SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 8640 words

HEADLINE: TESTIMONY June 27, 2000 BERNARDE E. ANDERSON ASSISTANT SECRETARY DEPARTMENT OF LABOR HOUSE EDUCATION AND THE WORKFORCE OVERSIGHT AND INVESTIGATIONS EMPLOYMENT STANDARDS

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TESTIMONY OF BERNARD E. ANDERSON ASSISTANT SECRETARY DEPARTMENT OF LABOR EMPLOYMENT STANDARDS ADMINISTRATION JUNE 27, 2000 Mr. Chairman and distinguished members of the Subcommittee, I am pleased to be here today to discuss the Government Performance and Results Act (GPRA) and its influence on the work of the Department of Labor's Employment Standards Administration (ESA). I am accompanied by the executive heads of the four operating programs that comprise the Employment Standards Administration: Mr. T. Michael Kerr, Administrator of the Wage and Hour Division; Ms. Shirley J. Wilcher, Deputy Assistant Secretary for the Office of Federal Contract Compliance Programs; Mr. Shelby S. Hallmark, Acting Director for the Office of Workers' Compensation Programs; and Mr. John Kotch, Director for the Office of Labor-Management Standards. ESA, the largest agency within the Department of Labor with over 4,000 employees, pursues a mission, "to enhance the welfare and protect the rights of American workers," and is inspired by the vision, "to achieve universally applied fair practices in the American workplace." Our work is accomplished from the national office and many field offices throughout the country to ensure that the enforcement and benefit delivery programs are accessible to the American public. ESA administers programs to implement over 100 laws that protect the basic rights of workers, including minimum wage, child labor, and overtime pay standards, equal employment opportunities for employees of Federal contractors, workers' compensation benefits, and workers' rights as union members. Nearly every worker in America is protected by laws and regulations administered by ESA programs. In the following statement, I will first present a brief overview of the framework for ESA's approach to strategic management, and then highlight some of the issues and accomplishments in the performance of ESA programs. The Department of Labor takes the Government Performance and Results Act (GPRA) very seriously and, as noted by the Government Accounting Office (GAO), our objective, measurable performance goals provide a clear picture of intended performance across the agency. The framework and principles of GPRA, which guide the Departmental performance team, are integral to our management of ESA's programs, beginning with a 5-year strategy for improving core program results. To execute this plan, we set ambitious goals each year, regularly evaluate our programs against these goals, and make improvements based on performance results. All of the ESA program goals support two of the Secretary's strategic goals for the Department of Labor: A Secure Workforce and Quality Workplaces. Eight of the ESA performance goals appear in the Department's Strategic and Performance Plans and in the Department's FY 1999 Annual Report on Performance and Accountability. The goals set the standard for measuring the performance and effectiveness of our programs and services as we pursue our mission. The annual performance report demonstrates progress toward achieving our goals and makes us accountable to the Congress, program stakeholders, and the American public. To stay abreast of our progress, we have quarterly reviews on the status of each program's performance in goal attainment. This is an opportunity not only to monitor and review progress but also to discuss the effectiveness of the strategies for goal achievement and evaluation of necessary corrections or interventions. To emphasize the importance of achieving ESA's strategic and performance goals, the performance appraisals of all senior managers include elements for rating the manager's contribution to the achievement of the strategic and performance goals. ESA Program Directors, in turn, specify performance expectations related to goal accomplishment for the Regional Directors who manage our program operations in the field. At every level, ESA demonstrates the importance of GPRA as a management tool that is useful for helping the agency to accomplish its goals. The Department and ESA have worked closely with the Office of Management and Budget (OMB) and the DOL Office of Inspector General (OIG) to develop and revise our goals and measures. We have also made considerable refinements in our plans and strategies based on recommendations from the GAO. Each of these organizations has provided valuable input and guidance through the GPRA process. GPRA has helped us not only to focus our efforts on the accomplishment of long-term outcomes but also to express them more clearly to our program and Congressional stakeholders, and to the American public. We work continuously to refine our goals, measures and strategies for achieving favorable results. In addition to the program performance goals, the ESA Strategic and Performance Plans contain a number of management goals. ESA's strategic planning establishes a framework that links the agency's program, administrative and financial management. This helps ensure that the Program Offices in ESA work together to achieve the Agency's overall goals and that they are supported by the administrative, management, and operational systems required to reach the goals. Our financial management and information technology goals are integrated into broader Departmental goals. In FY 1999, we exceeded or fully achieved six of the eight ESA goals, and substantially achieved the other two goals that were in the Departmental plan. The performance results caused us to reexamine how we defined our goals and helped us identify where we needed to refine our performance measures and our implementation strategies. As a result, our FY 1999 experience was the catalyst for a number of revised goals and performance measures that are now included in the FY 20OO and FY 2001 Annual Performance Plans. With this information as background, I would now like to provide some of the performance highlights and issues from the programs. Wage and Hour Division The Wage and Hour Division has two broad and complementary objectives: (1) to achieve compliance with the worker protection laws for which we are responsible; and (2) to improve satisfaction with the services we provide our many and varied customers. Our compliance program balances public education and outreach with enforcement efforts using a variety of tools and techniques. The program targets low- wage industries to increase compliance, with particular emphasis on child labor, and remediation of violations. In low-wage industries, violations are more often egregious and complaints less common. Many of these industries continue to offer a source of employment for vulnerable workers, including many immigrants, both legal and undocumented, who are commonly exploited but unlikely to complain. Wage and Hour has three goals that appear in the Department's FY 1999 Annual Performance Plan and Report. They are: (2. 1 A) to increase compliance with labor standards laws and regulations by five percent in the San Francisco and New York City garment industries; to establish compliance baselines for the agricultural commodities of onions, lettuce, and cucumbers; and to establish a baseline for the assisted living facilities segment of the residential health care industry; (2. 1 B) to increase compliance among employers which were previous violators and the subject of repeat investigations, establish recidivism baselines in the San Francisco and New York City garment industries, in the agricultural commodities of lettuce, cucumbers, and onions, and in the residential health care industry; and (2.2H) to implement a new Davis-Bacon wage survey data collection form and an automated printing and mailing process, and test whether automation can increase the accuracy and timeliness of the survey process and wage determinations. In choosing its performance goals, Wage and Hour has identified difficult and persistent compliance problems in industries with a long history of employing low-wage worker s, often in substandard working conditions-specifically the garment, agriculture and health care industries. Measuring compliance has been a challenge for Wage and Hour. Unlike many other regulatory agencies, Wage and Hour does not receive measurable data from the regulated community. For example, the Occupational Safety and Health Administration (OSHA) receives data on accidents, injuries and fatalities to assist them in targeting industries and employers, and the Internal Revenue Service (IRS) uses data from tax returns to plan compliance and enforcement strategies. Wage and Hour has begun to measure compliance by conducting statistically valid investigation-based surveys to establish baselines and measure improvements. The first step in the survey process is identifying a valid universe for the targeted industry. Depending on the industry, the universe is obtained from a database such as Dun and Bradstreet listings, State registration or licensing data, or other industry sources. A statistically valid sample is drawn from the universe, and the employers in the sample are investigated. At the same time another statistically valid sample is drawn of employers in the industry who were previously investigated so that compliance in repeat investigations and recidivism rates also can be measured. The compliance surveys conducted by Wage and Hour are part of a multi-pronged compliance enhancement strategy that includes enforcement and litigation, education and outreach, and partnerships in which we seek to involve all the stakeholders in the selected industries. Except for the garment industries in New York and San Francisco, Wage and Hour was successful in meeting its FY 1999 performance goal relating to compliance in low wage industries. The program established compliance baselines for lettuce at 65 percent, for cucumbers at 49 percent, for onions at 42 percent, and for assisted living facilities at 57 percent. Mr. Chairman, I appreciate and share your personal interest in the often terrible working conditions in garment industry sweatshops, particularly in New York City. In both New York and San Francisco, we were disappointed that the level of compliance in the garment industry was essentially unchanged from that found in 1997. The 1999 results led Wage and Hour to reassess its strategy for increasing industry compliance. We have broadened our outreach to community-based and worker organizations to build trust and improve communications, including developing a "rapid-response" capability to follow- up on complaints received from these organizations. This fiscal year, garment cases were successfully developed for criminal prosecution in New York and the results were announced to the public. A new office will be opened this summer in Brooklyn with staff devoted to investigating the growing garment industry in Sunset Park. Currently pending is a nationwide investigation of a major retail chain which we hope to resolve in the near future. Our objective in cases like this is to get retailers to accept greater accountability for labor law compliance of their garment suppliers. We anticipate increased use of litigation as a means of achieving compliance. Wage and Hour established a separate goal in the same low-wage industries to measure the impact of our enforcement interventions on employers who were previously investigated and found in violation of the laws we enforce. In FY 1999, compliance baselines were successfully established for recidivism. The baselines are 86 percent and 52 percent in the San Francisco and New York garment industries, respectively; 43 percent for lettuce, 42 percent for onions, 37 percent for cucumbers, and 55 percent for assisted living facilities. The third Wage and Hour performance goal in the Department's Plan is related to Davis- Bacon wage surveys. Beginning in FY 1997, Congress has provided additional resources for the express purpose of Davis-Bacon wage survey improvements. The ultimate goal of these improvements is to conduct more timely and accurate surveys in all areas of the country every three years. During the last three fiscal years (I 997-1999), improvements for the Davis-Bacon program have been directed to: (1) enhancing verification of data submitted by respondents to Davis-Bacon wage surveys; (2) examining the feasibility of using BLS surveys as the basis for, Davis-Bacon wage determinations; and (3) reengineering the current wage survey and wage determination processes by using new technology and revised procedures to substantially improve the efficiency, timeliness and accuracy of the process. Wage and Hour successfully completed its FY 1999 goals for the Davis-Bacon program and expects to be in a position to fully evaluate the reinvention and reengineering alternatives by the end of this year. Office of Federal Contract Compliance Programs The Office of Federal Contract Compliance Programs (OFCCP) administers and enforces Federal laws and regulations that prohibit Government contractors from discriminating in employment, and require that they undertake affirmative action to ensure equal employment opportunity in their workforces. We have pursued this challenge through the implementation of a comprehensive compliance program that emphasizes enforcement, education, public outreach, and technical assistance for Federal contractors. In FY 1999, it was OFCCP's goal to: (3.2A) increase by five percent over the FY 1998 baseline, the number of Federal contractors brought into compliance with the Equal Employment Opportunity (EEO) provisions of Federal contracts via ESA's compliance evaluation procedures. OFCCP achieved 93 percent of this goal in FY 1999 with 2,648 Federal contractors brought into compliance with EEO provisions. We have continued to pursue a three pronged "Fair Enforcement Strategy" which consists of. 1) a multi- tiered review process for determining contractor compliance with the laws and regulations enforced by OFCCP; 2) regulatory reform to strengthen the contract compliance program, while streamlining and simplifying the regulations; and 3) improved data collection. The amendments made to the regulations for investigating compliance allow agency to conduct tiered or differentiated evaluations of contractor compliance, thereby improving agency efficiency and allowing it to better target its resources. In FY 1999, the program secured over $41 million in financial settlements in cases involving allegations of discrimination. Of that amount, nearly $14 million constituted backpay, which benefited more than 8,000 individuals. Further, the agency has enhanced community and industry alliances, provided greater disclosures of procedures, enhanced technical assistance, implemented a unique OMBUD program, enhanced quality control, and strengthened enforcement when necessary to bring Federal contractors into compliance with their contractual obligations. Finally, and perhaps more important, we identified the need to revise OFCCP's goals and measures to better reflect changes in the program as our enforcement philosophy has shifted from a focus on contractor compliance with process and technicalities, to an emphasis on contractor development of effective affirmative action programs. By the end of this fiscal year, we expect to have refashioned OFCCP's GPRA goals and measures to better capture the mission related impact and outcomes of this strategy and other initiatives. To facilitate this important endeavor, we have engaged the services of recognized experts in the field. Office of Workers' Compensation Programs The Office of Workers' Compensation Programs (OWCP) mitigates the financial burden on certain workers, or their dependents or survivors, resulting from work-related injury, disease, or death, through the provision of wage replacement and cash benefits, medical treatment, vocational rehabilitation, and other benefits. OWCP provides individuals who experience work-related injuries with the best and most cost- effective assistance and services possible. In FY 1999, the three OWCP performance goals in the Department's Annual Performance Plan and Report were: (2.2E) to return Federal employees to work following an injury as early as appropriate, as indicated by a six percent reduction from the baseline in production days lost due to disability for cases in the Quality Case Management (QCM) program; (2.2F) to produce $19 million in first-year savings through Periodic Roll Management; and (2.2G) to save 19 percent annually versus amounts billed for Federal Employees' Compensation Act (FECA) medical services. The Government Performance and Results Act is being implemented comprehensively in OWCP and has been thoroughly integrated into the Office's overall management approach. Building upon OWCP's long performance measurement history, a union/management partnership team in 1995 identified strategic goals consistent with the OWCP mission and which would increase program impact. Multiple process reengineering, programmatic, and high technology initiatives, begun in the early 1990's, were organized in support of the strategic goals. GPRA goals were aligned with performance objectives in OWCP's program operational plans and incorporated into the performance agreements of national office, regional and field managers. GPRA performance evaluations, based on evolving data systems, are conducted at frequent intervals alongside OWCP's regular Quarterly Review and Analysis, and Accountability and Management Review processes. OWCP's experience with GPRA has been very productive. Focusing on measurable, real-world outcomes has become the central theme running through all planning and evaluation activities, from long- range strategic vision, through operational planning and monitoring, to day-to-day project management. As an organization with a long history of holding itself and its staff accountable for a wide range of process and output performance standards. we were quick to recognize the value of the two keys to the GPRA approach: (1) focus on the impact of the program on the customer, and (2) measure those customer-focused outcomes. The heuristic power of these two concepts has been demonstrated most clearly in our return to work" goal for the FECA program. In our 1995 Strategic Plan for FECA, and in all plans since then, return to work has been identified as the number one goal for the program. This embodied a recognition that FECA needed to expand its vision of itself, from that of a "gatekeeper" adjudicatory and benefit payment program to a proactive, "make whole" service delivery agency. By elevating return to work from an ancillary function to one of three key program goals (the others being service to injured workers and fiscal integrity), the agency challenged itself to address the entire experience of injured workers, including their prompt reintegration into the workplace following recovery from an injury. This in turn greatly emphasized the need for increased coordination with Federal employing agencies and employee representatives. FECA has moved steadily forward in its understanding of how to improve performance in this very complex arena. Initially, a goal was established to "resolve" 75% of serious injury cases within one year of the beginning of the disability. New and creative strategies were developed or enhanced to address this goal, including the assignment of rehabilitation nurses to injury cases that extended beyond a designated period. This QCM strategy was made a central part of the program's operational plan, and district office managers and staff were trained, detailed automated tracking systems were developed and deployed, and performance was tracked on a quarterly basis. Within about two years, the program was meeting its 75 percent goal on a national basis. In 1997 the program determined that measuring average "lost production days" -- the length of time a worker remains off the job due to a disability -- among the cohort of QCM cases would provide even greater accuracy and insight into performance. Using the comprehensive tracking system already in place, these more detailed measurements were generated to establish an FY 1997 baseline, and goals for gradual reduction in the average lost days were set for succeeding years. Simply establishing and evaluating this measure was profoundly educational for the program. A wide disparity of results was noted among the 12 FECA district offices, and between different Federal agencies. Further analysis of the data demonstrated that external factors, such as the speed with which the employing agency submits the original notice of injury to OWCP and the subsequent claim for wage-loss compensation, make a significant difference in the length of time a worker remains off the job, even when injuries are similar. This led OWCP to launch a major program to encourage Federal agencies to greatly improve their submission timeliness, a goal which was included in its own GPRA plan and in individual managers' performance agreements as well. The results, as indicated in the DOL FY 1999 Performance Report, have been extremely positive. OWCP has been able to continually lower the average lost days for QCM cases, far exceeding its goal in FY 1999, and continuing to exceed it this year. Regional differences remain, but the program goal is now being met all across the Nation, with continuing innovations in strategy, both internal to OWCP and in terms of partnerships with agencies and others, being deployed to further improve performance. With the announcement of the President's Federal Worker 2000 initiative, OWCP has undertaken to broaden the scope of this initiative to cover all Federal workplace injuries. The program always recognized that its QCM measure was a partial one, since it applied only to the approximately 12,000 most serious injuries that occur each year. To address the full 170,000 Federal workplace injuries each year was a more difficult undertaking, for which OWCP did not have adequate data initially, and which required a greater degree of coordination with the agencies than OWCP believed was feasible when it began its GPRA implementation. OWCP launched the broader measure in late FY 1999. In FY 2000 and beyond, the measure of "lost production days" will incorporate all days lost from work through injury, including the "continuation of pay" period which is paid and administered by the individual employing agencies rather than OWCP. The preliminary FY 1999 fourth quarter baseline for this much more comprehensive measure shows that about 65 days are lost for each .1 00 Federal FTE. Since this measure was constructed as a proportion of total employment, it encourages agencies to improve the measure both by assisting OWCP in returning injured workers to the job faster, and by improving safety and thereby avoiding lost days entirely. Other key goals reflected in the Department's plan include the Periodic Roll Management (PRM) and medical cost savings goals. The PRM goal is aimed at quality management of the long-term disability roll, improving service to disabled beneficiaries, rehabilitating and reemploying partially disabled workers, and adjusting benefits to accurately reflect eligibility. PRM has been enormously successful. In FY 1999, OWCP completed case actions on nearly 7,000 long-term cases, and saved $20.8 million in compensation costs. By the end of FY 1999, PRM case actions had saved $414 million in compensation benefits. In FY 1999, in recognition of PRM's demonstrated results, Congress appropriated resources to expand PRM to all 12 FECA district offices, and explicitly recognized this activity as a permanent aspect of the FECA program. Since 1986, use of a medical fee schedule has been successful in controlling physician and other outpatient medical costs. In January 1999, a fee schedule for pharmacy bills and the Diagnostic Related Group (DRG) approach was adopted for hospital inpatient services. Implementing these new cost controls saved $16.5 million over t e amounts billed in FY 1999. Combined with the savings of $106.4 million realized by the fee schedule for physician services, total medical billings were reduced by 22 percent in FY 1999. While OWCP has done well meeting its goals to reduce amounts paid against medical charges overall, the program has established a tougher GPRA goal aimed at reducing the average cost of medical care. To achieve this, OWCP is developing other medical cost control initiatives. These will match closely to medical industry practices, expanding medical technology and pharmacology, and other external factors that continue to affect medical costs in OWCP. One program is our Correct Coding Initiative (CCI), an automation-assisted process that detects improperly coded bills (such as bills "unbundled" into component services to enhance revenue), duplication, overuse or inappropriate use of services to treat given conditions and other abuses. Another initiative, Focus Reviews, will identify improper treatment and payment for selected medical conditions and will ensure that billed services are reasonable and related to the correct condition. Office of Labor-Management Standards The Office of Labor-Management Standards (OLMS) supports and advances union democracy and financial integrity by its administration of the Labor-Management Reporting and Disclosure Act of 1959, as amended (LMRDA) and related laws. OLMS has three primary objectives for the LMRDA program: (1) to resolve member complaints concerning union officer elections, union trusteeships, and other matters pertaining to safeguards for union democracy; (2) to protect union financial integrity by enforcing safeguards established under the law; and (3) to ensure that LMRDA reports required of unions and others are available for public disclosure. For FY 1999, OLMS had the following goal (2.1E) in the Department's Annual Performance Plan and Report: to have eighty- five percent of unions with annual receipts greater than $200,000 timely file union annual financial reports for public disclosure access. Labor organization annual financial reports afford union members access to important information concerning union finances and administration that promote their full, informed participation in union affairs, fostering union democracy and financial integrity. The goal of timely reporting by unions with annual receipts greater than $200,000 recognizes the greater public disclosure interest associated with the larger unions. The timely filing rate of these unions in FY 1999 was 89.8 percent, which significantly exceeded both the FY 1999 goal and the 87 percent target established for FY 2000. The FY 1999 performance result also is a marked improvement over the timely filing rates of 83 percent in FY 1998 and 79 percent in FY 1997. In FY 2000, the performance results are being monitored to determine whether performance targets should be adjusted or whether the goal should be replaced. Thus far in FY 2000, the timely filing rate stands at approximately 88 percent. Several strategies are employed to achieve the performance target. Compliance assistance is provided to union officials. Liaison is established with a number of international unions to encourage their assistance in promoting timely filing by affiliates. Also, special contacts are made to remind unions delinquent in the prior year to file their reports on time. In FY 2001 OLMS will implement a performance goal to measure compliance with standards of acceptability for labor organization reports. Efforts to improve the sufficiency as well as the timeliness of union reports will better serve the public disclosure purposes of the LMRDA. The timeliness and sufficiency of the LMRDA reports are particularly important in view of the new Internet public disclosure system under development for implementation in FY 2001 that will significantly expand public access to reported information. Conclusion In conclusion, GPRA has proven a major asset in focusing ESA's daily management efforts or the achievement of our core responsibilities to improve the security of America's workforce and to enhance the quality of the Nation's workplaces. ESA has made significant strides, but we also recognize the additional challenges that remain to fully implement the legislation and transform all comers of our agency into a performance based organization. ESA is committed to meeting those challenges and continuing to improve the results of the programs and services we deliver to America's workers. Mr. Chairman, that completes my prepared statement. My colleagues and I would now be pleased to respond to any questions that you or other members of the Subcommittee might have.

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