The Sophisticated Employer Blog

The U.S. Department of Labor (DOL) is getting ready to launch its new Paid Audit Independent Determination (PAID) program, which it claims will “facilitate resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA).”

But should employers participate? The short answer is maybe not. Let’s look at this new pilot program, and you can make your own informed decision.

PAID’s stated objectives are “to resolve such [wage] 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.” The DOL will launch the program nationwide for a six-month period and then review the effectiveness of the program and whether it should be modified, or possibly discontinued.

The program will be available to any employer covered under the FLSA, and most are.  But the program cannot be used if the DOL is already investigating the employer for wage violations or if a claim has already been asserted by an employee against the employer.

The program covers a variety of violations, including minimum wage, failure to pay overtime at time-and-a-half or at the wrong regular wage rate, misclassification of employees as exempt, “off-the-clock” work, etc. 

The primary benefit of the program for an employer is that it allows the employer to audit its practices and avoid the dreaded “liquidated damages” (twice the amount due) that are generally awarded under the FLSA.

To participate, an employer would be required to take specific actions including the review of compliance materials, auditing their practices (i.e., identify the violations, affected employees, time frames of violations, calculate wages due to each employee, etc.), certifying that it is not currently defending the claims at issue, and agree to correct its practices going forward. The DOL would then evaluate the information provided by the employer and become involved in the process.

Significantly, employees are not required to give up their rights under the FLSA, and they remain fully able to pursue civil litigation to enforce their rights (including the receipt of liquidated damages and attorneys’ fees). The DOL also retains its right to conduct its own investigation into the employer’s practices in the future and into the violations that were self-reported by the employer.

However, if an employee accepts the offer to settle, the employer will receive a release for that claim (only). The employer would be required to pay back all of the wages due to its employees the next payday after receiving the summary of unpaid wages from the DOL.

Is it just me or does this sound like a risky move for employers? An employer is basically blowing the whistle on itself in the hopes that the DOL doesn’t discover any further violations (that the employer may be unaware of) or make it a target for future investigations. And the employee is free to take all of the information that has been disclosed by the employer and hire an attorney to pursue the case that has already been admitted and established, and collect all of the back wages due, along with liquidated damages and attorneys’ fees. 

Call me crazy, but I hope that, if any of my clients are having even a fleeting thought about participating in PAID, they will call me first so we can discuss it and other strategies to correct any errors they may have made under the FLSA. 

If you aren’t working with experienced employment counsel, you should before signing up for PAID.