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  • What is the PAID Program? How Can it Affect Employers? Resolution or Trap?

    On March 6, 2018, the U.S Department of Labor’s Wage and Hour Division announced a nationwide pilot program, the Payroll Audit Independent Determination (PAID) program.

    PAID allows employers to self-assess potential wage and hour underpayments under the Fair Labor Standards Act (FLSA) while helping to protect themselves against litigation threats from the Department of labor and individual employees.

    The program’s primary objectives are to resolve claims of wage and hour underpayments in a quick and efficient manner 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 in a quick and efficient manner.

    Who is Eligible?

    All employers subject to the FLSA are eligible for this program unless they have acted in (1) bad faith; (2) are already involved in an existing litigation; (3) know of a forthcoming threat of litigation; (4) or are repeat offenders.

    What is the Process for PAID?

    Under this program, employers can self-audit their wage and hour practices. If when auditing, they find violations of wage and hour practices, the employer may voluntarily report it to the U.S Department of Labor’s Wage and Hour Division. The U.S Department of Labor’s Wage and Hour Division then determines whether or not the employer may participate in PAID. If so, then the employer must submit information such as the calculations for the back pay, specific details of the violation including who was affected, and the duration of the violations. In addition to details of the violations, employers must also submit a certification of audit practices and certification in which employers’ state they will change their pay practices to avoid similar violations in the future.

    Once the U.S Department of Labor’s Wage and Hour Division issues a summary of the unpaid wages, the employer must issue the back wages to the employee by the end of the next pay period. Employees still have the right to refuse the back wages. But once employees accept the back-wage payments, they waive their rights to private legal action for the period of time addressed by the program.

    The U.S Department of Labor’s Wage and Hour Division initiated this program in an attempt to push employers to disclose violations. In an exchange for their disclosure, the employer will only pay what is owed to the employee and will receive a settlement waiver. In addition, the employer does not have to pay liquidated damages or attorneys’ fees to the affected employees. It should be noted that the settlement waiver is narrowly tailored to include only the identified violations and limited to the time period for which the back wages were paid.

    For now, the PAID program is for only six months and will be in effect in April 2018. After the six-month period, the Department of Labor will evaluate the program in regards to its effectiveness, participation rate, and overall results to determine whether or not to make PAID permanent.

    What Should Employers Expect?

    Employers are encouraged to proceed with caution when considering whether or not to participate in the PAID program.

    It should be noted that the program requires full payment of the back pay by the end of the pay period hence taking into account when to report to the Department of Labor is of great importance.

    The program does not require an employee to accept the settlement offer and it does not prevent private litigation by an employee.

    Furthermore, records of PAID are subjected to the Freedom of Information Act which means that all employees may learn of violations which may lead to additional lawsuits.

    Most importantly the U.S Department of Labor’s Wage and Hour Division may still conduct future investigations of the matter.

    If you, or your institution, have any questions regarding the Payroll Audit Independent Determination (PAID) program, please contact Cynthia A. Augello at caugello@cullenanddykman.com or via telephone at 516-357-3753.

    Thank you to Kuljit Kaur, a law clerk with Cullen and Dykman LLP, for her assistance with this post.