paid to handicapped 
workers really reflect the degree of their disability.
    I think that the application procedure has to be changed so 
that the Labor Department gets this information up front. It 
may not be able to make much use of it because it doesn't talk 
to the individual people who compiled the data. At least it 
would have more information than it has now.
    Because the employer is required to have this information 
on hand in the event there is an investigation, it wouldn't 
force the employer to do any additional work to send it to the 
Labor Department. It would only be the cost of photocopying and 
postage. That seems to me to be a small expense to protect 
handicapped workers.
    You asked earlier of Mr. McKeon why it is that no one knew 
about this horrible situation, which seems incredible. I have 
some suggestions. The problem with these employers is the 
workers typically, because of their handicaps, are not 
necessarily as likely as other workers to understand when they 
are being exploited, when their wages are improper. Therefore, 
the Department of Labor tends to target likely violators.
    How do they pick their targets? This is a very difficult 
problem, and every investigative agency has it. Here is what I 
think the Labor Department ought to do and that all agencies 
ought to do. They ought to make more use of the eyes and ears 
of people in the community who would be likely to know about 
this.
    It seems highly unlikely to me that people in the town or 
near the plant didn't know something about this. If the Labor 
Department had partnerships or some other kind of cooperative 
arrangement with worker advocacy organizations and similar 
organizations, this would be a way in which the Labor 
Department could learn about these violations.
    We all know about community policing, where police forces 
encourage citizens and community groups to alert the police to 
possible violations of the law. This is the same thing that I 
am talking about in the case of handicapped workers.
    Now in the case of food and lodging and other facilities, 
you were asking Mr. McKeon if there is some way that the Labor 
Department can find out about what is going on in advance? Also 
you asked about whether or not we could really say that these 
things were primarily for the benefits of the employees?
    As he said, the program does not require the employer to 
notify the Labor Department that it is taking advantage of 
this. Here is a suggestion that I would make. If the employees 
had to be told exactly how the cost of food, the cost of 
lodging, or the cost of other facilities is being computed to 
be added to their cash wage so that they are raised up to the 
required wage, the employees would be in a better position to 
know whether they are being cheated.
    If you know that the schoolhouse you are living in cost 
$600 a month to rent and you see what is being deducted from 
your wage, you know immediately that there is a problem. This 
is, in effect, using the employees themselves as community 
policers because it would require the employees to be told 
exactly how the employer computes their additions to their cash 
wage in the form of meals and lodging.
    I would like to say a few quick things about enforcement. I 
know I am over my time. The Department of Labor is in serious 
straits because the staff, both of the Wage and Hour Division 
and of the lawyers who are supposed to enforce this law, along 
with many other laws, has been reduced drastically.
    Mr. McKeon talked about the 50 percent reduction since he 
joined the Labor Department. In the Solicitor's Office, the 
legal arm of the Labor Department, the situation is even worse. 
Here is a quick statistic. In 1992, the Solicitor's Office had 
786 employees. That includes not only lawyers. It includes 
paralegals and support staff.
    By 2001, it was down to 709 employees. In January 2007, the 
last statistics I have seen, it had only 590 employees. Yet 
during this time, it has been given other laws to enforce, and 
the workforce has increased as well.
    In the case of the Wage and Hour Division, based on my 
calculations, each full-time investigator in the Wage and Hour 
Division is responsible for protecting 245,000 workers. 
Impossible.
    That is why if the staff is not increased, the job of both 
these organizations--the Wage and Hour Division and the 
Solicitor's Office--is to try to figure how to leverage the 
power they have got, and I can discuss this in more detail and 
give more time to my colleague Kim Bobo.
    Thank you.
    [The prepared statement of Mr. Leonard follows:]

                 Prepared Statement of James B. Leonard

    Good afternoon. My name is Jim Leonard. I was an attorney for the 
U.S. Department of Labor for 22 years until I retired a while ago, and 
I am now on the advisory board of the National Wage and Hour 
Clearinghouse and also do volunteer legal work for two not-for-profit 
advocacy organizations--Farmworker Justice and the Child Labor 
Coalition. Thank you for inviting me to testify today on the important 
subject of how the Fair Labor Standards Act can be better used to 
prevent the exploitation of employees with disabilities and other 
vulnerable workers. This exploitation can include, among other 
problems, paying workers not in cash, but instead with in-kind payments 
that are not in accord with the restrictions of the Fair Labor 
Standards Act.
    The Fair Labor Standards Act ( ``FLSA'' ) contains minimum wage and 
overtime pay requirements for covered workers. The Federal minimum wage 
is now $6.55 per hour, and is scheduled to go up to $7.25 per hour on 
July 24, 2009. The term ``wage'' means not only cash, but is also 
defined to include ``the reasonable cost, as determined by the 
Secretary of Labor, of furnishing [any] employee with board, lodging, 
or other facilities, if [these] facilities are customarily furnished by 
[the] employer to his employees. . . . '' \1\ There are certain 
restrictions on how an employer can count the cost of lodging, meals, 
and other so-called facilities towards his wage obligation, which I 
will explain later.
---------------------------------------------------------------------------
    \1\ FLSA section 3(m), 29 U.S.C. 203(m).
---------------------------------------------------------------------------
                HANDICAPPED WORKERS (FLSA SECTION 14(C))

    The FLSA also contains various exemptions that excuse an employer, 
in specified circumstances, from following some of its requirements. 
One of these exemptions relates to handicapped workers. Specifically, 
the law says that workers whose ``earning or productive capacity is 
impaired by age, physical or mental deficiency, or injury, can be paid 
less than the minimum wage, so long as the wage paid is ``related to 
the individual's productivity'' and is ``commensurate'' with the wages 
paid to non-handicapped workers in the vicinity who do ``essentially 
the same type, quality, and quantity of work.'' \2\ An employer cannot 
employ any handicapped workers at less than the minimum wage unless the 
employer first receives a special certificate from the U.S. Department 
of Labor ( ``DOL'' ) authorizing such sub-minimum wage rates. The 
employer, in order to receive such a special certificate, has to 
provide written assurances to DOL that, among other things, he will 
maintain records that document the employees' disability; their 
productivity; any times studies or other work measurements; and 
prevailing wage surveys that were used to set the handicapped workers' 
wages. In addition, the employer must assure that he will ``review'' 
the wages of workers paid on an hourly basis at least once every 6 
months, and will ``adjust'' the wages of all employees at least once a 
year to reflect changes in the prevailing wage rate paid to non-
handicapped workers in the vicinity doing essentially the same work.
---------------------------------------------------------------------------
    \2\ FLSA section 14(c)(1), 29 U.S.C. 214(c)(1).
---------------------------------------------------------------------------
    DOL's regulations require that any employer of handicapped workers 
who has a special FLSA section 14(c) certificate must maintain, and 
have available for inspection, records that support the assurances that 
the employer made in the application for the certificate.\3\ These 
records must show critical information, namely, verification of the 
worker's disability; evidence of the productivity of each worker, 
gathered on a continuing basis or at periodic intervals; the prevailing 
wages paid to non-handicapped workers in industry in the vicinity for 
essentially the same type of work; and the production standards and 
supporting documentation for non-handicapped workers for each job 
performed by the employer's handicapped workers.
---------------------------------------------------------------------------
    \3\ The special recordkeeping regulation for handicapped workers is 
in 29 CFR 525.16.
---------------------------------------------------------------------------
    If the policy goal of DOL's Wage and Hour Division, which enforces 
the FLSA, is to protect handicapped workers from exploitation, then 
there are two serious problems with Wage-Hour's regulatory approach.
    The first problem is that when an employer first applies for a 
section 14(c) certificate, he does not have to send to DOL any 
information showing the employer's evaluation of the worker's 
productivity; this information does not have to be sent in until the 
employer applies to renew the certificate. The application form--Form 
WH-226--specifically says this in Items 10 and 11. Any certificate that 
is issued lasts for 1 year if the work is in competitive industry (such 
as a turkey processing plant), and for 2 years in other employments, 
such as sheltered workshops and residential care facilities. The 
application form and the regulations ought to be changed to require the 
employer to send in all this information not only with any application 
to renew the FLSA section 14(c) certificate, but also when any wage 
changes are made, including at the time of hiring handicapped workers 
after the first certificate is issued to an employer. DOL then would 
have in its possession information that would indicate problems, 
irregularities, or violations that warrant checking further into the 
matter.
    The second problem relates to those situations in which an employer 
has handicapped workers but does not have an FLSA section 14(c) 
certificate. In such cases, DOL does not have adequate procedures in 
place to protect those handicapped workers from abuse. There are 
several abuses that could occur.

     One abuse is that the employer may just be paying less 
than the minimum wage to handicapped workers and hoping that DOL will 
not find out. This is a clear violation of the law because no employer 
can pay handicapped workers less than the minimum wage without a 
section 14(c) certificate. The only way that DOL can learn about such 
violations is if it receives a complaint from an employee, a business 
competitor, or some other source, or if DOL, even in the absence of a 
complaint, decides to target the employer for an investigation. In 
order to do a better job of finding employers who are violating the 
law, DOL needs to make more use of the ``eyes and ears'' of individuals 
and organizations who are most likely to have knowledge of workplace 
practices affecting handicapped workers. DOL has in recent years had 
various so-called ``partnerships'' with employers and employer 
organizations, but very few if any partnerships with worker advocacy 
organizations that have ties to local communities. Just as some cities 
work closely with community groups to bring criminal activity to their 
attention, DOL must expand its outreach in this manner. If DOL had had 
such partnerships in place, the many organizations that knew what was 
happening to Henry's Turkey Service workers at the West Liberty Foods 
plant and about the shoddy lodging facilities in Atalissa, IA, would 
have been much more likely to bring the facts to DOL's attention.
     Another abuse is that the employer may have a section 
14(c) certificate and not seek to renew it but still pay his 
handicapped workers less than the minimum wage. This, too, is a clear 
violation of the law. I'm not sure what DOL now does when an employer 
does not renew a section 14(c) certificate, but DOL should follow up 
with the employer, by phone, letter, or even by sending an investigator 
to look into the matter.
     Another possibility for abuse occurs when the prevailing 
wage for the particular job may be high enough that even when the lower 
productivity of the handicapped worker is taken into account, the 
handicapped worker's commensurate wage would be above the minimum wage. 
Here, the employer does not need an FLSA section 14(c) certificate. 
Nevertheless, there may be handicap discrimination problems under the 
Americans with Disabilities Act, and this kind of situation is one in 
which there could also be FLSA violations as well. Here, too, if DOL 
had partnerships with worker advocacy organizations, it could rely on 
these ``eyes and ears'' to alert it to possible violations of the law.

  BOARD, LODGING, AND ``OTHER FACILITIES'' WAGE CREDIT (FLSA SECTION 
                                 3(M))

    Under section 3(m) of the FLSA all workers, including handicapped 
workers, can be paid not just in cash, but also in ``board, lodging, or 
other facilities'' that are provided primarily for the benefit or 
convenience of the employee. One example of the ``other facilities'' 
that have been deemed to be primarily for the benefit or convenience of 
the employee are the cost of transportation provided by the employer to 
employees from home to work before the workday begins and back home 
again at the end of the workday, provided that the employee is not 
doing compensable work (such as driving the vehicle).\4\ If any 
facility is furnished to an employee in violation of Federal or State 
or local law, it cannot count towards the employer's FLSA wage 
obligations.\5\
---------------------------------------------------------------------------
    \4\ 29 CFR 531.32(a).
    \5\ 29 CFR 531.31.
---------------------------------------------------------------------------
    It is important to note, in light of the Atalissa, IA, situation 
involving Henry's Turkey Service and West Liberty Foods that prompted 
this hearing, that these FLSA limitations apply only to deductions from 
cash wages. The FLSA does not restrict, for example, deductions from 
Social Security disability payments. I do not know if the Social 
Security Act or its regulations have any restrictions in this regard, 
but the FLSA does not.
    DOL needs to think of ways of strengthening section 3(m) by 
regulatory action, and Congress should also look to see whether 
legislative action is also needed. The key to section 3(m)'s 
protections is that the employer cannot deduct from cash wages any 
``board, lodging, or other facilities'' that are primarily for the 
benefit or convenience of the employer; and even with the ``board, 
lodging, or other facilities'' are primarily for the benefit or 
convenience of the employee, the employer cannot deduct more than the 
``reasonable cost.'' Most unfortunately, DOL has recently taken steps 
to weaken these two requirements. I will mention these steps briefly, 
and can elaborate, if you wish more detail, during any question and 
answer period.
    First, DOL, contrary to the rulings of every court that has faced 
the issue, has taken the position that the costs that an employer 
expends to recruit workers to come to work for him are primarily for 
the benefit of the employee, and hence can be deducted from wages even 
if those deductions reduce the employee's wage below the minimum wage. 
For years DOL took no position on this issue, stating that it was 
reviewing the matter. Then out of a clear blue sky, DOL, in the 
preamble of a final regulation issued on December 18, 2008, stated that 
these recruitment expenses were primarily for the benefit of the 
employees. There was no proposed regulatory change to this effect in 
the proposed regulations, nor did the final regulations contain a 
regulatory change that adopted the position. Instead, the preamble of 
the final regulation, for the first time, announced DOL's position.
    Second, DOL has proposed a regulatory change that would permit an 
employer to deduct from an employee's cash wages an amount that is 
greater than the cost to the employer of the meals that the employer 
furnishes to an employee.\6\ This proposed regulation, fortunately, has 
not been issued in final form, and is apparently on hold.
---------------------------------------------------------------------------
    \6\ See Notice of Proposed Rulemaking by the Department of Labor, 
73 Fed. Reg. 43654, 43660 (July 28, 2008).
---------------------------------------------------------------------------
              MORE AGGRESSIVE DOL ENFORCEMENT OF THE FLSA

    The best way for DOL to prevent worker exploitation across the 
board is for DOL to be more aggressive in the remedies it seeks under 
the FLSA when it finds that an employer has violated the law. The FLSA 
permits DOL to recover back wages that are due going back 2 years or, 
if the employer's violations are willful, going back 3 years. DOL, 
though, typically seeks back wages going back only 2 years, even when 
the violations are willful. The FLSA also authorizes DOL to recover--in 
addition to back wages--an equal, additional amount as liquidated 
damages. DOL rarely if ever seeks liquidated damages unless it files a 
lawsuit against an employer that has been investigated. DOL files 
lawsuits in only about 1 percent of the total number of FLSA cases that 
DOL investigates.\7\ DOL investigators in effect reward employers who 
violate the law because the employers are not even asked to pay 
interest on the money they have withheld from employees, so it is 
cheaper for an employer to pay back wages after an investigation than 
to pay the wages when they are due. There is even some indication that 
DOL investigators may point out to employers who owe back wages that 
the employers would be better off paying only back wages, since they 
might have to pay an equal, additional amount as liquidate damages if 
the case goes to court.
---------------------------------------------------------------------------
    \7\ In fiscal year 2007, the latest year for which data are 
publicly available, DOL filed only 151 FLSA lawsuits, whereas DOL 
conducted more than 11,000 FLSA investigations. (The exact number of 
FLSA investigations may have been considerably higher than this, but 
this information is not available on DOL's Web site.)
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    DOL can also impose civil money penalties, of up to $1,000 for each 
violation, against any person who repeatedly or willfully violates the 
minimum wage or overtime pay provisions of the FLSA. Moreover, if DOL 
files a lawsuit, it can seek an injunction barring the employer from 
committing further violations. If an employer violates an injunction 
that the court issues, the employer can be held in contempt of court 
and be forced to pay the costs that DOL incurs in proving that the 
employer has violated the injunction, and also be required to take such 
other corrective measures as the court, in its sound discretion, 
considers appropriate.
    Another remedy that is available, though rarely sought by DOL, is a 
so-called hot goods injunction. This is an emergency order, issued by a 
court, that bars shipment in the channels of interstate commerce of any 
goods that have been produced by employees who have been paid in 
violation of the FLSA's minimum wage or overtime pay (or child labor) 
provisions. Any person--not just the employer of the underpaid 
employees--can be sued in a hot goods case, and can be barred from 
shipping such ``tainted'' goods in his possession. In the Atalissa, IA, 
situation, the companies that could have been sued in a hot goods case 
would include not only Henry's Turkey Service, but also West Liberty 
Foods and any food brokers or wholesalers who had possession of the 
turkeys, if any of the turkeys were in the flow of commerce that would 
eventually go out of Iowa into another State.
    Why is DOL not being more aggressive in enforcing the FLSA? As I 
see it, there are two basic reasons.
    First, the number of Wage and Hour Division investigators and DOL 
lawyers has declined markedly in recent decades, even though the number 
of employees in the workforce, and the various laws that DOL has to 
enforce, have increased significantly. Here are some statistics. From 
fiscal year 1975 to fiscal year 2004, the number of Wage-Hour 
investigators declined from 921 to 788, a reduction of 14 percent.\8\ 
These investigators enforce not only the FLSA, but also many other 
laws, including the Family and Medical Leave Act (FMLA), the Migrant 
and Seasonal Agricultural Worker Protection Act (AWPA or MSPA), the 
Service Contract Act, the Davis-Bacon Act, and other laws. Moreover, 
the investigators do not spend all of their time investigating 
employers for possible violations of the law; they also engage in 
``compliance assistance'' (e.g., giving lectures to employer groups to 
educate them about the law's requirements), take part in training, and 
perform other tasks). In 2004, the actual amount of hours spent in 
investigative activity was 1,000,739.\9\ This is the equivalent of 544 
full-time investigators to enforce the FLSA and the various other 
laws.\10\ The laws that these investigators enforce protect over 135 
million workers in more than 7.3 million establishments.\11\ 
Accordingly, each full-time investigator is responsible for protecting 
245,000 workers.
---------------------------------------------------------------------------
    \8\ Brennan Center for Justice, Economic Policy Brief, No. 3, 
September 2005, available on-line at www.brennancenter.org/dynamic/
subpages/download_file_8423.pdf. The 788 investigators in fiscal year 
2004 were only part of Wage-Hour's total staff, which numbered 1,442 
employees; the other staff included supervisors, analysts, technicians, 
and administrative employees. (Department of Labor FY 2009 Performance 
Budget, www.dol.gov/dol/budget/2009/PDF/CBJ-2009-V2-03.pdf, pp. ESA-35 
and ESA-36.)
    \9\ DOL response to Freedom of Information Act (FOIA) request.
    \10\ A full-time employee works 40 hours per week for 52 weeks, or 
2,080 hours per year. It would take 481 such full-time investigators to 
spend 1,000,739 hours in investigative activity. Since even full-time 
employees take vacations and holidays, and are sometimes ill, it is 
more realistic to expect a full-time investigator to be absent from 
work roughly 6 weeks per year, and thus on the job for 46 weeks, or 
1,840 hours per year. It would take 544 such investigators to 
accumulate a total of 1,000,739 investigative hours.
    \11\ Department of Labor FY 2009 Performance Budget, www.dol.gov/
dol/budget/2009/PDF/CBJ-2009-V2-03.pdf, p. ESA-35.
---------------------------------------------------------------------------
    DOL's legal staff--known as the Solicitor's Office--has also been 
cut drastically, especially since 2001. In 1992, the Solicitor's Office 
had 786 employees,\12\ but by 2001, it was down to 709 employees, and 
in January 2007, it had only 590 employees.\13\ These employees enforce 
not only the FLSA but also many other laws such as the Occupational 
Safety and Health ( ``OSHA'' ), the Mine Safety and Health Act ( 
``MSHA'' ), the Employee Retirement Income Security Act ( ``ERISA'' ) 
and many others. As a result of these many responsibilities the 
Solicitor's Office lacks the ability to litigate many FLSA cases--and 
cases under other laws as well--aggressively. The contrast in a 20-year 
period, from fiscal year 1987 to fiscal year 2007, is striking. In 1987 
DOL's legal staff filed 705 FLSA lawsuits, whereas in 2007 it filed 
only 151, a decline of 79 percent.\14\ The FLSA authorizes lawsuits not 
only by DOL, but also by aggrieved employees represented by private 
attorneys. In 1987 there were 773 private FLSA lawsuits, and in 2007 
there were 7,159 private FLSA lawsuits, an 826 percent increase.\15\ 
This means that in 1987, DOL filed 48 percent of all FLSA lawsuits, but 
only 2 percent in fiscal year 2007.
---------------------------------------------------------------------------
    \12\ U.S. Department of Labor Budget Submission to Congress for 
Fiscal Year 1993.
    \13\ ``Legal Services,'' in volume 3 of the U.S. Department of 
Labor's FY 2008 Detailed Budget Documentation, pp. DM-28 to DM 28, 
available at www.dol.gov/dol/budget/2008/PDF/CRJ-V3-02.prf. Although 
the Solicitor's office had 590 employees in January 2007, it had 
funding to pay for only 551 employees. Id. at DM-28.
    \14\ Administrative Office of the United States Courts, Judicial 
Business of the United States Courts, 1987 Annual Report, Table C-2 
(Washington, DC, 1987); Administrative Office of the United States 
Courts, Judicial Business of the United States Courts, 2007 Annual 
Report, Table C-2 (Washington, DC, 2007).
    \15\ See previous footnote.
---------------------------------------------------------------------------
    The second main reason that DOL has not been aggressively enforcing 
the FLSA is that it needs to rethink, from top to bottom, its 
enforcement strategies, in light of its greatly reduced staff. There 
are too many issues it has to address under this heading to discuss 
today, but here are just a couple key ones that would benefit all 
workers (including handicapped workers).
    In the case of the Solicitor's Office, since it is filing only 2 
percent of FLSA lawsuits, it needs to focus more on lawsuits of a type 
that the private bar tends not to handle.
    In the case of DOL's Wage and Hour Division, there are three steps 
it could take right away. One is to propose amendments to various 
regulations that would strengthen the existing law. Many FLSA 
regulations are far out of date and do not reflect key court decisions 
that have strengthened the FLSA. A second step is to publicize much 
more widely and graphically the results of investigations in which 
employers pay back wages found due. The third step that Wage-Hour could 
take, mentioned above, is to work more closely with worker advocacy 
organizations, as well as with lawyers in private practice who 
represent employees in FLSA cases. This would leverage the power that 
DOL, in order to better protect vulnerable workers whose wages in many 
situations, it is not an exaggeration to say, have been stolen by their 
employers.

    Senator Harkin. Thank you very much, Mr. Leonard, for the 
testimony, the advice, and the suggestions.
    Now we will turn to Ms. Kim Bobo from Interfaith Worker 
Justice. Ms. Bobo, please proceed.

 STATEMENT OF KIM BOBO, EXECUTIVE DIRECTOR, INTERFAITH WORKER 
                      JUSTICE, CHICAGO, IL

    Ms. Bobo. Senator Harkin, thank you for inviting me today.
    Others have focused on the 14(c) subminimum wage 
provisions. I want to focus particularly on illegal paycheck 
deductions, which are a common problem for all vulnerable 
workers, not just disabled workers, and robs untold millions 
from workers each and every year.
    Interfaith Worker Justice runs a network of 21 worker 
centers around the country. We see illegal paycheck deductions 
on a regular basis.
    Several Polish cleaning women came to visit the IWJ-
affiliated Arise Chicago worker center. They were being 
deducted collectively about $2,400 a month for an apartment 
that costs about $800 a month.
    Workers in Houston, their employer deducted $1,900 from 
four workers' paycheck, claiming he had paid a notary to 
petition for the workers' citizenship.
    The now-famous Saigon Grill delivery workers in New York 
City, who were paid less than $2 an hour, also had fines of $20 
deducted if they entered information in the computer too slowly 
or slammed the door too loudly.
    Cincinnati Interfaith Worker Justice center told me the 
other day about an employer who deducted $2,000 from four 
workers for a room that at most he paid $750 for and then was 
deducting for $7 a day for transportation, whether or not they 
worked those days.
    So, paychecks have illegal deductions taken on a regular 
basis. It is a huge problem in the country right now. 
Interfaith Worker Justice has six recommendations that we think 
would help all workers, including disabled workers.
    First recommendation. Require under FLSA that all employers 
provide a statement explaining workers' wages, benefits, and 
deductions to each worker along with each paycheck. This would 
enable workers to ask questions about things that seem odd and 
to compare hours worked with hours paid.
    Now most ethical employers already provide such a pay stub, 
but for those who want to hide and steal wages, this does not 
happen. We need a pay stub explanation similar to the 
requirements under the Migrant Seasonal Protection Act.
    Second recommendation. Require under FLSA that workers 
agree ahead of time in writing to any fees that will be 
deducted from their paycheck that are for the workers' benefit. 
All workers who are paid subminimum wages and have legal 
guardians must have the guardian's approval ahead of time as 
well.
    If food and lodging are being provided for the workers' 
benefit, then the workers or their guardian should have the 
ability to say no to that benefit if they have to pay for it. 
This provision, if we did this, would be similar to a provision 
that the Texas Payday Law has, which our folks in Texas tell us 
actually works quite well.
    Third recommendation. Outlaw any housing deductions unless 
the employer has petitioned to the Department of Labor to 
provide housing and testifies that the housing is provided at 
reasonable cost and meets all relevant housing codes. This 
housing deduction is a place of enormous problems. Vulnerable 
workers are exploited in slave-like conditions across the 
Nation.
    Fourth recommendation. Penalize employers who take illegal 
deductions by making them pay triple damages for illegal 
deductions. If you knew that there was going to be a 
significant penalty if you stole somebody's wages, you might 
think twice before you did it.
    Fifth recommendation. We need to support the President's 
budget request that would provide more resources for Wage and 
Hour investigators. I join my colleagues in saying that the 
Wage and Hour Division simply does not have enough staff to do 
the job.
    When I am out there talking to investigators, they describe 
their work as ``triage.'' We are doing triage with workers' 
wages. Good laws without adequate enforcement render the laws 
meaningless.
    And finally, we need to target investigations of industries 
that are widely believed to be making illegal paycheck 
deductions. Interfaith Worker Justice-affiliated worker centers 
would recommend investigating those large buffet restaurants, 
which often house workers in dormitories and take illegal 
deductions; some cleaning companies who prey on new immigrants, 
again housing them and taking excessive deductions; 
construction firms who house employees in the buildings in 
which they are working; and companies that recruit workers to 
clean up after disasters, such as Hurricanes Katrina, Ike, and 
the Iowa floods.
    These are six recommendations that we think would make a 
difference. I am grateful to the committee for its work to 
investigate what went wrong for these workers. More importantly 
is figuring out how do we stop and deter illegal paycheck 
deductions for all workers in the future.
    [The prepared statement of Ms. Bobo follows:]

                     Prepared Statement of Kim Bobo

            PAYCHECK DEDUCTIONS: ANOTHER FORM OF WAGE THEFT

    Senators, thank you for inviting me today. My name is Kim Bobo. I 
am the Executive Director of Interfaith Worker Justice, a national 
organization that works through a network of interfaith groups and 
workers centers to improve wages, benefits and working conditions for 
low-wage workers. I am also the author of Wage Theft in America: Why 
Millions of Working Americans are not Getting Paid and What We Can Do 
about It (New Press, 2008).
    Others are focusing on the sub-minimum wage provision, which is 
controversial even within the disability rights community. I will focus 
on illegal paycheck deductions, which are one of the many forms of wage 
theft that rob billions of dollars from millions of workers each year. 
The problem of illegal paycheck deductions is illustrated so clearly in 
the case of Henry's Turkey Service.
    Twenty-one men lived in a bunkhouse with boarded up windows, 
roaches throughout and a non-functioning heater that Henry leased for a 
grand total of $600 per month from the city of Atalissa. He then turned 
around and charged the workers their full Federal disability checks and 
lots more, resulting in them earning $60.30 per month. Most of the 
workers had worked for this company for 20 years. According to 
newspaper articles, Henry's Turkey Service deducted $487 monthly for 
each worker's room and board and $572 for each worker's ``kind care.'' 
\1\ In fact ``kind care'' seems missing here.
---------------------------------------------------------------------------
    \1\ Clark Kauffman, State Closes Bunkhouse That Housed Mentally 
Retarded Workers, Des Moines Register, February 8, 2009.
---------------------------------------------------------------------------
    The men, most of them in their 50s and 60s were awakened at 2:30 
a.m. At 4:30 a.m. they boarded vans to the turkey plant where they 
donned gear and then took spots on the line cleaning turkeys. The men 
were paid a sub-minimum wage, about half what others were paid, 
theoretically because of how their disability caused them to be less 
productive than others.\2\
---------------------------------------------------------------------------
    \2\ Ibid.
---------------------------------------------------------------------------
    Several government agencies had investigated Henry's Turkey Service 
over the years. A 1974 memo from Iowa social worker Ed George said that 
once a man became an employee of Henry's Turkey Service, ``he for all 
practical purposes loses most basic human rights.'' \3\ A 2001 DOL 
Inspector General report criticized a 1999 Wage and Hour compliance 
action of this same turkey plant's deductions from disabled workers' 
paychecks. Not only did the company charge more than the ``reasonable 
cost'' for meals, lodging and services, but it deducted from the 
workers' paychecks for ``property improvement, building supplies and 
the owner's salary expenses unrelated to the operation of the group 
home.'' \4\
---------------------------------------------------------------------------
    \3\ Amy Lorentzen, Iowa Had Known of Plant's Use of Mentally 
Disabled, The Associated Press, February 25, 2009.
    \4\ Office of Inspector General, U.S. Department of Labor, The Wage 
and Hour Division's Administration of Special Minimum Wages for Workers 
with Disabilities, Audit Report No. 05-01-002-04-420, March 19, 2001.
---------------------------------------------------------------------------
    This case is so wrong on so many levels--shipping mentally disabled 
folks from Texas to Iowa to work in a turkey plant, housing folks in 
unsafe and filthy conditions, stealing wages through blatantly illegal 
deductions, and government inspections that failed to protect these 
workers and punish systemic wage theft.
    Others are focusing on the sub-minimum wage provision, which is 
controversial even within the disability rights community. I want to 
focus on illegal paycheck deductions. Unfortunately, employers 
routinely take illegal deductions from many workers' paychecks.
    Several Polish cleaning women came to visit the IWJ-affiliated 
Arise Chicago workers center. As a condition of their employment, they 
were required to live in a dormitory floor housing eight women. Two 
women shared a small room and bathroom down the hall. Each woman was 
charged $300 per month. Clearly, the employer made money off these 
workers.\5\
---------------------------------------------------------------------------
    \5\ Notes from interview with Anna Karewicz, polish worker rights 
advocate, Chicago Arise Workers Center.
---------------------------------------------------------------------------
    Then there are the workers in Houston whose employer deducted $1900 
from four workers' paychecks, claiming he had paid a notary to petition 
for the workers' citizenship.\6\
---------------------------------------------------------------------------
    \6\ Kim Bobo, Wage Theft in America (New York: The New Press), 
2008, page 31.
---------------------------------------------------------------------------
    The now famous Saigon Grill delivery workers in New York City, 
whose employer paid them less than $2 per hour, also deducted $20 in 
fines for being slow on entering information into the computer or 
slamming the door too loudly.
    The Cincinnati Interfaith Workers Center assisted workers employed 
by Diverse Able. The first deduction from paychecks was $400 for 
flights from Puerto Rico. Next was the advance on the first paycheck, 
plus interest, of course. The workers were initially charged up to $135 
per week for four or five of them to stay in a two-bedroom apartment 
until the workers center intervened and the rent dropped to $65 per 
week (probably still higher than the true cost of the housing). Workers 
were charged $7 per day for transportation even if they didn't work 
each day.\7\
---------------------------------------------------------------------------
    \7\ Notes from interview with Don Sherman, Director, Cincinnati 
Interfaith Workers Center.
---------------------------------------------------------------------------
    My all-time personal ``favorite,'' is the employer in Chicago who 
handed out a list of fines for worker misdeeds that included:

     Being late for work: $100.
     Being absent without giving at least 48 hours 
notification: $250 and up.
     Forgetting to lock the trucks: $100 from all crew members.
     Smoking on job site or in company vehicles: $150 and up.
     Possession of alcohol on site--first offense: $500; 
second: $1,000; and third: $1,500.
     Quitting without giving 2 weeks notice will forfeit the 
worker's previous weeks' work, unless the worker had been there more 
than 6 months, in which case the worker must give a month notice or 
lose paychecks.

    This employer sums up the policy: ``If you think that your presence 
(spirit) at the job site is enough to get paid you are wrong. Before 
you are paid you must reveal the quality and quantity of your work and 
your loyalty to the company. In the future this is what your pay will 
be based upon.'' \8\ And there you have it!
---------------------------------------------------------------------------
    \8\ Policy obtained from Anna Karewicz, polish worker rights 
advocate, Arise Chicago Workers Center.
---------------------------------------------------------------------------
    Illegal employer deductions are common for all workers, not just 
for those covered by the sub-minimum wage. Interfaith Worker Justice 
offers six recommendations that would help all workers.

    1. Require under FLSA that all employers provide a statement 
explaining workers' wages, benefits, and deductions to each worker 
along with each paycheck. This would enable workers to ask questions 
about things that seem odd and to compare hours worked with hours paid. 
Because most employers provide such a pay-stub already, this 
requirement will focus on improving transparency and accuracy among 
those employers who are most likely to cheat workers and will have 
little impact on most employers. This pay-stub explanation would be 
similar to the requirements for giving information to migrant workers 
under the Migrant Seasonal Protection Act.
    2. Require under FLSA that workers agree ahead of time in writing 
to any fees that will be deducted from their paycheck that are for the 
workers' benefit. All workers who are paid sub-minimum wages and have 
legal guardians must have the guardians' approval ahead of time. If 
food or lodging are being provided ``for the workers' benefit,'' then 
the workers or their guardians should have the ability to say ``no'' to 
that benefit if they have to pay for it. This provision would be 
similar to that required by the Texas Payday Law, which says ``The 
employer may not make deductions unless ordered to do so by a court of 
competent jurisdiction (as in court-ordered child support payments); 
authorized to do so by State or Federal law (as in IRS withholding); or 
authorized in writing by the employee, and then only for a lawful 
purpose.'' \9\
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    \9\ Description of the Texas Payday Law, which can be found at 
http://www.twc.state.tx.us/ui/lablaw/pdlsum.html.
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    According to Cristina Tzintzun of the Workers Defense Project, and 
Austin-based workers center, this law is enormously helpful in 
challenging illegal deductions. \10\ Iowa has a similar law, but 
without adequate public enforcement or advocacy by a nonprofit agency, 
the law was meaningless.
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    \10\ Interview with Cristina Tzintzun on March 3, 2009.
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    3. Outlaw any housing deductions unless the employer has petitioned 
to the Department of Labor to provide housing and testifies that the 
housing is provided at ``reasonable cost'' and meets all relevant 
housing codes. Filing such a housing deduction petition should 
automatically trigger an unscheduled wage and hour inspection. Many of 
the worst employers, those who effectively keep workers in slave-like 
conditions, ``provide'' housing for their employees.
    4. Pay workers triple damages for illegal deductions. If a worker 
agreed to have lunch provided and deducted from his/her paycheck and 
the actual employer cost of that lunch was $2 but the employer deducted 
$4, the employer would be required to pay the worker $6 for each lunch 
($2 overcharge times 3) for which he/she was overcharged. This kind of 
meaningful penalty would help make sure employers calculate costs 
fairly and accurately.
    5. Support the President's budget request that would provide more 
resources for Wage and Hour investigators. One reason Henry's Turkey 
Service wasn't closed down was because the Wage and Hour investigators 
who visited this plant in 1999 did not have time to do a follow-up 
unscheduled visit. My experience with Wage and Hour investigators is 
that they have way too many cases to deal with, so follow-up seldom 
occurs. The word the investigators use is ``triage.'' They are 
performing triage with workers' wages. Good laws without adequate 
enforcement render the laws meaningless. More investigators will reduce 
the possibility that such situations as Henry's go undetected.
    6. Target investigations of industries that are widely believed to 
be making illegal paycheck deductions. IWJ-affiliated workers centers 
would recommend investigations of large buffet restaurants, which often 
house workers in dormitories and take illegal deductions, some cleaning 
companies who prey on new immigrants, again housing them and taking 
excessive deductions, construction firms who house employees in the 
buildings in which they are working, and companies that recruit workers 
to clean-up after disasters such as Hurricanes Katrina and Ike and the 
Iowa floods. The same firms that make illegal deductions from paychecks 
are usually not paying minimum wage or overtime. Wage and Hour 
investigators probably have a good idea which industries should be 
investigated as well, but, as I stressed above, there must be enough 
investigators to do the job.

    I am grateful to the committee for its work to investigate what 
went wrong for these workers, but more important is figuring out how we 
stop and deter illegal paycheck deductions for all workers in the 
future.

    Senator Harkin. Well, thank you very much. We have got some 
great suggestions there. Follow up on some of those and discuss 
them here.
    Thank you all very much. One of the things that I was 
amazed to see is that I think it was in 1938 when FLSA was 
passed, there was a 75 percent floor, 75 percent of minimum 
wage that had to be paid to subminimum wage people under 14(c). 
Then that was reduced to 50 percent at some point. I can't 
remember where and when. And then, in 1986, that was even taken 
away.
    I have got my staff looking into why. I was actually here 
in 1986. I can't remember this actually happening. It seemed to 
have been broadly supported because the people that were listed 
on that particular provision were people that I know of being 
sensitive to this and supportive of people with disabilities. I 
am trying to figure out what that was all about.
    Just broadly speaking, do you think there ought to be--do 
we need to reinstate a wage floor or not? As I said, it was 75 
percent. Then it went to 50, and now there is no wage floor. I 
don't know why. Can any of you enlighten me as to why this was 
done? No? Do we need a wage floor?
    Curt.
    Mr. Decker. My guess is that as we began to bring more and 
more people with severe disabilities out into the community 
from large institutions and attempted to bring them--to give 
them some kind of day activity, it was thought that making 20 
cents an hour was OK because it meant that they then had some 
kind of activity during the day.
    I think that might have been a well-intentioned and well-
thought of idea that has sort of gone awry. I would certainly 
think that reestablishing a floor is not a bad idea because we 
are trying to get, really, people into competitive employment 
now through a variety of supports and to disincentivize, to 
change the dynamic from assuming people can't do very much to 
assuming they can do the job and only in a few rare situations 
let them be paid less.
    Senator Harkin. Well, as you pointed out--of course, I 
wasn't here in 1938, but in those subsequent years----
    Mr. Decker. Neither was I.
    Senator Harkin [continuing]. People were looked upon, 
people with disabilities were all just sort of lumped together, 
everybody was in that lump. As you point out now, with 
supportive services, new technologies, people with significant 
disabilities can actually do a lot of work that they otherwise 
could not have been able to do.
    Perhaps we need to more narrowly define what people with 
disabilities are eligible for this. Now Ms. Bender, you have 
done great work, but correct me if I am wrong. There are some 
people with significant disabilities that just simply cannot 
make it in competitive work?
    Ms. Bender. There are some people that--we have hired 
people with intellectual disabilities, such as Down Syndrome--
--
    Senator Harkin. Right.
    Ms. Bender [continuing]. That we also were able to hire, 
and I am sure there are some that would not be able to work for 
us.
    Senator Harkin. Because there is a spectrum of Down 
Syndrome.
    Ms. Bender. There is a spectrum. The majority of people--
what Curt is talking about, things have changed. With assistive 
technology today, it has equaled the playing field. And 
although there are some, I am very fearful of what these two 
have talked about with people like this group taking advantage 
of that. That is why I am so happy that you are doing this.
    Senator Harkin. Well, OK.
    Ms. Bender. For example, we have people who are blind, 
deaf, wheelchair, cerebral palsy, epilepsy, psychiatric 
disabilities, intellectual disabilities.
    Senator Harkin. Again, do we need to more narrowly define, 
for example? If you can't answer, think about it and get back 
to me on it. I ask all of you, do we need to more narrowly 
define who might be eligible for a 14(c) subminimum wage? Just 
more narrowly define it some way in terms of capabilities, what 
kind of supportive services they might need, and how much that 
might cost?
    I don't know. I am just thinking that we can't lump 
everybody under that one big umbrella any longer.
    Ms. Bender. Yes, I agree it should be re-evaluated. Don't 
you think so?
    Mr. Decker. Well, I also think that this idea that the 
private employer has sort of a self-assessment, they do the 
productivity determination. I would like to see that 
standardized, but also a party to outside review so that the 
incentive for an employer to say, ``Oh, yes, this person can 
only work at 40 percent or 30 percent,'' I think is very grave, 
given the sort of profit motive.
    Senator Harkin. See, that is another thing I wanted to get 
into. It is up to the employer to determine how much the 
productivity of that person is. Well, are there more objective 
individuals or concerns that could help decide what their 
productivity is, rather than just the employer?
    I mean, there would obviously be a bias for the employer to 
get it down. That is just a normal inclination. Maybe we need 
DOL or someone to come in and do an assessment of the 
productivity of an individual.
    Mr. Decker. Or as I said, I think the partnering with local 
disability providers who have some expertise in this area.
    Senator Harkin. Well, how about your own P&A people?
    Mr. Decker. Well, as you heard in my testimony, I am a big 
believer in spreading, getting as many people as possible in 
contact with these workers. I think that is how you uncover 
these kinds of situations.
    When you have that closed, little society where they are 
the representative payee, they are providing the room and 
board, they are also providing the evaluation--I believe in 
this situation they actually didn't have 14(c) certificates in 
these last years. That closed environment I think really lends 
itself to abuse.
    The more people involved in terms of evaluation or 
productivity and recognizing a large number of representative 
payees in one place, a large number of 14(c) certificates with 
low productivity evaluations, all that information I think 
would give us the opportunity to identify these kinds of 
situations before they go on for many, many years.
    Ms. Bobo. This is another place where if the information 
were widely available on the Web about what firms have applied 
for the 14(c) and what is the criteria that has been used, it 
would make it easier for community partners to be advocates on 
this. If they said, ``Oh, look, there are all these folks, and 
they are getting these deductions,'' and they are paying 50 
cents in terms of--50 percent on the wage. Then people could 
say, ``Hey, that doesn't make any sense.''
    Right now, it is next to impossible to get any of this 
information. I think if it were made more publicly available, 
it would be easier to have these community partnerships.
    Senator Harkin. Now again, as Mr. McKeon said, the vast 
majority of 14(c) applications are from nonprofits.
    Ms. Bobo. That is right.
    Senator Harkin. Community-based, probably something we used 
to call sheltered type workshops, that kind of work setting, 
right?
    Ms. Bobo. Right.
    Senator Harkin. Well, again, they may be--correct me if I 
am wrong, they may be nonprofit, but they do make money.
    Mr. Leonard. Oh, yes, they do. In addition, sometimes they 
have contracts where they are supplying things to for-profit 
firms.
    Senator Harkin. That is very true.
    Mr. Leonard. And so, there is a certain incentive for them 
to reduce their costs because of what they are trying to sell 
to others. I don't mean to suggest that they are nefarious 
employers, but merely because they are not for profit and 
really because they are running a sheltered workshop does not 
mean that they wouldn't try to cut corners in a way that would 
harm workers.
    Mr. Decker. In addition----
    Mr. Leonard. Getting back to your original point, I think 
the question about what to do with 14(c) in the overall context 
requires several questions. The first one would be can anyone 
figure out what would happen if all handicapped workers had to 
be paid at least the minimum wage? How would that affect 
employment?
    If it would be a very negative effect on employment, is 
there some lesser level, like a 75 percent or a 50 percent 
floor that could not be breached and if lower than that would 
not have an adverse effect on employment? I don't know whether 
economists or any other such study this issue, but it seems to 
me that is the first question to look at.
    If it turns out that without some fluctuating wage, the way 
you now have in section 14(c), there would be a lot of people 
who want work who wouldn't be able to get jobs. Then the 
question is how can you better enforce section 14(c)?
    I think you mentioned the key point, which is who is it 
that decides the productivity of these handicapped workers, and 
should it just be the employer? Would it be possible to have 
someone else involved in the equation? Those are the basic 
policy issues, it seems to me, that need to be addressed and 
the facts that need to be gathered.
    Senator Harkin. Well, we have the protection advocacy 
people out there. We have the university-affiliated programs 
out there, the DD councils. There are a lot of entities out 
there that--I don't know if they--of course, they are not flush 
with money and personnel either, but should be at least 
notified. As you said, put on the Web that they have that 
notification.
    Now that seems to me sort of a bare minimum, Ms. Bobo, of 
what we ought to be doing. I think beyond that would be to 
actively engage these entities into looking into these 
instances to see if people are not being paid.
    Now it just occurred to me listening to you that under 
14(c) it is the employer, it is the employer who gets the 14(c) 
exemption, right? It is the employer.
    Mr. Leonard. That is correct. The employer is excused from 
paying the Federal minimum wage if he has a 14(c) certificate 
that authorizes a lower wage.
    Senator Harkin. Should we certify that an individual is 
eligible for 14(c)? We don't have that requirement. Maybe we 
should have some determination of an individual, whether that 
individual should be certified for 14(c)?
    Mr. Leonard. Well, the way the system now works, the 
employer is the one who handles it because he is the one who is 
responsible for paying wages. As Mr. McKeon said, the employer 
has to give information about individual employees when he 
reapplies to get a new certificate.
    Mr. Decker. I was also concerned, Senator, when Mr. McKeon 
said that after a while, they don't reapply, their names drop 
off the database. Again, this seems like it was a situation 
where they had 14(c) certificates in the early 2000, 2001, and 
they never reapplied but continued to pay less than the minimum 
wage.
    We need to know who had certificates and who may now have 
just not bothered to reapply but are--still think that they 
have the right to charge--to provide subminimum wage. It is 
important to know, I think, to look back as well at those folks 
who have that, assuming they are still in business.
    Senator Harkin. Yes, well, that also gets into this whole 
area of penalties that you were talking about.
    Ms. Bobo. That is right.
    Senator Harkin. Like triple damages type of thing. Because 
as I have looked into this Atalissa case, first of all, you 
have got to figure out what laws were broken, and that is still 
a question.
    Then what are the penalties? Well, from what I have been 
able to determine, not much. Not much. This has been going on 
20 or 30 years.
    Mr. Leonard. May I speak to that issue for a moment, 
Senator?
    Senator Harkin. Yes, sir. Yes, sir.
    Mr. Leonard. The penalties under the Fair Labor Standards 
Act call for the payment of back wages owed.
    Senator Harkin. Back wages.
    Mr. Leonard. There is a statute of limitations, and that is 
for 2 years. So you can seek back wages going back 2 years, but 
if the employer commits willful violations, you can go back 3 
years.
    In addition, the statute authorizes an equal additional 
amount on top of the back wages in the form of so-called 
liquidated damages. The purpose of that is to pay for other 
expenses the employees may have because they didn't get the 
proper wage. It is just a way of a rough estimate of what the 
damages would be without the employee having to prove them 
exactly.
    When the Department of Labor does an investigation, it 
seeks only 2 years of back wages. Even when the violations are 
willful, it typically does not seek 3 years of back wages. In 
addition, the investigator does not ask for liquidated damages. 
So the employer, in the typical case, is allowed to pay back 
wages for 2 years, not even with interest on top.
    If the violations went back 2 years, the employer, in 
effect, has had the beneficial use of those back wages for 2 
years. I hate to put it this way, but there is almost a 
financial incentive to take a chance that you won't be caught 
because if you are caught, you will have to pay back wages, 
which in mildly inflationary times are actually a little less 
than the actual value of the wages had they been paid on time.
    This is one of the problems, and my view is that one of the 
reasons the Wage and Hour Division does this is that the 
Solicitor's Office is so short-staffed that it is not in a 
position to file many lawsuits. If the employer refuses to pay 
the third year of back wages, if the employer refuses to pay 
liquidated damages, then the only way that can be collected is 
to take the employer to court.
    In 2007, the last year for which I have data from the 
Administrative Office of the U.S. Courts, the Department of 
Labor filed 151 Fair Labor Standards Act cases. That is three a 
week. Twenty years ago, the Labor Department filed over 700 
cases.
    The private bar, because employees are able to bring their 
own lawsuits--it is not just the Department of Labor that can 
sue. The private bar 20 years ago brought about half of all the 
Fair Labor Standards Act cases in the country. In 2007, the 
private bar brought 98 percent of all Fair Labor Standards Act 
cases.
    The Department of Labor is a very small actor in the courts 
in enforcing the Fair Labor Standards Act. The Department of 
Labor's Wage and Hour Division, according to its statistics--
and remember, they enforce more than the Fair Labor Standards 
Act. They enforce other laws. They have something like what 
they call 30,000 enforcement actions a year.
    I don't know how many of those are Fair Labor Standards 
Act. I don't know how many of those are full-dress 
investigations or simple phone calls or simple conciliations. 
Whatever the number, when you compare 30,000 or even 20,000 or 
even 10,000 to 151 lawsuits, that is a miniscule set of teeth 
to put into a law when you are facing an employer who refuses 
to pay.
    The bottom line, I think, is one of the reasons the Wage 
and Hour Division does not insist on a third year of back wages 
when the violations are willful and does not insist on 
liquidated damages, even though they are awardable on every 
case in court, is that they think the case might wind up in the 
Solicitor's Office, and the Solicitor's Office can't handle it.
    This is a very serious problem in enforcement.
    Ms. Bobo. I want to affirm what he is saying on this. Our 
worker centers say they talk to investigators all the time who 
say, ``Look, this is the best deal we can get.'' We are going 
to settle on 50 cents on the dollar in terms of getting back 
wages with no penalties because the Solicitor's Office can't 
follow through and can't take them to court.
    It is a huge problem in terms of enforcement right now. We 
not only need more investigators, but we need more attorneys to 
take some of these cases when employers won't pay up with what 
they owe workers.
    Senator Harkin. I was going to kind of ask this question. 
Well, so what? If the number of DOL cases, solicitor's cases 
have gone down, if the private bar is taking 98 percent of 
them, what is wrong with that? Let the private bar take them. I 
think what you are saying is a lot of these are, what, just 
bargained away, and they accept some kind of a settlement?
    Ms. Bobo. Yes, I mean, I was literally on the phone the 
other day with one of our worker centers in Cincinnati who was 
saying he was so frustrated because he had worked with a group 
of 30 workers, and they had--he had worked with a Wage and Hour 
investigator, and he really liked the investigator.
    Then, when it got to the Solicitor's Office, they were just 
trying to settle it as quickly as possible. What it appeared to 
him from looking at the workers' paycheck was they ended up 
getting half of what they were owed.
    Senator Harkin. But if it goes to the private bar, a 
private attorney wants the highest settlement possible. That is 
how they make their money.
    Ms. Bobo. That is right.
    Senator Harkin. Contingent in these cases. Again, I ask the 
question, what is wrong with having the private bar pick up----
    Ms. Bobo. That is good if there are a lot of workers or if 
there is a lot of money involved. If you are just owed a couple 
hundred dollars in terms of overtime, what attorney is going to 
take it? We have got to have a very strong Department of Labor 
that folks worry about, right?
    I mean, you know, we worry about the IRS. No one worries 
about the Department of Labor, right? I mean, we need to be 
fearful of them coming in because they are going to find 
something, and if they do, they are going to penalize you. They 
are going to fine you, right? Let us make this some meaningful 
consequences here.
    Ms. Bender. Senator Harkin, I just want to say that, you 
know, you were talking earlier. Remember when you mentioned 
next year is the 20th anniversary of the Americans with 
Disabilities Act? Yet we still have this huge unemployment. How 
many people have I met throughout the past years who could work 
in competitive employment, but were told to work in these 
situations with this 14(c)?
    I believe that if you take a lead on this in some way, this 
will be one aspect--this will be one way we will change that. 
Because there is a stigma that, ``Oh, they can't do it. Oh, 
they can't perform. Oh, we have got to put them in this 
sheltered workshop. They can't do it.''
    I believe if you take a lead on this, this would just be 
one thing that will help us change that because that is the 
problem. It is this, the big picture, the attitudinal barrier, 
the myth, the thinking that all of these people are inferior 
when they are not. Sadly, as has been mentioned by my two 
colleagues here, sometimes people are not doing the right 
thing.
    Senator Harkin. OK. So, we want to get out of this idea 
that everyone is lumped together. We need individual 
assessments of personal abilities in terms of different job 
sectors and jobs that they could do.
    Again, the more I think about it, that is not so much 
different than what we normally do in employment practices. 
People are assessed for their abilities to do certain jobs.
    Ms. Bender. Right. As you just said, the new rule should be 
you are assessed for one thing only. Do you have the skills to 
do this job? That is it.
    If the person is able to do the job, if they have the 
skills to do the job----
    Senator Harkin. Right.
    Ms. Bender [continuing]. They are no different than anyone 
else. And sadly, by the way, the deaf community has been caught 
up in this.
    Senator Harkin. Of course, now there are other problems 
there, too, having been in this work for so many years. A 
person may be assessed to have the ability to do a job.
    Ms. Bender. Yes.
    Senator Harkin. Maybe that person doesn't have the 
transportation to get to and from that job.
    Ms. Bender. That is right, yes.
    Senator Harkin. Maybe that person has----
    Ms. Bender. Epilepsy, that is a big problem. Transportation 
can be a problem.
    Senator Harkin. Of course. Or it could be, of course, under 
ADA we did mandate that employers had to make reasonable 
accommodations. We got the reasonable accommodations basically 
covered.
    Not only do you have to look at a person for their ability 
to do the job, but what other factors are there involved that 
might preclude that person from actually doing that job?
    Ms. Bender. Well, see, I don't think they have listened to 
you. That is their problem. They haven't listened because with 
the ADA, you provide the accommodations for the person. I mean, 
really, I have placed people with all different types of 
significant disabilities, and here is the thing. They go on the 
interview, and they look at one thing. Can you do the job?
    Again, just as you said, there could be an individual 
unable to do this job. The majority of people that I have met, 
including people who are deaf or blind, have sometimes been 
scooped up into that big world you are talking about. I still 
believe that when you do what you are doing here, it is going 
to have an impact on this.
    Senator Harkin. Well, like I said, that is what we are 
going to do. We are going to change this law some way.
    Ms. Bender. I know you will.
    Senator Harkin. I am trying to get the best information. 
You have great suggestions. Ms. Bobo, Mr. Leonard had some 
suggestions on how to change it, on how to change this law 
also.
    I am just thinking again out loud that we have to get more 
of the entities that are out there. I mentioned the DD 
councils, university-affiliated programs, the Protection and 
Advocacy services. Who am I missing?
    Mr. Decker. Well, the vocational rehabilitation system----
    Senator Harkin. Oh, rehab, of course.
    Mr. Decker [continuing]. Certainly, I think should be a 
major actor in this whole evaluation process. They are the 
experts in getting people ready for employment.
    Senator Harkin. Exactly. We need everybody involved. Then 
we need to have it transparent, put out there so people know. 
Families and guardians of some individuals also need to be told 
about this. They need to have access to that information.
    We need to strengthen the enforcement activities of DOL. 
They obviously need more people, right, Mr. Leonard? And also 
on the solicitor's side. I think we also need to strengthen the 
penalty system so that people do know that if they get caught, 
they are going to get severely fined.
    What is lingering in the back of my mind, though, is the 
idea that most of these people work for these nonprofits, 
community programs. They do things--as you pointed out, they 
make things. They may be collating, putting things together 
that go on to a profit-making business.
    How do we get at that under 14(c) and enforce that? Because 
it is not just--this just happens to be a private person, 
private----
    Mr. Decker. No, and Senator, I have to say we have 
certainly seen some abuses in those situations as well.
    There is the issue of changing people's job so that they 
may have gotten proficient in one job and were starting to earn 
a higher wage, closer to the minimum wage. Then because of the 
need to meet the contract deadline or the deliverable, they 
move them over to another job, lower the evaluations. There is 
a constant shifting of the evaluation.
    We have seen the nonprofits charge for transportation, 
charge for room and board. I think the structure that you are 
talking about could apply to the nonprofits as well as the 
profit-making businesses.
    Senator Harkin. OK. All right.
    Mr. Decker. And should.
    Senator Harkin. OK. I just want to make sure of that. OK. 
There is one other thing.
    You mentioned all these different things. Office of 
Disability Policy, what role should they play in that, Curt?
    Mr. Decker. Well, I think, as I said in my testimony, I 
would like to see that agency authorized with some very 
specific direction and mandates. One would be to utilize some 
of their resources, build on what they have already done. They 
have created a technical assistance center on wage and hour. It 
is now ended.
    They, I think, have an important role to work in 
conjunction with Wage and Hour and act as kind of the 
disability experts at the department. I think that was your 
original concept of that agency back in 2000, and I don't 
believe that it has come up to its full potential.
    Senator Harkin. Maybe this might spur it on.
    Mr. Decker. I agree.
    Senator Harkin. We have a new administration that might be 
more adaptable to that, too.
    Just only one last thing. I don't mean to prolong this any 
more than necessary. One other thing, Ms. Bobo, that I want to 
get into, and that is this idea that there is a lot of other 
deductions taken out of people's wages that are happening and 
not just people with disabilities.
    Ms. Bobo. That is right.
    Senator Harkin. A whole broad range of people out there, 
and you mentioned some in your testimony. Some of them were 
egregious examples of that.
    Again, I am just trying to think, how do we stop something 
like this? How do we make it more reasonable?
    Ms. Bobo. I think there are some examples out there. The 
Texas Payday Law, where you have to sign in writing ahead of 
time for deductions that are going to come out of your 
paycheck. If they are going to be for your benefit, you have to 
agree that you want them taken out of your paycheck. We need 
some sort of requirement like that for all workers.
    I also believe this, the housing stuff is such a problem 
for not just disabled workers, but other vulnerable workers, 
that that should automatically have to be filed--some sort of 
appeal for the housing deduction to the Department of Labor--or 
should automatically trigger an investigation. Anyway, the 
housing deduction is one that makes--that workers are 
particularly vulnerable on.
    That is one. Again, just requiring that every employer 
provide information about the deductions that are taken out of 
your paycheck. That would be useful.
    Because you and I have that in our paychecks, but workers 
who are paid in cash don't have that. Workers who are 
vulnerable often don't have that, and that would be useful and, 
frankly, would get stuff a little more in the light so that 
workers and their advocates could be better advocates on these 
issues.
    Senator Harkin. Why do they go to you rather than go to the 
Government? You said a lot of these, they come to you for help. 
Why would they----
    Ms. Bobo. Well, particularly for immigrants who don't have 
proper documentation, they often can't get into the Government 
buildings. Folks, even if they have documents, a lot of folks 
are a little nervous about Government agencies, and our worker 
centers are usually based in churches and community 
organizations. So, we are very available.
    Again, we don't want to do this job without the Department 
of Labor. We want to work in partnership with the Department of 
Labor. Again, from our point of view, they really need more 
resources to be able to do the job well.
    Mr. Decker. Senator, I think one model that could be looked 
at is when we passed the Ticket to Work program, we created the 
benefits planning groups, the WIPAs, and also funding for the 
Protection and Advocacy agency, where people who are thinking 
of going back to work are able to get counseling on how it is 
going to affect their benefits, what the deductions would be.
    I think that is something that we could build on to make 
sure that workers who might be in the subminimum wage category 
had some advisor, had some advice to make sure they understood 
their protections and what they should be looking for and 
asking for.
    Because this is a very serious issue, especially with the 
economy, I think there is the incentive for employers to say, 
``Well, if you take less, we will keep your job.'' I think this 
is even more urgent than it has been.
    Mr. Leonard. Senator Harkin.
    Senator Harkin. Yes.
    Mr. Leonard. One thing I wanted to mention is that the 
Department of Labor takes the position with regard to patient 
workers, those who are living in an assisted living facility 
but also doing work there, that room and board that they get 
cannot count toward the employer's wage obligation.
    There is a different rule there for 3(m) than there is 
everywhere else. I don't know why that is the case. That is 
something that is worth asking the Department of Labor about.
    Ms. Bobo. That is interesting.
    Senator Harkin. Is that a law or what, regulations?
    Mr. Leonard. I believe it is in the regulations. Yes, it is 
in the regulations, and it says with regard to patient workers 
only, the employer cannot take any so-called section 3(m) 
credits. He has to pay those workers entirely in cash.
    As I said, I don't know why that is the rule, and I only 
found it over the weekend. It struck me as unusual as to why 
they don't have that for other handicapped workers.
    Senator Harkin. My staff, Michelle, thinks that this might 
go back to that 1986 law, but we don't know.
    Mr. Leonard. I just don't know. I just don't know. It is 
worth exploring because it might suggest something that could 
be done for other handicapped workers as well.
    Senator Harkin. Absolutely.
    Mr. Leonard. The other thing I wanted to mention is with 
regard to these section 3(m) credits. The Labor Department 
takes the position, and it has generally been upheld by the 
courts, that the employee has to accept this voluntarily. In 
other words, the employee can insist on being paid entirely in 
cash, but if the employee decides, yes, I want to take meals at 
this restaurant or, yes, I want to live in your housing, then 
the employee can do that.
    I think that is a very good protective device. The 
Department of Labor proposed regulations under the last 
administration, which now appear to be on hold, which would 
change the rule with regard to meals and would allow an 
employer to tell employees if I am supplying you with meals, 
you have to accept the cost of that as part of your wage. You 
cannot get a full wage in cash.
    I think that is flat-out wrong. It is based on a couple of 
court decisions that I think were completely wrongly decided, 
and many of the commenters on this proposed regulation, which 
hasn't taken effect and probably won't, opposed it vigorously.
    If there were a clear protection in that sense that any 
time the employer wants to pay partly with these noncash items 
that the employee would have the opportunity to say, ``No, I 
don't want that. I want cash.''
    That is in the law now. But again, when you are talking 
about handicapped workers and even other vulnerable and 
exploited workers, they might not understand the law. It is 
hard enough for us to understand what I just said, even for me. 
So, the question is how can we protect these workers against 
exploitation they may be unaware of even though they are given 
all this detail?
    I think in the case of handicapped workers, as I think some 
people at this table have mentioned, if their parents or 
guardians or other people who are looking after them had to be 
informed as well, that is a way to assure that even though the 
handicapped worker doesn't understand what is going on, there 
would be somebody who has the interest of that worker at the 
top of their priorities to examine the matter.
    Senator Harkin. I love my staff. I just found out that I 
sent a letter opposing that last fall. Well, I wasn't the only 
one. There were a lot of people, a lot of Senators and 
Congressmen--Senator Kennedy, Senator Murray, Senator Harkin, 
Senator Reed, Senator Obama.
    Ms. Bobo. Heard of him.
    Senator Harkin. I have heard of him.
    [Laughter.]
    Senator Brown, Senator Sanders, Senator Clinton, Senator 
Mikulski, Senator Dodd, Congresswoman Woolsey, and Congressman 
George Miller all sent a letter opposing this that we were just 
talking about. They are on hold right now.
    Mr. Leonard. That is right.
    Senator Harkin. Yes, they are on hold. Maybe we will get 
some better outcomes from that.
    Again, you all know what we are wrestling with here. I 
would just ask all four of you that as we move ahead, if you 
will make yourself accessible to me or my staff in trying to 
figure out exactly how we do this and what we put together.
    It is my intent to have some legislation soon in draft form 
that would not only get at the Atalissa problem but cover the 
nonprofits that are out there and get at what you pointed out 
that these 3(m) deductions--the rule that we were just talking 
about here.
    Ms. Bobo. That is right.
    Senator Harkin. Also looking at how we better--I don't 
know. Do we need to put a floor under this, or do we just need 
to say they have to be paid the minimum wage? You know? Period. 
That is it.
    And then do individual assessments for people as to what 
their abilities are and what jobs they can do. Again, we need 
to do a better job of enforcing the part of the ADA that 
requires reasonable accommodations for people. These are all 
the things I am thinking of that we have got to put into this 
legislation. The fines and penalties, make those more 
stringent, too.
    Maybe Atalissa was kind of a wake-up call to us that we 
have really got to look at not just that aspect, but a broader 
aspect of what is happening with worker exploitation. That is 
why I entitled this hearing--if I am not mistaken, I entitled 
it ``Preventing Worker Exploitation: Protecting Individuals 
With Disabilities and Other Vulnerable Populations.''
    Poor people, people that don't speak English very well, 
recent immigrants to this country that come here. I think we 
just have to take a much broader look than just this one 
incident.
    Ms. Bender, thank you for all you are doing. You can also 
be a very great source of information to us and help on how we 
can structure things for competitive employment.
    Ms. Bender. I will. I will. I thank you because I am going 
to tell you, that minimum wage--if you are able to do that, 
minimum wage. Minimum, this is it. You know what? There you 
are, once again, Senator Harkin, saying equality for all, 
justice for all.
    I will provide you with that information. Once again, on 
behalf of everyone with disabilities, I thank you.
    Senator Harkin. I thank all of you. Any last things I 
should be thinking about before we adjourn the hearing?
    I just thank you all for your recommendations. I appreciate 
them very much, and we will be in contact with you as we move 
ahead on this.
    Thank you very much. With that, the committee will stand 
adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

                  Prepared Statement of Senator Murray

    Thank you, Mr. Chairman, for calling this important 
hearing. Thanks to the witnesses for being here today to 
discuss how individuals with disabilities are being treated in 
the workplace.&
    I share Senator Harkin's concern about reports of 
deplorable conditions and mistreatment of some workers with 
disabilities in his home State of Iowa. I applaud the speed 
with which Senator Harkin has addressed these reports, and I 
agree that we must dig deeper to examine whether the laws on 
the books are adequate to ensure workers with disabilities are 
treated fairly and with respect.
    The opportunity to work in a safe and healthy environment 
and to be treated equitably in the workplace is a basic human 
right. Unscrupulous employers who take advantage of workers 
with disabilities should be held accountable to the fullest 
extent of the law. Where the law fails to protect workers, it 
needs to be changed. Where government agencies fail to enforce 
the law, they should be held accountable.&
    It is Congress' responsibility to be a voice for those who 
may not always be able to speak for themselves in abusive 
situations. That is the reason this hearing is so important.&
    I look forward to the testimony of our witnesses and 
working together on this important issue. And I want to thank 
everyone again for coming to share their expertise.

                       Prepared Statement of NISH

    Mr. Chairman, Ranking Member, and members of the committee, thank 
you for the opportunity to submit this statement for the record of the 
hearing on March 9, 2009, regarding Preventing Worker Exploitation: 
Protecting Individuals With Disabilities and Other Vulnerable 
Populations.
    The Committee for Purchase From People Who Are Blind or Severely 
Disabled (Committee for Purchase) is the independent Federal agency 
that administers the AbilityOne Program, which is the largest single 
source of employment for people with significant disabilities. The 
AbilityOne Program's mission is to provide employment opportunities in 
the manufacture and delivery of products and services to the Federal 
Government for people who are blind or have significant disabilities.
    Established in 1974, NISH is one of two Central Nonprofit Agencies 
designated by the Committee for Purchase. Headquartered in Vienna, VA, 
NISH supports a network of 560 producing Nonprofit Agencies (NPAs) and 
the Federal customers that rely on the quality goods and services 
supplied by these NPAs. NISH provides the technical assistance and 
professional training to these social entrepreneurs needed for 
successful contract management. In fiscal year 2008, NISH-affiliated 
AbilityOne agencies secured 38,775 jobs for people with significant 
disabilities within the AbilityOne Program. During this same period, 
AbilityOne-producing NPAs reported more than 129,000 jobs for people 
with significant disabilities.
    As a nonprofit dedicated to promoting a dignified place in the 
workplace for people with significant disabilities, we were most 
disturbed to learn of the conditions at Henry's Turkey Service and Hill 
Country Farms, and are appreciative of the oversight the committee has 
brought to this matter. We applaud the Chairman's commitment to 
protecting the rights and dignity of all working Americans, including 
those with significant disabilities.
    The committee's hearing explored the role of FLSA 14(c) and 3(m) 
programs by highlighting their failure to protect 21 men with 
significant disabilities working at Henry's Turkey House in Iowa. The 
conditions reported at Henry's Turkey House would appear to have 
occurred as a result of serious and numerous violations of Federal and 
State law and regulation that were not corrected due to lapses in 
oversight. A situation of this kind should never be allowed to happen 
again. While we understand the committee's concerns over the use of 
Federal commensurate wage provisions in this instance, the fundamental 
and broader benefit of FLSA 14(c) cannot be ignored. FLSA 14(c) remains 
needed as one of the tools available to employers who wish to create 
employment opportunities for people with significant disabilities with 
the greatest barriers to productivity.
    This hearing on March 9, 2009 brought out several statements and a 
few key questions on which NISH is offering comments. In the Chairman's 
opening statement of the hearing he said, in part:

          Now the stated intention behind the 14(c) program is ``to 
        prevent the curtailment--to prevent the curtailment of 
        employment opportunities for individuals with disabilities.'' A 
        very laudable goal. There are many individuals with significant 
        disabilities who are employed under this program who may not 
        otherwise have found employment. There are also many workers 
        with significant disabilities who are every bit as productive 
        as the workers without disabilities, and our laws must be 
        tightened to ensure that employers cannot use programs like 
        14(c) to take advantage of this.
          So we have to do all we can to promote employment for persons 
        with disabilities. People with disabilities working have 
        dignity and purpose. It helps them achieve economic self-
        sufficiency, one of the four stated goals of the Americans with 
        Disabilities Act. However, in our efforts to ensure that 
        individuals with disabilities find employment and economic 
        self-sufficiency, we obviously must draw a bright line in 
        prohibiting and preventing employers from taking advantage of 
        these vulnerable workers.

    NISH agrees fully with these statements. The 560 NPAs employing 
people with significant disabilities under the AbilityOne Program share 
these beliefs as well. They put these beliefs to work everyday as 
evidenced by the average wage of $10.57 per hour earned in 2008 by 
people with significant disabilities in the AbilityOne Program.
    The key questions raised in the hearing deserves to be answered. In 
addition to the answers provided by the witnesses, NISH offers the 
following information.

    Question 1. How are Special minimum wages determined; how 
accurately do Special minimum wages reflect the productivity of 
workers; and who is checking to ensure that workers with disabilities 
are being compensated fairly and correctly?
    Answer 1. Special minimum wages are commensurate wages which are 
based on the productivity of a worker with a disability, in proportion 
to the wage and productivity of workers who are not disabled for the 
same type, quality, and quantity of work in the same or similar 
geographic location. NISH, in cooperation with the DOL Wage and Hour 
Division, conducts training and technical assistance site reviews of 
all NPAs employing people with significant disabilities under the 
AbilityOne Program. This enhanced assistance acts to ensure this 
vulnerable group of workers are fully protected as well as offering the 
opportunities to maximize their earnings.

    Question 2. In 1938 when FLSA was passed, there was a 75 percent 
floor. Then that was reduced to 50 percent at some point. Then, in 
1986, that was even taken away. Do we need to reinstate a wage floor or 
not?
    Answer 2. From the earliest days of the Wagner-O'Day Act, the 
AbilityOne Program has sought to emphasize the capabilities of persons 
who were blind or had significant disabilities. The AbilityOne Program 
emphasizes what individuals can do. The program has always strived to 
be inclusive and to recognize that participants with lower productivity 
levels have something of value to offer. Under the commensurate wage 
system, even employees with extremely low levels of productivity are 
offered a seat at the workbench and are given an opportunity to improve 
their skills and their productivity to earn higher levels of 
compensation.

    Question 3. Perhaps we need to more narrowly define what people 
with disabilities are eligible for this. There are some people with 
significant disabilities that just simply cannot make it in competitive 
work? Should we certify that an individual is eligible for 14(c)?
    Answer 3. We already define who is eligible for the Program. There 
is in fact a certification process for employers that use 14(c). What 
we need to ensure is that existing Federal, State and local laws are 
fully implemented.

    Question 4. Does DOL keep track of how many people with 
disabilities are employed under a 14(c) application for a particular 
employer?
    Answer 4. As you heard in John McKeon's testimony, the U.S. 
Department of Labor's Wage and Hour Division needs to improve its 
enforcement and oversight of the program. NISH has a partnership with 
the U.S. Department of Labor, Wage and Hour Division (WHD). 
Representatives from the WHD provide training to AbilityOne Program 
Community Rehabilitation Program (CRPs) on the Fair Labor Standards Act 
and payment of special minimum wages to workers with disabilities under 
section 14(c).
    Furthermore, the AbilityOne Program has its own regulatory 
requirements. The AbilityOne Program requires CRPs to submit quarterly 
employment reports (QER). The QER collects the number of direct labor 
hours performed by people without substantial disabilities, by products 
and services; hours include vacation, holiday or paid sick leave; and 
other information as required by the committee.
    In addition, participating CRPs are also required to submit an 
annual certification, the cumulative total of all data submitted 
throughout the fiscal year on the Quarterly Employment Report. In 
addition, the AbilityOne Program requires NPAs to maintain compliance 
with all Federal laws and regulations pertaining to them as employers, 
employers of people with disabilities, and as Federal contractors. 
There are systems in place to monitor compliance and to deliver 
consequences for noncompliance.

    Question 5. What would happen if all workers with disabilities were 
paid the minimum wage? How would that affect employment? If it would 
have a negative effect on employment, is there some level, like a 75 
percent or a 50 percent floor that could not be breached that would not 
have an adverse effect on employment of people with severe 
disabilities?
    Answer 5. To pay all people with significant disabilities working 
on AbilityOne projects full minimum or competitive wages would have 
severe consequences for people with significant disabilities working in 
the AbilityOne Program. In order to remain price competitive, the 
population of people with significant disabilities who are less than 85 
percent productive will be supplanted by people with disabilities who 
have a higher productivity rate. This would eliminate the employment of 
people with the most significant disabilities--the people that the 
AbilityOne Program was initially established to serve. In order to 
continue the employment of the people with the most significant 
disabilities, the cost of AbilityOne contracts would increase 
substantially as full minimum or competitive wages are paid to the 
population of people with significant disabilities that are less than 
85 percent productive.

    Question 6. Should there be individual assessments for people as to 
what their abilities are and what jobs they can do?
    Answer 6. Individual assessments are absolutely critical to 
determine individual abilities along with requirements for individual 
supports and services. They should be mandated along with a dedicated 
funding stream to ensure full and accurate compliance.

    Question 7. If employers are to hire someone with a disability, 
they have to request or file a 14(c) application. Should the employee 
have the right to request or file a 14(c) application?
    Answer 7. Under the principle of self determination there is every 
reason to allow a potential employee to file a 14(c) application. It is 
necessary that the term ``self determination'' be clearly defined to 
avoid disputes.

                            RECOMMENDATIONS

    We ask that the subcommittee move cautiously before initiating any 
legislative action that might eliminate or restrict access to the 
provisions of section 14(c). The impact to the thousands of hard 
working Americans with significant disabilities along with people 
without disabilities who support them in the AbilityOne Program would 
be profound and long-lasting. The hardest hit would be employees with 
developmental disabilities and intellectual disabilities. These are the 
employees who would have little chance at securing employment in the 
competitive environment; the employees who would most likely have no 
job opportunities if not for the AbilityOne Program. Considerable 
discussion and a review of the commensurate wage system by all involved 
parties should be undertaken in advance of any proposals to amend the 
provisions of FLSA section 14(c).
    NISH proposes the following immediate action steps:

     Direct the Department of Labor (DOL) Wage and Hour 
Division Administrator to ensure sufficient resources are allocated to 
increase training, technical assistance, and oversight activities of 
Fair Labor Standards Act Section 14(c) certificate holding employers to 
ensure that the law is closely monitored and adhered to strictly.
     Direct the Rehabilitation Services Administration, the 
National Institute on Disability and Rehabilitation Research, and the 
Office of Disability Employment Policy to provide funding, training, 
technical assistance, and other supports to certificate holding for-
profit and not-for-profit employers which will increase productivity 
levels of people with significant disabilities work incentives and 
employment support programs.
     Require the Rehabilitation Services Administration and the 
Office of Disability Employment Policy to cooperatively conduct pilot 
projects which would prove the effectiveness of customized employment 
in large-scale employer applications, rather than the small scale 
studies conducted.
     Require the Wage and Hour Administrator to survey 
certificate holding for-
profit and not-for-profit employers to determine an accurate count of 
people with significant disabilities who meet the criteria specified in 
the regulation as having significant disabilities for the work being 
performed.
     Congress should reinstate the Advisory Committee on 
Special Minimum Wages. Members should be appointed by the Secretary of 
Labor to advise and make recommendations to the Secretary and the Wage 
and Hour Division Administrator concerning the administration and 
enforcement of regulations and the need for amendments thereof and 
serve other functions as needed by the Secretary or the Administrator.

    Thank you for considering our point of view. Please feel free to 
contact Tony Young, Senior Public Policy Strategist, on [email protected] 
or at 571-226-4567 for additional information.

    [Whereupon, at 4:20 p.m., the hearing was adjourned.]

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