Taking note of employer concerns, the U.S. Department of Labor (DOL) has released some preliminary guidance on its new PAID program, a six-month pilot initative intended to quickly resolve accidental wage and hour violations outside of the courtroom and help employers improve pay practices to avoid similar mistakes in the future. In a question-and-answer format, the department answered 25 questions about the benefits of the program and what employers can expect if they choose to participate.
What is the PAID program?
In early March, DOL announced the establishment of the Payroll Audit Independent Determination (PAID) program. As implied by the title, the purpose of the program is to incentivize employers to independently audit their own wage and hour practices to ascertain whether inadvertent minimum wage or overtime violations may have occurred.
If a non-compliant practice is discovered, the employer can submit the relevant data to DOL and request to participate in the PAID program, which will “expedite” a settlement between the employer and any affected employees. Employers who are accepted will be required to any pay back wages which are owed as a result of the violation and “proactively” work with DOL to correct pay practices in order to avoid future violations. However, participation may also allow employers to bypass lengthy and costly litigation, and avoid the imposition of DOL civil penalties and liquidated damages.
Because the program is intended to quickly resolve newly-discovered and accidental violations, employers may not use PAID to resolve issues which are currently in litigation or under investigation. Employers are also barred from repeatedly using PAID to resolve the same issue, as participation in the program requires evaluating current pay practices to ensure that they are compliant going forward.
Questions and Concerns On Both Sides
Although DOL has pitched the PAID program as the ideal resolution system for both employers and employees, lawyers on both sides have raised doubts. New York State Attorney General Eric T. Schneiderman blasted the program as “nothing more than a Get Out of Jail Free card for predatory employers” and stated that his office will continue to prosecute employers regardless of their participation in the PAID program.
AG Schneiderman’s statement handily identifies the concerns of management-side lawyers: that employees who become aware of their employers’ violations may decline participation in a settlement and take the issue to court, and that employers will remain vulnerable under state wage and hour laws even if they have resolved violations under the federal Fair Labor Standards Act (FLSA).
Employer representatives have also raised concerns that requesting to participate in the program will be taken as an admission that hey have violated the law, and thereby essentially invite DOL to launch a full-scale investigation into whatever avenue the department wishes.
PAID PROGRAM: QUESTIONS ANSWERED?
The new Q & A page covering the PAID program may assuage some (if not all) employer concerns. On the subject of additional investigation, DOL assures employers that the Wage and Hour Division will examine employer records, as well as “other information as necessary,” in order to verify employer-submitted data. However, “If WHD discovers additional minimum wage or overtime issues outside the scope of the employer’s proposal, WHD will ordinarily attempt to resolve them as part of the audit” rather than pursue them under a traditional investigation.
Additionally, the Q&A states that an employer’s request to participate in the program will not be used as the basis for a future investigation, “unless WHD has reason to believe that health and safety are at risk (for example, if there are child labor violations).” This caveat shouldn’t come as a surprise, since PAID has been explicitly pitched as a resolution for the type of violations which are investigated by the Wage and Hour Division, while occupational safety and health and child labor are investigated by different divisions which are not involved in PAID.
The guidance also specifies that the PAID program is only intended to address violations under federal law, and that“WHD may not supervise payments or provide releases for state law violations.” Employers who discover that they have violated a provision of state minimum wage or overtime law may be vulnerable to enforcement action from the state, but are not precluded by their participation in the PAID program from separately settling claims with employees “as allowed under state law.”
Employers can read the full Question and Answer session here. DOL will also be hosting a webinar today (April 10) which will presumably yield more information. Don’t forget to follow CPC on social media, or subscribe to our blog, to keep up with federal and state labor law news.