The US Department of Labor/Wage and Hour Division Launches PAID Program

Today, the Wage and Hour Division (WHD) of the U.S. Department of Labor launched a new nationwide pilot program, the Payroll Audit Independent Determination (PAID) program. PAID facilitates resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). The program's primary objectives are to resolve such claims expeditiously and without litigation, to improve employers' compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.

Under the PAID program, employers are encouraged to conduct audits and, if they discover overtime or minimum wage violations, to self-report those violations. Employers may then work in good faith with WHD to correct their mistakes and to quickly provide 100% of the back wages due to their affected employees. According to the DOL, if an employer chooses to participate in the PAID program and to "proactively work with the Division to fix and resolve their potential compensation errors," the DOL will not impose penalties or liquidated damages to finalize a settlement.

An employer may not initiate the process to resolve any issues for which DOL is already investigating the employer, or which the employer is already litigating in court, arbitration, or otherwise. An employer likewise may not initiate the process when an employee's representative or counsel has already communicated an interest in litigating or settling the issue. Also, employers cannot use the program to repeatedly resolve the same violations, as this program is designed to identify and correct non-compliant practices.

WHD is implementing this self-audit pilot program nationwide for approximately six months. At the end of the pilot period, WHD will evaluate the effectiveness of the pilot program, potential modifications to the program, and whether to make the program permanent.

A reasonable question: why would employers participate in the program if they can perform their own internal audits and pay whatever additional wages they conclude are appropriate?

According the DOL, the main benefit of this program to employers is DOL supervision of the payment of unpaid wages, and the execution of valid employee releases that release their rights to privately sue the employer for the unpaid wages. Under the FLSA, private out-of-court settlements do not result in a waiver of employees' rights to sue their employer.

Nevertheless, we advise that employers tread carefully if they choose to participate in this program. If your company does choose to participate, we recommend that you have qualified counsel assist in the process and calculations. It also remains to be seen how the DOL will treat repeat violations of issues resolved in the PAID program.