Labor Secretary Elizabeth Hanford Dole, backpedaling on a recent Labor Department order that the Salvation Army pay minimum wage to clients in its work therapy program, said she will ask Congress to exempt the organization from some wage and hour laws.

Noting that "government shouldn't operate with blinders on," Dole said Tuesday that her staff will press Congress to reexamine the 52-year-old Fair Labor Act "to look for ways that rehabilitation centers such as the Salvation Army can function and house the homeless while we protect workers' rights."

Negotiations between the Labor Department and the Salvation Army broke down Sept. 7, when the department issued a letter threatening "appropriate legal action" if the organization failed to treat its clients in rehabilitation centers as regular employees entitled to minimum wages, overtime pay and other benefits.

A few days later, the Salvation Army asked a federal judge in Alexandria to issue an injunction prohibiting the Labor Department from forcing it to comply.

William J. Moss, counsel for the Salvation Army, said Dole changed her position because of the bad publicity over the issue. "Elizabeth Dole wants to back off and she's looking for a way to solve it," Moss said.

Moss said the Salvation Army would not yet abandon its federal suit, but was willing to negotiate if the Labor Department offered to push legislation that would exempt church-sponsored institutions that provide "a short-term moral and social rehabilitation program."

New Jersey Rep. Marge Roukema, the ranking Republican on the House labor-management subcommittee, said yesterday that a legislative solution was not feasible, adding that the wrangling would take too much time and money.

Roukema said she did not believe that the Fair Labor Act applied to the Salvation Army. However, she added that as a last resort the Labor Department could use existing exemptions to release the organization from any obligation under the law.

Nationally, the Salvation Army has 117 Adult Rehabilitation Centers, which provide food, shelter and counseling to 50,000 people annually. Those enrolled for up to 90 days in work therapy programs help process public donations to the Salvation Army and are given weekly stipends of $5 to $20 for personal items.