Today’s FLSA Question: I am a newly appointed fire chief. I am very concerned about some of my department’s pay practices. In particular, payments made to firefighters for paramedic certification and longevity are not being included in their regular rate of pay. I want to resolve this issue. Based on my figures, we probably owe our firefighters around $60,000 in back wages alone looking back over the past 2 years. City hall is on board with my desire to fix our payroll discrepancies, however there is genuine concern over the additional costs associated with any resolution. Our legal team has advised us the damages will likely be another $60,000 and legal fees associated with the settlement an estimated $60,000… Plus, our attorney believes the firefighters will make additional claims beyond the regular rate issues that I have identified and will push for the maximum of 3 years for back wages and damages… Based on those possibilities, the ultimate price tag for our $60,000 mistake could be closer to $400,000 or even $500,000 at the end of the day… City management is understandably concerned about the financial repercussions associated with resolving the problem. First, do you agree with our attorney’s analysis? Second, are there other options available other than simply kicking this “can-of-worms” down the road?
Answer: Chief, you are not alone in this situation. In my opinion, you are wise to move carefully and evaluate the many different outcomes that could arise depending upon your actions. I think that you are in a very precarious position. You are a new chief and you want to ensure your firefighters are being paid correctly, but you also have to act in the best fiscal interests of the city. Additionally, it defies logic and common sense to think that a $60,000 error could cost the city as much as a half of a million dollars to rectify.
To answer the first part of your question. Your attorney is most likely correct in assuming that the firefighter’s will look to expand the standard two-year statute of limitations to the FLSA’s maximum statute of limitations of three years. Also, as a general rule, the firefighters will be entitled to liquidated damages, which would likely be equal to the amount of back wages. Additionally, the city will also most likely be responsible for paying the fees and costs associated with the firefighters’ attorney or attorneys if they opt to file a lawsuit. This is all pretty much standard practice. Whether the firefighters opt to pursue additional claims, in addition to the regular rate issues that you have identified, is truly an unknown. Are there other FLSA issues present that you are unaware of? Is your attorney aware of any other potential FLSA issues? These answers will likely determine whether the firefighters would pursue additional claims.
Despite these unknowns, I do have some good news. The Department of Labor (DOL) has a fairly new program entitled “Payroll Audit Independent Determination” or “PAID” that is intended to resolve potential FLSA claims quickly without the need for litigation. In theory, if your firefighters are on-board, you could rectify the current situation at a cost the city would be foolish to balk at.
What is the PAID Program?
The PAID program was initially launched by the DOL’s Wage and Hour Division (WHD) in the spring of 2018 as a tool for employers to avoid the costs, uncertainty, and delays often associated with FLSA compliance. Under the PAID program, the employers conduct wage and hour audits of their own organization’s pay practices in an effort to discover potential overtime and/or minimum wage violations. The WHD assists the employer in this process by providing “compliance assistance materials” and additional support as needed. While not required, a basic working knowledge of the FLSA and DOL regulations will prove helpful for employers conducting self-audits.
Next, if the employer discovers any minimum wage and/or overtime violations it then must calculate any back wages owed to impacted workers. The WHD then reviews the employer’s findings, works with the employer to correct any mistakes and helps get workers any wages owed. As part of this process, the WHD drafts settlement and release documents for the employees to sign and supervises the actual settlement. Once the employee has agreed to accept the terms, the employer must pay impacted employees any back wages by their next normal pay day. Finally, the employer must agree to voluntarily adjust its pay practices to avoid making the same mistakes moving forward.
What is the upside to PAID?
From an employer’s standpoint, the key advantage to utilizing the PAID program is monetary. First, there are no per se attorney fees associated with the program. Remember, in FLSA litigation, the employer is typically stuck paying the attorney fees for both sides of the case. Second, there is no requirement to pay any damages for the mistake. Workers are being paid wages that they should have received in the first place, absent liquidated damages that are standard in litigation.
For the employee, there is a big advantage of getting paid for back wages in a very timely manner. In some instances, the employee may not be aware that he or she is owed any money. If the employee opts for litigation over the PAID settlement, they would likely not see any money for many months, if not years. Additionally, litigation carries a great deal of unknowns. This settlement is guaranteed money for impacted employees paid on the employee’s next payday.
What is the downside to PAID?
From the employee’s standpoint, the biggest disadvantage of accepting a PAID settlement is monetary. The employee could potentially receive double his or her back wages (i.e. liquidated damages) if they pursued their claims in court. But again, he or she wouldn’t likely see any of that money for quite a while.
Whether or not the PAID program is a good fit for you and your organization remains to be seen, however if you and the city are truly looking for reasonable ways to resolve your FLSA issues absent litigation this may be the best option.
Just as an aside, employers must certify that they are not being investigated by the DOL for possible wage and hour violations or engaged in any FLSA litigation in order to qualify for the program. All it takes is one of your firefighters engaging an attorney to eliminate this option for the organization. I strongly urge you to act quickly.
The applicability of the PAID program is one of many topics discussed in depth at all of our FLSA for Fire Departments live webinars. If you have questions about how the FLSA impacts firefighters and other emergency service workers, please consider joining us. We are only a few days away from the next class which will run from September 15-18, 2020. Also, if your schedule doesn’t work for the September class, consider attending the last class for this year, which runs from November 10-13, 2020.