The government agency responsible for compliance with wage and hour laws, the Department of Labor (“DOL”), has announced a new pilot program to facilitate resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (“FLSA”). The Payroll Audit Independent Determination (“PAID”) program will allow employers to proactively identify and resolve potential wage and hour violations, without additional liquidated damages, penalties, or attorneys’ fees. The program will be in place for approximately 6 months. At the end of the pilot period, the DOL will assess the program and determine its next steps.
Why is the program important?
The FLSA requires employers to pay employees at least minimum wage for every hour worked and overtime at a rate of time and one half for every hour worked over 40 in a workweek. There are exceptions for administrative, executive, professional, and sales employees, provided their duties and salary meet the exception’s requirements.
If an employer fails to pay minimum wage or overtime for those employees whose duties and salary do not meet an exception, the employer is liable for the unpaid wages and may be assessed liquidated damages and attorneys’ fees if an employee brings a claim. Under the FLSA, an employee cannot waive these requirements unless a settlement is supervised by the DOL or the court. This means an employee may still bring an FLSA claim even after accepting severance or signing a general release.
The PAID program will allow employers to resolve these claims without liquidated damages or civil penalties and receive a release from affected employees who accept payment.
How does the program work?
To take advantage of the PAID program an employer must review all compliance assistance materials, audit its pay practices, pay all back wages owed to affected employees, and agree to correct the pay practices going forward.
The first step for an employer is to carefully review their compensation practices for potential non-compliance with the wage and hour laws. If the employer discovers a non-compliant practice, it should identify all affected employees, the appropriate time frame, and the amount of back wages owed to the affected employees.
The employer will submit these calculations to the DOL, who will confirm the back wages due and facilitate a settlement with affected employees. Employees will receive any back wages due to them and the employer will receive a release of the wage and hour violation from each employee that accepts the settlement payment.
While there are certainly benefits to taking advantage of this program, it is not without risk. There are some potential hidden risks involved, such as opening the door for other investigations by the DOL or inviting potential lawsuits from employees who decline to accept the settlement payment. If you are considering taking advantage of the PAID program, you should consult with legal counsel first.
Should you need any assistance in assessing your pay practices or if you’d like to discuss your options under the PAID pilot program, please contact the Gunster labor and employment law practice group at (561) 650-1980.
