DOL Bends Slightly More Toward Employers – Self-Audits (Via Pilot Program) Are Back!

By: Jason E. Reisman, Blank Rome LLP

No one questions the incredibly complex and nuanced web of wage and hour regulations that the U.S. Department of Labor (DOL) has laid down over the last 80 or so years as guidance under the Fair Labor Standards Act (FLSA). Of course, in one sense, the regulations represent a grand effort to try to address just about every possible scenario implicating minimum wage and overtime pay concerns. On the other hand, the sheer volume of the regulations and embedded intricacies often leave employers scratching their heads. Well, compliance help may be on the way! In another (expected) move under Republican administration stewardship, which typically focuses on compliance assistance rather than “gotcha” enforcement, there will soon be an option for any employer that realizes it has been mistakenly out of compliance to self-report and obtain a final resolution.

The DOL’s Wage and Hour Division (WHD) has just announced that it will implement a new nationwide pilot program, the Payroll Audit Independent Determination (PAID) program, which it says is designed to “facilitate[] resolution of potential overtime and minimum wage violations under the [FLSA].” See the WHD’s information page here (https://www.dol.gov/whd/paid/) for more details. The DOL has created the program to assist in expeditiously resolving claims and avoiding unnecessary litigation, while also providing a vehicle to (1) improve employer compliance with minimum wage and overtime obligations, and (2) ensure that more employees receive the back wages they are owed without the delay associated with pursuing claims through lawsuits or DOL investigations.

The WHD plans to implement this pilot program nationwide for approximately six months. Upon completing the pilot, the WHD will evaluate how effective it is, whether potential modifications to the program would enhance it, and whether to make the program permanent. Voluntarily participating employers can correct compliance errors without risk of paying liquidated damages, civil money penalties, or attorneys’ fees.

The benefits of this program (to the extent it ultimately becomes permanent) will be for those employers who are vigilant and monitor their wage and hour compliance … and want to properly correct any mistakes found, which includes voluntarily paying any back wages employees are owed. Currently, when an employer identifies a compliance issue where back pay is owed, it cannot simply calculate and pay the back wages and have certainty that the matter is resolved. The potential for litigation remains (possibly seeking more money, liquidated damages, a longer back pay period, and attorneys’ fees) as well as a time-consuming and costly DOL investigation.

With the PAID pilot program, a self-reporting employer coming forward in good faith can pay 100% of the back wages owed under the WHD’s supervision and achieve peace of mind knowing the matter is conclusively resolved. Of course, not surprisingly, employers currently in litigation or under investigation by the WHD cannot participate in this program for the issues involved in the litigation/investigation. Although employees being offered back wages do not have to accept the payment (and can retain any right to pursue an action), if the employee accepts the payment, she/he will be required to grant a release “tailored to only the identified violations and time period for which the employer is paying the back wages.”

Stay tuned for the DOL announcing exactly when the pilot program will begin and providing more detailed information about participation. Please don’t hesitate to reach out to any member of the Wage and Hour Defense Institute with questions.

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