Self-Reporting Wage Violations for a Release of FLSA Claims
The Department of Labor’s (DOL) Wage and Hour Division has extended the nationwide program called the Payroll Audit Independent Determination (PAID) by six months. Under this program, employers may self-report overtime and minimum wage violations which would subject them to liability under the Fair Labor Standards Act (FLSA). Apart from the PAID program, employers only have two other options for handling wage violations: court approved settlement or a DOL initiated investigation.
What is the Benefit?
The PAID program provides employers with several benefits. For instance, employers who voluntarily submit a violation and calculation of back wages for the past two years obtain the benefit of DOL supervision over a settlement and a release of the FLSA claim. If a settlement is reached under PAID, the employer is not required to make a payment of liquidated damages or civil monetary penalties and the DOL will not seek a third year of back pay. Further, voluntary resolution through PAID may be more efficient than litigation which can take up to two years. PAID also presents an opportunity for employers to review their pay practices and ensure they are following FLSA requirements.
For employees, the PAID program presents the opportunity to receive the wages rightfully earned sooner and without the expense of litigation.
Who can Participate?
To participate in the PAID program, an employer must be (1) subject to the FLSA, (2) interested in resolving wage violations, and (3) willing to commit to future compliance under the FLSA. A major limitation on this program is that an employer may not use PAID for claims that are already being investigated or litigated. A disqualifying investigation could be as simple as a representative of an employee expressing an interest in litigating the issue. Thus, employers are advised to decide sooner rather than later whether to submit a violation under PAID as this option disappears once an investigation begins. Another limitation on participation in the program is that an employer cannot repeatedly use the program for the same wage violations. But, by participating in PAID and identifying wage violations, employers can limit their liability for FLSA claims in the future.
What are the drawbacks?
Although the PAID program may help employers attain a release of FLSA claims, participating in the program will not lead to a release of state law claims. However, the DOL is working with state labor officials to gain their endorsement of the PAID program. Another drawback is that employees may choose to decline the settlement under PAID and pursue litigation against an employer.
Is getting PAID right for you?
The PAID program presents employers with an interesting opportunity to address wage violations. This program can provide benefits to both the employer and the employee. To encourage participation in the program, the DOL will keep employer identities confidential, only subject to FOIA requests.