Elizabeth P. Johnson, shareholder and Lindsay M. Massillon associate Fowler White Burnett

The DOL’s Payroll Audit Independent Determination (PAID) is a pilot program implemented in March, which allows employers to self-report any overtime or minimum wage violations discovered as a result of a self-audit and work with the DOL’s Wage and Hour Division (WHD) to address these violations. PAID was extended for an additional six months on Oct. 9, so employers interested in the program can participate through April 2019.

Benefits:

  • Employers accepted into the program can avoid the liquidated damages provision of the Fair Labor Standards Act (FLSA) which typically will attach to claims made by employees, or as part of DOL investigations;
  • Generally, if the WHD finds other violations, those will be addressed as part of the PAID program; and
  • Employers who resolve violations through PAID avoid having to pay attorney fees for the employees, and generally save on their own legal expenses.

A word of caution: Employers who have widespread minimum wage and overtime violations may not be the best candidate for the PAID program, as they will need to be willing to pay 100 percent of back wages owed to all current and former employees for the past two years. Employees have the option of declining the receipt of back wages payment, and may refuse to sign the release. If this occurs, that employee can retain an attorney, seek liquidated damages, as well as seek payment for three years of wages (if applicable) rather than the two years covered by PAID. Participating in PAID also does not shield the employer from being sued under local or state laws regarding minimum wage or overtime violations. Further, the DOL is not clear as to whether employers are allowed to dispute the findings of the WHD with regard to determining the extent of violations.

Employers interested in participating must do the following:

First, determine your eligibility:

Eligible employers are those employers covered by the FLSA, and which are willing to resolve all potential minimum wage and overtime claims, as well as willing to commit to future compliance with the FLSA. There are two ways for FLSA coverage to attach:

Enterprise Coverage: Any employer with at least two employees and a gross annual volume of sales or business done of at least $500,000 is considered an “enterprise” and covered by the FLSA. Hospitals, government agencies, businesses engaged in care for the sick, aged or mentally ill, and schools are also covered enterprises.

Individual Coverage: Even if your business is not an “enterprise,” your employees may be covered by individually. If your employees engage in interstate commerce, produce goods for interstate commerce, provide services closely related to the production of goods for interstate commerce, or provide domestic service are covered individuals under the FLSA.

In order to participate, employers must be willing to resolve all potential minimum wage and overtime claims, as well as be willing to commit to future compliance with the FLSA. Further, any employer who has been found by the DOL or a court of law to have violated minimum wage or overtime requirements of the FLSA by engaging in the same compensation practices at issue are barred from participating in PAID.

Second, complete a Compliance Assistance Review:

Eligible employees then must complete the Compliance Assistance Review, an online training/educational program. The program generates a certificate of completion which must be presented to the DOL in order to participate in PAID.

Third, conduct your self-audit:

Employers must take a close look at payroll procedures and determine any potential violations which have occurred in the past two years, employees potentially affected, dates in which employees were affected, and back wages owed to each employee.

Employers cannot participate in PAID if the employer is already being investigated by the DOL, or is actively litigating a wage claim with a former or current employee (which includes the receipt of a demand letter from an attorney).

Submit the above to the Wage and Hour Division (WHD):

If accepted:

  • WHD will review the information submitted by the employer. If additional violations are found by the WHD, it is unclear whether they will include them in this audit or not.
  • WHD will oversee settlements to employees and will ensure that back wages are computed for all former and current employees during the past two years.
  • Employees have the option to receive the settlement and sign the release. However, if an employee decides not to resolve with the WHD, that employee can still file suit and may seek liquidated damages.
  • Employees who sign a release as part of the PAID program can still file suit under any applicable state or local laws which may apply.

If denied: The WHD states that it will not use the employer’s request to participate in the PAID program as a basis for an investigation unless WHD has reason to believe that health or safety are at risk.

Elizabeth P. Johnson is a shareholder at Fowler White Burnett where she focuses her practice on all aspects of labor and employment Law. Contact her at EJohnson@fowler-white.com.

Lindsay M. Massillon is an associate at the firm where she focuses her practice on labor and employment law and commercial litigation. Contact her at LMassillon@fowler-white.com.