Who doesn’t like getting P.A.I.D.? The DOL has a plan for employers to rectify FLSA violations without litigation!

Want to rectify past FLSA mistakes without costly litigation? Many employers (including fire chiefs and city administrators) have been reluctant to tackle FLSA compliance concerns for fear of the unknown. Very often, the amount of money in wages owed as a result of an FLSA violation is easy to determine. What follows is the real question . . . The parade of horribles that accompanies FLSA litigation includes but is not limited to: double damages, court fees, costs, even interest, the unknown cost of hiring an attorney to represent your organization, the uncontrollable cost of reimbursing the employees’ attorney or even attorneys. These unknowns can cause the most well-intentioned employer to bury his or her head in the proverbial sand! Well, the Department of Labor wants to help you keep your head above ground.

The Department of Labor’s Wage and Hour Division has just proposed a new pilot program designed to help employers resolve potential FLSA violations without the delay, cost, and uncertainty of going to court. It is called the Payroll Audit Independent Determination (PAID) program. While the official start date for PAID has yet to be announced, the DOL began releasing information on the plan this past week. PAID is designed to help employers reconcile past FLSA violations, provide guidance to avoid future violations, and provide an avenue for employees to quickly receive owed wages without the delay and cost often associated with litigation.

Here is how it works. First, PAID is a “self-audit” program. Under the program, the employer is required to review materials provided by the DOL related to minimum wage and overtime requirements and conduct a self-audit of their compensation policies to determine FLSA compliance. If the employer finds what it believes to be a “noncompliant” pay practice, they need to identify the areas of noncompliance and determine what, if any, wages are owed, and to which employees.

Next, the employer contacts the DOL. The employer must describe the nature of the violations and explain how back wages were calculated. Additionally, the employer is required to certify that it will alter its pay practices to avoid future violations. Unfortunately for employers, PAID is inapplicable if employees have already initiated legal action, or have even “express[ed] interest” in “litigating or settling” claims related to the pay practices in question.

Then, the DOL evaluates this information and issues a “summary of unpaid wages.” The DOL also provides settlement forms that employees must complete in order to receive back wages. These settlement forms require the employee to waive the option of pursuing these claims in court. Finally, if the employee agrees to the settlement, the employer must pay all back wages by the next payday.

The DOL proposes this will be a beneficial process for the employee. The employee will get the amount of wages they were owed in a timely fashion. While the employer could pursue litigation and receive more money, they would be potentially waiting years for their “payday.” This is also beneficial for employers. Employers can avoid paying the double damages typically required through FLSA litigation. However, the big benefit for employers will come from avoiding the unknown costs associated with litigation.

Whether this proves a useful tool in reducing the skyrocketing number of FLSA lawsuits remains to be seen. The PAID program is one of many new, emerging topics that are covered in much greater detail at all our FLSA for Fire Departments seminars. Please consider joining us.