Self-Audit for FLSA Violations
On March 6, 2018, the U.S. Department of Labor (DOL) announced that it would soon be implementing its Payroll Audit Independent Determination (PAID) program. The PAID program will permit employers to self-report potential Fair Labor Standards Act (FLSA) violations without fear of exposure to liquidated damages. According to the DOL news release, the PAID program seeks to expedite resolution of minimum wage and overtime violations by limiting potential damages to solely the back wages owed. The DOL’s Wage and Hour Division (WHD) intends to employ the PAID program nationwide for 6 months, at which time it will evaluate the effectiveness of the program and its future options.
How the PAID Program Works
To participate in PAID, employers must first review information about PAID and compliance assistance materials on the WHD portion of the DOL website. Employers must then self-audit their pay practices for potential non-compliance. If the employer discovers a non-compliant practice, or believes its pay practices may be compliant but wishes to proactively resolve any potential claims, the employer must take four steps: 1) Identify the specific potential violations, 2) Identify affected employees, 3) Identify the timeframes in which each employee was affected, and 4) Calculate the back wages the employer believes are owed to each affected employee.
Upon receiving such a report from an employer, the DOL will request 1) the calculations conducted during the self-audit, 2) the scope of potential violations to be included in a release, and 3) a variety of certifications regarding due diligence and pay practice adjustments to avoid the same violations in the future. The DOL will assess back wages due and will prepare releases for affected employees, tailored to waive claims only for the identified violations for the time period during which back wages are paid.
Benefits to Employers and Employees
According to the DOL, the program is designed to appeal to both employers and employees. While employee participation in any settlement under the program remains voluntary, employees will receive 100 percent of the back wages paid, without paying litigation expenses, attorneys’ fees and other costs.
Employers may be enticed because the program does not impose penalties or liquidated damages. Employers who participate in the program are expected to correct pay practices going forward; employers who resolve an FLSA violation through the PAID program are ineligible to use the PAID program a second time to resolve the same issue in the future. Also, the PAID program is unavailable for employers currently under DOL investigation or in ongoing litigation concerning the reported FLSA violations.
California Employment Law
It will remain to be seen if the pilot program provides employers with an effective method to resolve FLSA wage claims that also avoids the cost of litigation and risk of being required to pay double the wages owed. Further, additional questions remain, to include:
1) Will the DOL’s expedition of outstanding back wage payments to employees nullify the employer’s liability for the same violations?, and
2) Is PAID limited only to the federal FLSA violations or will it ever encompass state wage and hour claims?
The California employment lawyers at Kingsley & Kingsley can answer your questions about state and federal wage and hour laws and we will continue to monitor the DOL’s updates regarding the PAID program. Should you have immediate questions about your rights as an employee, call and speak to an experienced California lawyer toll-free at (888) 500-8469 or click here to contact us via email.
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