Monday, March 12, 2018

Department of Labor trying to get employees PAID for inadvertent FLSA violations

Photo by Sharon McCutcheon on Unsplash
For almost as long as I’ve been writing this blog, I’ve been preaching the proactive benefits of wage and hour audits for employers (e.g., here and here).

It appears that the Department of Labor agrees.

Last week, it announced a nationwide pilot program—the Payroll Audit Independent Determination (PAID) program—which will permit employers to self-report FLSA violations to the Department of Labor without risk of litigation or enforcement proceedings. It enables employers to resolve inadvertent minimum wage and overtime violations without litigation.

As explained by Bryan Jarrett, Acting Administrator for the DOL’s Wage and Hour Division:
At times, employers may be the first to uncover violations of overtime or minimum wage laws. Many employers prefer to correct their mistakes and voluntarily pay their employees the wages they are owed. Our current laws, however, preclude employers from simply paying the wages due to conclusively settle overtime or minimum wage violations. Fearing full-scale federal investigations or costly litigation, employers may choose to not address the violations at all — resulting in losses to employees, employers, and taxpayers.

Some of PAID’s key features:
  • It’s open to any FLSA-covered employer to redress any FLSA overtime or minimum wage violations.
  • It’s only available for claims that are not yet subject to investigation or litigation.
  • It requires that employers review WHD’s compliance assistance materials, carefully audit their pay practices, and agree to correct the at-issue pay practices moving forward. 
  • It permits the resolution of violations without liquidated damages or civil monetary penalties.
  • It fosters cooperation between employers, employees, and the DOL for employers to find and correct pay errors and ensure employees are paid what they are owed as quickly as possible.
  • It fosters voluntary settlements of FLSA claims without employees incurring legal expenses or attorneys’ fees.

Critics refer to this program as a “get out of jail free” card for wage-and-hour scofflaws. That argument only holds water, however, if you assume that most employers are intentionally violating the FLSA—an argument with which longtime readers know I absolutely disagree. Plus, if you’re an employer intentionally stealing wages from your employees, are you really going to blow the whistle on yourself to the DOL? Or is it more likely that you will keep right on stealing until someone catches you?

Yet, if you know that you’ve violated the FLSA in how you’ve paid your employees minimum wage or overtime, it’s best to self correct by making employees whole for the wages they lost. You are always free to do this on your own, though, without involving the DOL. 

I worry that participating in this program may fast-track an employer onto some super secret DOL list for future FLSA audits. As the DOL itself flags, “By allowing employers to participate in the PAID program, WHD does not waive its right to conduct any future investigations of the employer.”

Unless and until the DOL confirms that it will not use violations resolved under this program against employers in future audits to find repeat violations and willfulness, I have some concerns about employers using this program.