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Paul Zimmerman
pzimmerman@mrllp.com
310.299.5500

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The Payroll Audit Independent Determination (PAID) Program: Wage and Hour Amnesty for Employers

Attention employers: the Department of Labor has your back – at least on a six-month trial basis. The DOL has launched the Payroll Audit Independent Determination (PAID) program, a new nationwide initiative that seeks to facilitate the resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA).

Such violations have become more and more problematic for employers. The numbers are revealing – since 2000, federal wage and hour lawsuit filings have increased nationally by more than 400%. And these cases, many of which are in the form of class and collective actions, are expensive. Between defense costs, potential liability (especially when faced with large class sizes) and statutory penalties and attorneys’ fees, the exposure associated with wage and hour litigation can be rather formidable.

But now, the DOL has provided employers that may have violated overtime or minimum wage laws under the FLSA with an out, all the while creating a win for their workforces. By availing itself to the PAID program, an employer can proactively address potential wage and hour underpayments under the FLSA and avoid the risk of litigation by the DOL and individual employees.

An employer can do so by conducting a self-audit of its pay practices and, if overtime or minimum wage violations are discovered, self-report those transgressions to the DOL. The employer may then request to participate in the PAID program and, unless the request is rejected, work in good faith with the DOL’s Wage and Hour Division to correct mistakes and promptly pay back wages to impacted employees. Toward that end, the DOL will ask for documents and information from the employer regarding the violation(s) (including duration), the specific employees affected and the amount of wages owed. Certification by the employer is also required during the process, attesting to its audit practices and confirming the adjustment of pay practices going forward.

On balance, the PAID program will serve to minimize litigation of FLSA claims (on either an individual or class basis), and help employers avoid the associated burden of attorneys’ fees and costs, liquidated damages and civil penalties. For their part, employees – who waive their FLSA claims for corrected violations – will receive the wages they are owed faster, and without the need to participate in protracted litigation.

Still, employers must understand that participation in the PAID program will not serve to resolve an already-existing lawsuit or administrative enforcement action (or one that has been threatened). In addition, the initiative does not eliminate susceptibility to state wage and hour claims (remember, the PAID program applies to FLSA violations only). And finally, affected employees can decline to sign the aforementioned waiver or accept payment when offered.

Of course, we are here to answer any questions you may have about the PAID program or any other wage and hour issue.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.