Why it matters

In updates to recent news, the Department of Labor (DOL) released additional information about the new Payroll Audit Independent Determination (PAID) program—although the New York attorney general vowed to continue bringing lawsuits for wage and hour violations under state law—while the fight over the joint employment standard continues, with the U.S. Court of Appeals, D.C. Circuit keeping Browning-Ferris Industries of California, Incv. NLRB on its docket given the “extraordinary circumstances” at play. In March, the DOL announced a pilot program that enables employers to conduct self-audits of Fair Labor Standards Act (FLSA) compliance and voluntarily report violations to the agency. The DOL recently provided additional information about PAID, including criteria for participation, a description of compliance assistance materials and the required elements of a self-audit, among other details. However, the agency’s efforts to achieve compliance without litigation or additional penalties hit a speed bump when New York Attorney General Eric T. Schneiderman announced that his office will not ease up on prosecuting wage theft, calling the PAID program “nothing more than a Get Out of Jail Free card for predatory employers.” Meanwhile, the joint employer standard used by the National Labor Relations Board (NLRB or Board) remains a hot topic, with a split panel of the D.C. Circuit holding that “extraordinary circumstances” meant the appeal of Browning-Ferris should remain before the court. Although the panel had previously ordered that the case be sent back to the NLRB, the ensuing drama—with the Board’s subsequent decision in Hy-Brand Industrial Contractors, Ltd., reversing the Browning-Ferris standard, thrown out after a decision that one of the members should have recused himself from the proceeding—requires the case to remain in the court system, the majority said.

Detailed discussion

In an effort to expedite resolution of inadvertent overtime and minimum wage violations under the Fair Labor Standards Act (FLSA), the Department of Labor (DOL) launched a new nationwide pilot program.

The Payroll Audit Independent Determination (PAID) program aims to resolve statutory violations “expeditiously and without litigation, to improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.”

All FLSA-covered employers are eligible to participate in the pilot, with the exception of those already under investigation by the Wage and Hour Division (WHD) or employers already facing litigation, arbitration or similar legal action.

To participate in the program, employers must audit their compensation practices for potential noncompliance. If the employer discovers any noncompliant practices, or if the employer believes its compensation practices may be lawful but wishes to proactively resolve any potential claims anyway, four steps are required: Specifically identify the potential violations, identify which employees were affected, identify the time frames during which each employee was affected and calculate the back wage amounts the employer believes are owed to each employee.

Now the WHD has provided additional information for employers interested in participating in the PAID program. Employers can visit the PAID portal to determine whether they meet the criteria for participation, find more details on the compliance assistance materials and learn about the required elements of the self-audit.

However, the agency’s efforts experienced a hiccup when New York Attorney General Eric T. Schneiderman spoke out against the initiative. “The Trump Labor Department’s ‘PAID Program’ is nothing more than a Get Out of Jail Free card for predatory employers,” he said in a statement. “Employers have a responsibility under state and federal laws to pay back stolen wages, as well as damages intended to deter them from breaking the law again. The PAID Program allows employers to avoid any consequences for committing wage theft, while blocking lawsuits intended to vindicate employees’ rights.”

Schneiderman, who said he has “won back over $30 million in stolen wages and additional damages for over 21,000 workers” in the state since taking office in 2001, vowed to continue his efforts.

“I want to send a clear message to employers doing business in New York: my office will continue to prosecute labor violations to the fullest extent of the law, regardless of whether employers choose to participate in the PAID Program,” Schneiderman warned.

In other news, the battle over the joint employer standard used by the National Labor Relations Board (NLRB or Board) continues, with a divided panel of the U.S. Court of Appeals, D.C. Circuit reversing course to keep the high-profile Browning-Ferris Industries of California, Inc. v. NLRB case before the court.

The NLRB adopted a controversial new standard to determine the scope of joint employer liability in its 2015 Browning-Ferris decision. There, the Board held that even when two entities have never exercised joint control over the essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be joint employers based on the existence of “reserved” joint control, or based on indirect control or control that is “limited and routine.”

The employer appealed the decision to the D.C. Circuit. While the case was pending, however, things got even more complicated with the subsequent case of Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. In that case, an administrative law judge applied the Browning-Ferris standard to find that the two entities were joint employers for purposes of the National Labor Relations Act (NLRA) when they terminated a total of seven workers.

But when the employers appealed to the NLRB, the Board—complete with new members courtesy of President Donald J. Trump—took the opportunity to throw out the Browning-Ferris standard and establish a new test.

Although the decision was hailed by employers, the victory was short-lived. In a motion for reconsideration, for recusal and to strike, the charging parties requested that the NLRB vacate its decision and that Board member William J. Emanuel recuse himself. The NLRB’s Inspector General launched an investigation into whether Emanuel was required to recuse himself because his former law firm represented Leadpoint, another entity involved in the Browning-Ferris case.

After the Inspector General agreed Emanuel should have recused himself, the NLRB vacated its decision.

In light of such “extraordinary circumstances,” the D.C. Circuit granted a motion to reconsider Browning-Ferris after previously remanding it to the NLRB. The divided panel—one member took the position that the court should “stay its hand” until the Board finally decides Hy-Brand—also ordered the case be held in abeyance pending “prompt” disposition of the pending motion for reconsideration in Hy-Brand, requesting the parties file status reports every 21 days.

For more details on the PAID program, click here.

To read AG Schneiderman’s statement, click here.

To read the order in Browning-Ferris Industries of California Inc. v. NLRB, click here.