Pilot FLSA program will test employer self-reporting

The Labor Department’s Wage and Hour Division (WHD) is launching a pilot—the Payroll Audit Independent Determination (PAID) program—to facilitate the resolution of potential FLSA overtime and minimum wage violations. The program would permit employers to self-report potential wage violations that they uncover during the performance of a compensation practices self-audit and permit them to pay all back wages due to employees without the added burden of liquidated damages and penalties that they may currently be required to pay. Secretary of Labor Alexander Acosta discussed the PAID program pilot on March 6 at a House Appropriations Committee hearing on the Labor Department’s FY 2019 budget hearing.
The PAID program’s goal is to resolve overtime and minimum 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 more quickly, according to the WHD. The program will undoubtedly be appreciated by employers because, while they will be required to pay all back wages due, they will not be required to pay liquidated damages or civil monetary penalties when they choose to participate in the program and proactively work with the WHD to fix and resolve any compensation practices at issue.

Employer self-audit

Under the program, employers would conduct a self-audit for potentially non-compliant compensation practices. If the employer discovers any non-compliant practices, or if the employer believes its compensation practices may be lawful but wishes to proactively resolve any potential claims anyway, the employer would then identify the potential violations, which employees were affected, the timeframes in which each employee was affected, and calculate the amount of back wages the employer believes are owed to each employee. The employer would then contact the WHD to discuss the issues for which the employer seeks resolution. Unless the WHD denies the employer’s request to participate in the program at the outset, the agency will tell the employer how to submit additional required information.

Settlement terms

The WHD will then assess the back wages due, issue a summary of unpaid wages, and issue forms describing the settlement terms for each employee, which employees may sign to receive payment. The release of claims provided in the form will match the previously agreed-upon language and, again, must be limited to only the potential violations for which the employer had paid back wages. Employers would then be responsible for issuing prompt payment of all back wages due by the end of the next full pay period after receiving the summary of unpaid wages, and providing proof of payment to the WHD expeditiously.

Employee side of the equation

For employees, the program will ensure that more employees receive the back wages they are owed and that they receive them more quickly, according to the WHD. Employees will get 100 percent of the back wages paid, without having to pay any litigation expenses or attorneys’ fees.
Employees also purportedly benefit because under the program, employers must review the WHD’s compliance assistance materials, carefully audit their pay practices, and agree to correct the pay practices at issue going forward. These requirements are expected to improve the employers’ compliance with their minimum wage and overtime obligations, and further protect workers’ rights.

Limited release

Under the program, employees are not required to surrender any rights, the WHD noted. They will choose whether or not to accept payment of back wages due. Employers are prohibited from retaliating against the employee for his or her choice. Employees who choose to not accept the payment will not be releasing any private rights of action. Employees who do choose to accept the payment will not be granting a broad release of all potential claims under the FLSA because the releases will be tailored to only the identified violations and time period for which the employer is paying back wages.

Future investigations and repeat violations

The WHD also stressed that by permitting employers to participate in the PAID program, the agency does not waive its right to conduct any future investigations of the employer. Importantly, employers cannot use the program to repeatedly resolve the same violations, as the program is designed to identify and correct non-compliant practices.

Investigations in progress

Notably, the PAID program is not available to resolve any issues for which the WHD is already investigating an employer, or which the employer is already litigating in court, arbitration, or otherwise. Nor may employers initiate the process when an employee’s representative or counsel has already communicated an interest in litigating or settling the issue.

Six-month pilot

The WHD plans to implement the self-audit pilot program nationwide for about six months. At the end of the pilot period, the agency will evaluate the program’s effectiveness, potential modifications to the program, and whether to make the program permanent.

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