Cites record in Food Lion case

A WAGE LAW WITH NO TEETH? GAO

September 23, 1992|By Bloomberg Business News

WASHINGTON -- A case study involving Food Lion Inc. employees shows that employers' liability for back wages isn't being enforced properly, the General Accounting Office told a House of Representatives panel yesterday.

Employers incur a liability for back wages when they illegally force employees to work "off the clock." Last March, Food Lion employees told a congressional subcommittee that the company routinely forced employees to work off the clock.

Food Lion, a North Carolina-based supermarket chain, paid less than 25 percent of the $1.2 million in back wages Labor Department investigators determined were owed for work performed between October 1984 and September 1986.

The GAO, Congress' investigative arm, released a report yesterday saying that the Fair Labor Standards Act needs to be modified to better protect workers' rights to back pay.

"The settlement with Food Lion for 25 cents on the dollar raises many troubling issues," said Rep. Tom Lantos, D-Calif., who presided over yesterday's employment and housing subcommittee hearing.

The Fair Labor Standards Act is flawed, the GAO said, because the Labor Department or the injured employees must sue the employer within a two-year statute of limitations. If the Labor Department doesn't file suit soon enough, employees risk losing their back wages. Since employees in these cases often earn close to the minimum wage, it might be impossible for them to hire a lawyer and bring their own suit, Mr. Lantos said.

The Labor Department says it recovers 81 percent of back wages owed by employers. The GAO concluded, however, that the department might be substantially overstating its recovery rate through mathematical subterfuge.

For example, the department settled the Food Lion case for $300,000, or one-fourth of what its investigators found was owed. However, the Labor Department recorded the $300,000 as the amount the employer agreed to pay and the amount owed to employees, giving the illusion that it had recovered 100 percent of the back wages.

The Labor Department says employees seldom lose back wages as a result of their claims expiring under the statute of limitations because the department obtains waivers of the statute from employers as they are needed. However, the Labor Department doesn't collect data on the number of cases in which waivers are needed. Thus, the GAO couldn't determine the percentage of cases in which the department failed to obtain waivers.

Employees at the Labor Department's district offices estimated that they obtained waivers in less than 10 percent of their back pay cases in fiscal 1991, and that most of the waivers were for employers who had agreed to pay the back wages but wanted to pay them in installments.

In the Labor Department's initial investigation of Food Lion, three former employees lost more than $11,800 in back wages because their claims expired under the statute of limitations, the GAO said.

The GAO recommended changing the statute of limitations on back wages cases so that an employee must file a complaint with the Labor Department within two years, instead of having to sue within two years. Making this change would make the statute of limitations on back wages cases the same as for some other labor laws, the GAO said.

Food Lion, meanwhile, says that the United Food and Commercial Workers union is using Congress to pressure the supermarket chain to unionize. Food Lion employees rejected the union in 1980.

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