On March 6, the Department of Labor announced a pilot program called the Payroll Audit Independent Determination (PAID) program, which seeks to expedite resolution of minimum wage and overtime violations.

Under the program, employers may self-audit their compensation practices for compliance with the FLSA. If the audit reveals a violation, employers must: (1) identify any possible violations, (2) identify the affected employees, (3) identify the timeframes in which each employee was affected, (4) calculate the amount of back wages owed to each employee and (5) report the results to the DOL.

Upon receiving such a report from an employer, the DOL will request: (1) the calculations conducted during the self-audit, (2) the scope of potential violations to be included in a release and (3) a variety of certifications regarding due diligence and pay practice adjustments to avoid the same violations in the future. The DOL will assess back wages due and will prepare releases for affected employees, tailored to waive claims only for the identified violations for the time period during which back wages are paid.

According to the DOL, the program is designed to appeal to both employers and employees. Employees will receive 100 percent of the back wages paid, without paying litigation expenses, attorneys’ fees and other costs. Employers may be enticed because the program does not impose penalties or liquidated damages. Employers who participate in the program are expected to correct pay practices going forward; employers who resolve an FLSA violation through the PAID program are ineligible to use the PAID program a second time to resolve the same issue in the future.

Importantly, the PAID program is unavailable for employers currently under DOL investigation or in ongoing litigation concerning the reported FLSA violations. Also, employee participation in any settlement under the program remains voluntary.

Employers who self-detect potential FLSA violations should carefully consider whether participation in the PAID pilot program makes strategic sense based on their individual factual scenarios. The program may not absolve claims for violations of state wage-and-hour laws, and participation may expose additional risk in some circumstances.

The PAID program has not yet been implemented. The DOL expects to pilot the program nationwide for approximately six months to determine its effectiveness and evaluate the program’s future. The DOL has not yet announced when the pilot program will start.

The PAID program may present a valuable tool for employers who self-detect FLSA violations. However, since the program does not mandate employee participation, does not prohibit private litigation and does not resolve possible state wage-and-hours claims, employers should carefully consider whether participation makes strategic sense given the specific factual scenario confronting them.

Click here for the DOL’s details about the program.

Click here for the DOL’s press release about the program.