U.S. Department of Labor Launches Pilot Program To Expedite Resolution of Wage and Hour Violations

The Wage and Hour Division of the U.S. Department of Labor announced today that it is launching the Payroll Audit Independent Determination (“PAID”) program, a new national pilot program intended to help employers resolve potential FLSA overtime and minimum wage violations quickly and without litigation. The pilot program will run for approximately six-months, after which the Wage and Hour Division will evaluate its effectiveness and its future.

A covered employer who wishes to participate in the PAID program must conduct a self-audit for potential non-compliant compensation practices. If the employer discovers overtime or minimum wage violations, it must take the following steps:

  • Identify the employees affected by the violations and the relevant timeframes during the previous two years;
  • Calculate the amount of back wages owed to each employee;
  • Contact the Wage and Hour Division to report and discuss the violations; and
  • Cooperate in good faith with the Wage and Hour Division to provide requested information and correct mistakes.

After the Wage and Hour Division receives all necessary information from the employer, it will assess the back wages due and issue a summary of unpaid wages. The employer is then responsible for paying all back wages to affected employees by the end of the next full pay period. In order to receive a payment, each affected employee must sign a settlement and release of all claims relating to those violations for which the employer has made full payment of back wages.

For some employers, the PAID program will provide an opportunity to avoid costly wage and hour litigation, as well as potential exposure to liquidated damages and other penalties. However, it will not be a panacea for all employers. An employer cannot use the PAID program to resolve potential violations that have been the subject of prior litigation, current litigation, a current investigation by the Wage and Hour Division, recent complaints by employees, or a prior PAID program proceeding. Moreover, an employer who obtains a release under the PAID program may still face liability under state or local laws. For these reasons, any employer who is considering participation in the PAID program should consult with employment law counsel about its relative risks and benefits.

Please contact Clark & Gotzler with any questions or concerns about this program or its potential effect on your organization.