The United States Department of Labor (DOL) recently announced the launch of a new pilot program which would encourage employers to audit and self-report payroll practices to the DOL. The “Payroll Audit Independent Determination” program (PAID) would potentially resolve violations of the Fair Labor Standards Act (FLSA) overtime and minimum wage requirements or misclassification of employees.
The program is voluntary but participation comes with the incentive of allowing employers who participate to pay employees any back wages they are owed without having to pay DOL fines and litigation expenses or penalties. This may be useful for an employer who discovers and reports “inadvertent” employee payment errors—including errors that violate the FLSA.
In order to participate in the program, employers must audit their compensation practices for potentially non-compliant practices. 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 anyway, the employer must then (i) specifically identify the potential violations, (ii) identify which employees were affected, (iii) identify the timeframes in which each employee was affected, and (iv) calculate the amount of back wages the employer believes are owed to each employee. The DOL will then evaluate the information and assess the back wages due for the identified violations.
All FLSA-covered employers are eligible to participate. However, employers cannot use the program to resolve claims that are already being investigated or litigated. An important consideration when determining if an employer should participate is that an employer’s participation in the PAID program will not resolve any outstanding liability for state law non-compliance. This may have implications for New York employers, because of the existence of the New York State Minimum Wage Act which sets New York-specific requirements for overtime pay and overtime exemptions, as well as other state-specific requirements New York law imposes, such as call-in pay.
Nevertheless, the program may be helpful for some employers to address issues regarding their current wage and hour compliance. The pilot program will operate for six months, after which it will be evaluated and, potentially, made permanent.