On March 6, 2018 the U.S Department of Labor’s Wage and Hour Division (“WHD”) announced a new program entitled Payroll Audit Independent Determination (“PAID”), which offers employers an opportunity to proactively resolve inadvertent wage and hour errors that fall short of compliance with the Fair Labor Standards Act (“FLSA”). Specifically, employers who perform self-audits and voluntarily disclose potential minimum wage and overtime violations through PAID may resolve any back wages owed without risking the payment of liquidated damages or civil monetary penalties frequently assessed in WHD-initiated audits. This could save employers significant financial costs.
Participating employers may also receive a supervised release of federal wage claims from employees who choose to accept the payment of back wages through this program. However, this release is not general and will be tailored to the specific FLSA violations and time period for which the employer is paying the back wages. The release also does not cover an employee’s potential state law wage claims or waive the WHD’s right to conduct any future investigations of the employer. Nonetheless, it will provide an employer with an avenue to avoid litigation under the FLSA related to the specific violations resolved, as well as the attorneys’ fees, costs and other expenses associated with that litigation.
But participation in PAID must be carefully considered, as there are several conditions and restrictions imposed on employers by the WHD. For example, employers who are already involved in litigation or under investigation for the wage practices at issue are not eligible to participate in PAID. Also, PAID may not be used by employers to repeatedly resolve potential back wages owed for the same violations. For those employers who are addressing previously unknown inadvertent errors, the back wages owed must be paid by the end of the next full pay period after receipt of the summary of unpaid wages. Proof of such payment is also due immediately to the WHD.
Moreover, self-reporting a potential FLSA violation to the WHD, who will then contact an affected employee to advise him or her of the violation, is not without risk. It could actually increase the threat of litigation for the employer, as an affected employee is under no obligation to accept the payment of back wages offered and may instead reach out to an attorney to explore his or her legal options.
Currently, PAID is only a pilot program and will be concluded after a six-month trial period, barring the WHD’s determination at that juncture to continue the program. More information on PAID may be found here.
If you have questions about your pay practices or PAID, please contact your Kutak Rock attorney or a member of our National Labor and Employment Practice Group.