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Attorney Offers Guidance After DOL Introduces Pilot Relief Program

03/27/2018

--LeClairRyan’s Davis outlines options for employers as Department of Labor offers temporary relief of penalties for unintentional wage and hour violations

A recently announced United States Department of Labor (DOL) Wage and Hour Division national pilot program, called PAID, could let some employers resolve their unintentional wage and hour violations, according to Betsy Davis, a Richmond-based member of national law firm LeClairRyan. But companies need to carefully consider their situation before signing up for it, she cautions.

“The program, aptly named Payroll Audit Independent Determination or ‘PAID’ for short, is intended to facilitate resolution of potential overtime and minimum wage violations under FLSA (the Fair Labor Standards Act),” she writes in a recent blog, DOL Announces PAID – the Pros and Cons of the Wage and Hour Self-Audit. Her post appears in the firm’s LR Workplace Defender blog, which focuses on employment litigation issues.

Announced by the DOL’s Wage and Hour Division (WHD) on March 6, the pilot program offers qualified employers the ability to self-audit wage and hour violations under the FLSA—the federal statute that governs payment of minimum wage and overtime pay for nonexempt employees. The program is expected to launch in April 2018 and run for approximately six months, Davis notes.

Businesses that face penalties like double or “liquidated” damages and attorneys’ fees may be temped to sign up for the program, but Davis says there are some restrictions and other issues to consider.

“Employers with a history of FLSA violation are not eligible to participate, and employers cannot use the PAID program to resolve an existing WHD audit or investigation, litigation or arbitration,” she warns. Instead, the program is designed to “unearth and resolve unintentional violations discovered, reported, and corrected by the employer,” including alleged ‘off-the-clock’ work, failures to pay overtime, or misclassification of employees as exempt from the FLSA’s minimum wage and overtime requirements.

Eligible businesses that sign up may see some benefits, like being able to correct inadvertent minimum wage and overtime violations without litigation, Davis notes. Also, while employers are liable for payment of all back wages, they won’t be required to pay liquidated damages or civil monetary penalties.

But counterweights include the fact that “after violations are disclosed, the WHD is not obligated to accept the employer into the PAID program,” she writes. Also, even if the federal agency accepts a business’ plan to correct any violations, affected individual employees can still opt out and retain the right to bring suit themselves.

Additionally, even if both the WHD and the employees accept a company’s wage-and-hour payment proposal, the business could potentially remain on the hook. That’s because the release only appears to settle federal issues, Davis notes. “Employees who accept payment under the PAID program may not be required to release state law claims for the specific, identified FLSA violation,” she cautions, adding that WHD has not yet released any guidance on potential state-level implications.

“Employers who have made inadvertent wage and hour errors should consider the PAID program and carefully weigh its pros and cons after a full audit of all its practices to ensure compliance,” Davis concludes, adding that companies should confer with legal and tax advisers before making a decision.

The full column is available here