Purpose

To determine if the Department of Labor (Department) adequately ensured that parents/guardians and employers complied with the legal requirements that help protect the welfare of child performers. The audit covers the period April 1, 2014 through March 16, 2017.

Background

The Department of Labor (Department) is charged with protecting workers in New York State. Part 186 of the New York Codes, Rules and Regulations (NYCRR) and Article 4-A of the State Labor Laws (Law) were established to protect child performers, including models, whose interests and well-being during employment may be vulnerable to exploitation. The Department’s Child Performers Unit (Unit) is responsible for monitoring compliance with all parts of the Law and NYCRR.

The Law and NYCRR establish certain responsibilities and requirements for parents/guardians and employers to protect child performers’ safety, well-being, and educational rights. Furthermore, the Law and NYCRR also ensure that a portion of each child’s earnings is protected, in accordance with Article 7, Part 7, of the Estates, Powers and Trusts Law. Specifically, the Law requires 15 percent of a child performer’s earnings to be placed in trust on behalf of the child. If an employer or payroll company does not have valid information about a child’s trust account, it is required to deposit those funds with the State Comptroller. As of October 2016, the Comptroller had received over $640,000 in trust for more than 5,600 child performers.

The Department has used its Child Performers Registration System database (System) to maintain permit and certificate information since 2004. Information from annual permits and employer certificate applications is manually entered in the System by Department staff. Information related to one-time temporary permits is entered by the child’s parent or guardian when applying through a web portal and automatically posted to the System. Unit staff use System-generated reports as a permit management tool to streamline permitting processes.

System records indicate that, from April 1, 2014 to October 31, 2016, the Department issued about 27,000 child performer permits, including approximately 8,000 temporary permits, 11,000 new annual permits, and 4,500 annual permit renewals. The remaining 3,500 permits were not identified by type. For the same period, the Department issued 844 employer certificates.

Key Findings

• The Department has not created a sound and effective system of internal controls for the Unit. Several systemic weaknesses exist that undermine the Department’s ability to adequately monitor the child performers program, detect violations, and prevent non-compliance with legal requirements. We found instances where: children were likely working without permits; parents or guardians had circumvented the Department’s System to improperly obtain permits for their children; and child permits and employer certifications were issued without all required documentation.
• The Department does not have the necessary controls to monitor and enforce compliance with regulations designed to protect child performers’ earnings. Although deposits to the Comptroller’s trust account should be limited, the number has increased over the years and approached 1,200 in 2016.
• The Department has not designed or implemented proactive monitoring activities to verify that permits, certifications, and education, safety, and work conditions fully comply with the Law and the NYCRR.
• The System has significant deficiencies – with data entry, maintenance, and functionality – that limit its effectiveness and reliability as a monitoring tool. The Unit does not have an adequate process to validate information entered in the database, nor does it properly use data analysis or System data reports to identify and correct potential System flaws. Further, the System does not have edit checks requiring all fields to be completed, and reports generated from the System contain errors.

Key Recommendations

• Design and implement a system of internal controls to ensure that the welfare of child performers is protected and that parents/guardians and employers comply with the requirements of the Law and the NYCRR.
• In conjunction with the Office of Information Technology Services, develop a System that can easily and readily store, access, and analyze required child performer and employer information and develop a process to identify and correct apparent System flaws.

Other Related Audits/Reports of Interest

Department of Labor: Wage Theft Investigations (2013-S-38)
Department of Labor: Wage Theft Investigations (Follow-Up) (2015-F-9)