In late July, the US Department of Labor (USDOL) announced that it was reinstating the Payroll Audit Independent Determination (PAID) Program to allow employers to correct FLSA and FMLA mistakes in a supervised audit.
The PAID program was instituted in 2018 to encourage employers to conduct self audits and fix minimum wage and overtime violations, including off the clock work and misclassification of employees. The program was shut down in 2021, but has now been reinstated, although with some differences. If an employer wishes to participate in the program, it must apply to USDOL by explaining the nature of the issue it wishes to correct, and represent that it is not in the midst of a state or federal investigation, a party to litigation over the issue it wishes to fix or in receipt of a demand letter. If accepted into the program, the employer submits detailed information about the mistake and its proposed payments to correct the mistake. If DOL agrees that the proposed remedy is acceptable, it will issue official releases which evidence that the settlement has been supervised by DOL.
There are some risks to the program, so it may not be appropriate for every situation.
- Employees are not compelled to accept the proposed payment, and can pursue private litigation, so there is some risk in bringing the mistake to their attention.
- A company cannot explore participation anonymously, but must self-identify and provide information about its non-compliance. USDOL says in its FAQs on the program that: If WHD declines an employer’s good faith request to participate in the program, the employer’s request to participate will not serve as the basis for a future investigation involving the identified potential violations, employees, and timeframes, unless WHD has reason to believe that health or safety are at risk (for example, if there are child labor violations).
- USDOL may not agree with the employer’s proposed monetary remedy, but may demand more unpaid wages. Nonetheless, if an employer believes that it has made mistakes that it wishes to correct, this may be an option worth exploring with employment counsel.
- The PAID program cannot be used to resolve compliance issues under state wage and hour laws.
The program can also now be used to correct mistakes in the administration of the Family and Medical Leave Act. USDOL provides these examples of mistakes that can potentially be corrected through the program: miscalculating the amount of FMLA leave available to an employee, incorrectly determining that an employee is ineligible for FMLA leave, improperly assessing attendance points when an employee takes FMLA leave, or improperly categorizing FMLA leave as an unexcused absence. USDOL describes potential remedies for FMLA violations this way: Employees may be compensated or restored benefits lost because of an FMLA violation, or they may be reimbursed for other actual monetary losses sustained as a direct result of the violation, such as costs the employee incurred hiring someone else to care for a family member. Remedies may also include the removal of points under a “no-fault” attendance policy, the withdrawal of a disciplinary action, or other nonmonetary relief, such as employment, reinstatement, or promotion, where appropriate.
The restoration of the PAID program is another positive sign that the current administration is trying to assist employers with wage and hour compliance. While not a panacea for all FLSA and FMLA problems, the PAID program is worth careful evaluation with competent counsel when a company learns of non-compliance.
