In Brief: U.S. Department of Labor Reinstates PAID Program: What it Means for Employers
The U.S. Department of Labor’s (“DOL”) Wage and Hour Division (“WHD”) recently announced the relaunch of the Payroll Audit Independent Determination (“PAID”) program. Supervised by the WHD, PAID provides employers with the opportunity to avoid litigation and instead self-audit, voluntarily report, and quickly resolve certain violations of the Fair Labor Standards Act (“FLSA”) and the Family and Medical Leave Act (“FMLA”). The original program was implemented in 2018 under the Trump administration and discontinued in 2021. With its resurrection, FLMA violations are now included, and the WHD announced that it would no longer seek liquidated damages in pre-litigation FLSA investigation. Ultimately, the PAID program presents an option for both employers and employees to proactively and efficiently resolve wage and leave issues without becoming subject to the higher costs and uncertainty associated with the courtroom.
How it Works
Through PAID, employers can identify potential violations, such as unpaid overtime or minimum wage deficiencies, report their findings to the WHD, and work with the agency to remedy the issues. Participating employers must start with a review of the WHD compliance materials, then conduct a self-audit of their pay or FMLA practices and identify any possible instances of noncompliance. This includes determining affected employees, calculating back wages or other remedies owed to employees, and submitting self-audit results to the WHD. WHD will then review the submissions and provide a summary with its own determinations, after which, the employer is required to provide payments or other remedies within 15 days.
Eligibility
Firstly, an employer must be covered under the FLSA and/or the FMLA to use the PAID program. Employers cannot participate if they are currently under WHD investigation or in litigation where the same violations are alleged or if it has been determined that FMLA or FLSA violations have occurred within the last three years. Additionally, employers must disclose any recent complaints related to the practices at issue, and if the employer has participated in PAID for the same issues within the last three years, they are not eligible for the program. Lastly, employees included in the audit cannot be subject to wage requirements under the H-1B, H-2B, or H2-A visa programs, the Davis-Bacon Act, or the Service Contract Act.
Benefits and Risks
Employers are provided with a structured avenue to resolve violations and reduce exposure to costly litigation, liquidated damages, and civil penalties. Employees benefit from prompt payment of 100 percent of their back wages or other remedies without the uncertainty of a lawsuit. Importantly, because the settlements are supervised by WHD, employers can obtain a release of liability for covered claims—something unavailable when addressing violations outside the program. On the other hand, WHD has discretion to adjust the employer’s calculations, employees may reject proposed backpay and pursue private claims and PAID does not preempt potential state law actions.
Because of these complexities, employers should consult counsel before using the program. If you or your business may be affected by these changes, please contact Kessler Collins to assist you in navigating these challenges and protecting your interests.
