The U.S. Department of Labor (DOL) officially launched its new pilot program to facilitate the resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). The focus of the pilot program is to encourage employers to conduct self-audits to improve their compliance with overtime and minimum wage obligations, and to ensure that more employees are paid the back wages they are owed more quickly.
The new Payroll Audit Independent Determination (PAID) program is being conducted under DOL’s Wage and Hour Division (WHD). WHD will implement this self-audit pilot program nationwide for six months. As part of its evaluation, WHD will identify possible modifications to the program and decide whether to make the program permanent. All employers required to comply with the FLSA are eligible to participate in the pilot.
Essentially, the pilot program will work like this. An employer will review WHD’s compliance assistance materials online. Based on these materials, employers will self-audit their compensation practices for potential non-compliance. If the employer discovers any non-compliant practices, or if the employer believes its compensation practices may be lawful, but wishes to proactively resolve any potential claims, the employer can do the following:
· Specifically identify the potential violations
· Identify which employees were affected
· Identify the timeframes in which each employee was affected
· Calculate the amount of back wages the employer believes are owed to each employee
Once the self-audit is completed, the employer discusses the findings with WHD. Upon review, WHD will tell the employer what additional information to submit, including the following:
· Each of the back-wage calculations—accompanied by both evidence and explanation concerning how the calculations were made
· A concise explanation of the scope of the potential violations for possible inclusion in a release of liability
· A certification that the employer reviewed all of the information, terms, and compliance assistance materials
· A certification that the employer is not litigating the compensation practices at issue in court, arbitration, or otherwise, and likewise has not received any communications from any employee’s representative or counsel expressing interest in litigating or settling the same issues
· A certification that the employer will adjust its practices to avoid the same potential violations in the future
WHD will issue a summary of unpaid wages upon reviewing the information. Forms will be issued describing the settlement terms for each employee. The release of claims provided in the form will be limited to only the potential violations for which the employer has paid back wages. After receiving the summary of unpaid wages, employers must pay all back wages to employees by the end of the next full pay period. Proof of payment must be provided to WHD.
The DOL’s selling point for the pilot program is that it will allow employers to expeditiously resolve minimum wage and overtime violations without litigation. WHD will require payment of all back wages. However, it will not require additional payment of liquidated damages or civil monetary penalties when employers choose to participate in the program and proactively work with WHD to fix and resolve the compensation practices at issue.
One catch is that it is up to the employees whether to accept the payment of back wages identified through the employer self-audit. If they accept the findings, such employees will receive 100% of the back wages without having to pay any litigation expenses or attorneys’ fees. If they choose not to accept the payment, the employee will not release any private right of action. Additionally, even if the employee chooses to accept the payment, the employee does not grant a broad release of all potential claims under the FLSA. Rather, the releases are tailored to only the identified violations and time period for which the employer is paying the back wages. Employers are prohibited from retaliating against employees for their choices.
Another potential hitch is that WHD does not waive its right to conduct any future investigations of employers that participate in the PAID program. And employers cannot use the program to repeatedly resolve the same violations, as the program is designed to identify and correct non-compliant practices.
More information concerning the pilot program is available at www.dol.gov/whd/paid.