PILOT PROGRAM AIMS AT RESOLVING WAGE VIOLATIONS FASTER, CHEAPER
Q: What is the Payroll Audit Independent Determination (PAID) program the U.S. Department of Labor recently announced?
A: On March 6, the DOL announced that it was rolling out PAID, a six-month pilot program that allows employers to self-report potential overtime violations and have the DOL approve back pay amounts to employees in return for a valid release of liability claims. While it remains to be seen if the program will be expanded past the pilot stage, this program is an indication that the DOL under the Trump administration is moving away from favoring strict enforcement to educating employers and seeking voluntary compliance. Q: How does an employer participate in PAID? A: After an employer performs a self-audit and determines there may be potential violations and has calculated the amount of back pay, the employer needs to contact the DOL to request participation in PAID. If the DOL accepts the employer’s request to participate, the employer will then need to provide the DOL with information and documentation showing how the employer made the back pay calculations and a description of the violations to potentially be included in a release of liability. The employer also must certify it isn’t currently litigating the potential violation at issue and that it will change its pay practices to comply with the law. Once the DOL receives all necessary information, the agency will determine the amount of back pay to assess, issue forms describing the settlement terms of participating employees, and negotiate the terms of a release. The employer is then responsible for distributing the back wages to employees.
Q: What are the benefits of an employer participating in PAID?
A: The primary benefit for employers is that they potentially can avoid the time, hassle and expense of defending a federal wage and hour claim in court. Another benefit is that the DOL will not assess liquidated damages — that is, double damages — or civil money penalties if it allows an employer to participate in PAID. In short, PAID potentially can allow employers to resolve federal wage violations faster and for less money, all while ending up with a valid release.
Q: What are potential problems with an employer participating in PAID?
A: The biggest potential drawback of participating in PAID is there’s a lot of uncertainty over how DOL will operate the program in practice. For example, it isn’t clear if the DOL will allow employers to negotiate and receive releases from state wage and hour laws in addition to the Fair Labor Standards Act (the federal law over which the DOL has jurisdiction). Additionally, it’s unclear what would happen if an employee contacted by the DOL as part of the PAID program decides to file a lawsuit after learning of potential wage violations. While the DOL allows an employer to voluntarily participate in PAID, it doesn’t require employees to accept the settlement terms. Should the DOL refuse to exercise jurisdiction of the potential violations at issue, employers potentially could be both admitting a violation and inviting employees to file suit. Further, it isn’t clear if there’s any immunity for employers that request to participate in PAID and the DOL denies the request. For egregious violations, the DOL may deny the employer’s request to participate in PAID and then file a lawsuit against the employer and seek liquidated damages or civil money penalties.
Q: What else should employers consider before participating in this voluntary compliance program?
A: While the prospect of avoiding a wage-and-hour lawsuit is appealing, employers must realize that any request to participate in PAID is a request to have the DOL audit their company’s records. While that’s rarely a wise choice, there may be limited circumstances where it makes sense for an employer to participate, particularly if the potential violation was defensible, the amount of back pay exposure is low, and there’s high morale among employees. And, once some of the uncertainty over PAID is resolved, it may turn out that PAID is a useful tool for employers to resolve potential wage and hour violations. Wage and hour issues are notoriously technical, and any employer facing potential violations should seek counsel to explore all options, including PAID.