The U.S. Department of Labor (DOL) announced several self-audit programs to assist employers, unions, and benefit plan officials with voluntarily assessing and correcting their compliance with federal labor laws. One of those programs is the Wage and Hour Division (WHD) Payroll Audit Independent Determination (PAID) program. The PAID program encourages employers to self-identify and resolve minimum wage and overtime violations under the Fair Labor Standards Act (FLSA), and certain leave violations under the Family and Medical Leave Act (FMLA).
Initially launched by the WHD in April 2018 as a six-month nationwide pilot, the PAID program aimed to "facilitate[] resolution of potential violations, without litigation, and ensure[] employees promptly receive the wages they are owed" under the FLSA. However, WHD ended the program in January 2021, stating that the "program deprived workers of their rights and put employers that play by the rules at a disadvantage." The revival and expansion of the PAID program reflects a shift in the DOL's priorities under the Trump and Biden administrations.
Under the PAID program framework, an employer first reviews the program's compliance assistance materials and conducts a self-audit of compensation and/or leave practices. Next, the employer contacts WHD to discuss any noncompliance issues the employer wishes to resolve and, unless WHD denies the employer's request to participate in the program, the employer submits required information to WHD. Then, WHD reviews and evaluates the submission. Finally, WHD issues a summary of unpaid wages or remedies due, along with forms describing the settlement terms (including the release of claims) for each employee. Within 15 days of receiving the summary of unpaid wages or remedies due from WHD, the employer must pay all back wages due (for FLSA violations) or implement all remedies (for FMLA violations). WHD estimates that the audit process will typically take fewer than 90 days to complete.
All private employers covered by the FLSA or the FMLA are eligible to participate in the PAID program. However, employers who participated in the program within the past three years, who are currently under WHD investigation, who are currently litigating similar claims, or who have received communications from an employee's representative or counsel seeking resolution outside of the program, are not eligible. Additionally, employers found to have violated the FLSA or the FMLA within the past three years may also be ineligible. WHD maintains discretion to determine whether to accept employers into the program, examining potential participants on a case-by-case basis.
The PAID program addresses potential violations of FLSA minimum wage and overtime rules, such as "off-the-clock" work, incorrect overtime payment calculations, or improper salary payments to exempt employees. The program also addresses certain FMLA leave violations, including miscalculating leave, incorrect eligibility assessments, improper attendance penalization, or improperly categorizing leave as an unexcused absence.
Employee participation in the PAID program is voluntary. They can choose to accept or reject the payments or other remedies offered, and employers are prohibited from retaliating against the employee for their choice. Employees who accept the settlement sign a release to receive payment or other remedies offered. Employee releases under the program are limited to the identified potential violations and the specific time periods for which the employer is paying the back wages or providing other remedies.
Employees who reject the settlement offer under the program retain their private right of action against employers. Additionally, the program is limited to resolving federal FLSA and FMLA violations. Participating in the PAID program does not cut off employee rights under other laws, such as the Americans with Disabilities Act, the Pregnant Workers Fairness Act, and/or other state or local laws.
The PAID program allows employers and employees to resolve potential federal minimum wage, overtime, and leave claims without formal investigation or litigation. Employees receive the full amount of the back wages owed under the FLSA or other FMLA remedies due, and employers are not required to pay additional civil monetary penalties.
Employers should be aware that participation in the PAID program does not waive WHD's right to conduct future investigations of employers, and that self-audits under the program are subject to the same Freedom of Information Act requirements and defenses as WHD investigations or audits.
More information regarding the PAID program is available on WHD's website, including compliance assistance materials and additional guidance regarding the program.
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