Earlier this month, the U.S. Department of Labor (DOL) announced the Payroll Audit Independent Determination (PAID) Program. PAID will be rolled out in April 2018 as a six-month pilot program to incentivize employers to address any wage and hour underpayments under the Fair Labor Standard Act (FLSA).
Claims under the FLSA have been on the rise for more than a decade. Employers found to have violated the FLSA risk paying a variety of costly damages for violations, including liquidated damages. As a result, employers that discover FLSA violations in their payroll practices risk drawing attention to the organization if they are to correct their practices. PAID seeks to provide employers with an avenue to bring their organization into FLSA compliance without expanding their exposure.
PAID may be utilized by any FLSA-covered employer unless the company has a history of repeated FLSA violations. In addition, the program may not be utilized on already existing proceedings or if the employer has received a threat of litigation.
If an employer is interested in participating in PAID, the first step is to conduct a thorough self-audit of the company’s pay practices to determine if any potential FLSA violations exist. If there are any potential violations, the employer should then contact the DOL and ask to participate in PAID. The DOL in its discretion may then deny or accept the company’s request. At this time the DOL has not released any specific criteria that it will use to make these determinations beyond whether the employer has frequently violated the FLSA.
If accepted into the program, the DOL will ask the company for specific information regarding the potential violations. The employer must also commit to providing multiple certifications to the DOL, including a certification about its auditing program and a certification indicating that it will make whatever adjustments necessary to be FLSA compliant.
At the completion of the process the employer is required to pay all of the wages owed to employees due to the violations no later than the next regularly scheduled pay period following the determination. In return, the DOL will promise not to require the payment of liquidated damages or civil monetary penalties, and will also provide a form for employees to sign waiving their FLSA claims to the enumerated violations.
In theory, PAID seeks to bring more employers into compliance and reduce class action FLSA litigation. However, employers that participate in the program are still taking a risk. For example, there is no requirement that employees sign the class action waiver form and accept payment of the wages from their employer. Employees instead may wish to take their chances in court. Moreover, the employee waivers are only applicable to federal claims under the FLSA and will not include a waiver of state law claims.
There will be a reevaluation of PAID after the six-month trial period, at which point the DOL will evaluate the program’s effectiveness and determine if it should continue as-is, continue with certain modifications, or not continue at all.
Employers are well advised to seek counsel to determine whether to request to participate in PAID so that the risks and benefits of participating in the program can be fully evaluated.
To learn more about the potential impact of PAID on your business, please contact: