Last week, I answered some of the questions that we have been receiving about the new FLSA regulations, but I saved one that I hear almost everywhere I go: what should the Department of Labor do with the FLSA? Last week, I said “start over.” Of course, that’s not going to happen. Scrapping the FLSA and starting over is not an option right now, realistically or politically. If I was Secretary of Labor, what would I do? Develop a safe harbor for employers.

As someone who has spent nearly 25 years as an entrepreneur in three different industries, I have seen the FLSA increasingly become a vehicle for plaintiffs’ attorneys to turn a profit, not to remedy violations of the FLSA. FLSA litigation continues to grow by leaps and bounds, as we have discussed in the past. Litigation is expensive. Employers don’t “win” by spending hundreds of thousands of dollars to prevail at summary judgment or trial. The FLSA isn’t a “loser pays” statute. As a result, FLSA litigation has become as much a shakedown of employers who operate their business in good faith as it has a remedy for punishing not-so-ethical ones.

The FLSA’s Missing Correction Mechanism

Neither the FLSA nor its regulations has any safe harbor for good faith actors. Sure, the DOL has its elaws website and hotline, but that information is very generalized and can’t capture the nuance of applying 1938’s definitions to 2014’s realities. Furthermore, there are very real risks to any employer (ethical or otherwise) of admitting that it may have committed a violation of the FLSA. Admitting a mistake with one employee often means that another employee has also been misclassified or failed to receive proper compensation as well. Fixing a mistake with one employee can often lead to other employees making similar claims, leaving the employer  liable for its own litigation costs, the cost of plaintiffs’ attorneys, liquidated damages, and, many times, separate state law violations, too.

That risk is compounded by the rampant misuse of the phrase “wage theft,” which further unfairly demonizes employers. Because it is being used to push political agendas, not to express some criminal act, we often see the term “wage theft” attached to any situation where an employer does not pay required wages or overtime, whether intentionally or because of an honest mistake. “Wage theft” connotes bad intent, even though the vast majority of employers have acted with no bad intent and have no desire to steal anything from employees. As a result, when it comes to the FLSA, employers get no benefit for admitting FLSA violations, other than the very real public relations nightmare of being mislabeled “wage thieves.” Understandably, many employers then tend to take few, if any, steps toward discovering and correcting these types of mistakes.

The Wage and Hour Safe Harbor

I’m not saying we should let employers off the hook entirely for wage violations. Employers who fail to follow federal and state wage and hour laws, however confusing and arcane, must be held accountable (including for any actual, not politically invented, criminal theft from employees). However, if the regulations are going to include stricter, narrower exemptions and increased penalties for employers, then they must also include a real safe harbor for those employers who want to remedy a wage or hour violation committed under a good faith belief that they were complying with the law. Of course, the employer should still have to pay any wages lawfully owed within a reasonable amount of time. But if an employer self-reports a compliance error, it should be immune from suit for that error, as well as from liquidated damages and other penalties (such as the loss of federal contracts), as long as it complies with reasonable requirements and deadlines to repay the debt to any affected employees. Provisions like this would encourage employers to audit their pay practices and correct mistakes and it would properly reserve FLSA litigation for the truly bad actors.

As I told SHRM last week, failing to include any safe harbor provisions in the new FLSA regulations would be a mistake, and one I fear that the administration is poised to make. Now, if only I could wrangle an appointment to the DOL!