What Employers Should Know About the DOL's New “PAID” Self-Audit Program

Minimum wage and overtime lawsuits are common and can be very costly to resolve. Employers can spend years embroiled in lengthy investigations, court hearings and trials.  A pilot program launched in April by the federal Department of Labor (DOL) seeks to help employers simplify the process and settle potential wage and hour and FLSA violation disputes without litigation. The Payroll Audit Independent Determination or “PAID” program is scheduled to be in place for six months and if successful, may become permanent.

The program is designed to proactively address inadvertent wage and hour non-compliance, such as “off-the-clock” work violations, failures to pay overtime wages, or employee misclassifications. Employers voluntarily participate in the program to repay any back wages owed without penalties or liquidated damages.

Here’s how it works: the employer is encouraged to self-audit and then voluntarily disclose wage and hour issues to the DOL. The DOL then conducts a review and determines any back pay the employer owes. Once advised of the calculation, the employer must make full payment by the next pay period, which will be monitored by the agency. It’s unclear what will happen if the employer disagrees with the DOL’s assessment.

Participation in the program does not give the employer a “get out of jail free card.” The DOL can still investigate employers in the future for any potential violations. If a company is currently in FLSA litigation, it cannot participate in PAID. Also, employers cannot repeatedly resolve the same potential violations through the program.

As for employees, they could save on attorney’s costs through this program and receive any back wages owed more quickly than if they would pursue litigation.

Employers should proceed with caution

Avoiding a lawsuit, steep penalties and damages may sound good to employers, but there are some areas for concern. For example, an employee who rejects a settlement payment can still sue the employer, and the program only involves FLSA violations. PAID does not appear to settle claims at the state level. At least one state’s Attorney General, New York’s Eric Schneiderman, has issued a press release in response to PAID stating “my office will continue to prosecute labor violations to the fullest extent of the law, regardless of whether employers choose to participate in the PAID Program.”

The PAID program is still in its early stages and much is unclear. The key takeaway for employers is prevention is worth a pound of cure. The best way to avoid wage and hour litigation is to always follow HR best practice: regularly review your wage and hour policies, payment practices and employee classifications. It’s a big job and many companies will need the help of an HR advisor to do it well, but it’s time and money well spent.