Many employers unknowingly classify employees as exempt from overtime pay or fail to correctly calculate wages and, in some cases, entitlement to unpaid leave time. This can result in significant liability under the Fair Labor Standards Act (FLSA) and/or the Family Medical Leave Act (FMLA).
These problems are often brought to light when a private class action lawsuit is filed, or when the U.S. Department of Labor (DOL) institutes a compliance investigation and enforcement action.
Some employers who are aware of compliance issues are hesitant to take corrective action, fearing that resulting penalties or required remedies may be more extensive than anticipated. In many cases, civil penalties and attorney fees awarded through litigation can far exceed the actual wages due to the employees. However, relief may be available to certain employers through a recently reintroduced government program offering a path to compliance and encouraging voluntary corrections without the fear of excessive penalties.
On July 24, 2025, the Wage and Hour Division (WHD) of the DOL announced the reintroduction of the Payroll Audit Independent Determination (PAID) Program – a program designed to help employers voluntarily assess and resolve FLSA and FMLA compliance issues with DOL oversight. The PAID program was originally initiated in 2018 but discontinued in 2021 by the Biden Administration.
Under the reintroduced PAID program, employers who register with DOL are permitted to conduct self-audits. If the audit uncovers FLSA or certain FMLA violations, such violations must be reported to DOL. Employers must then work in good faith with DOL to correct the mistakes and to provide back wages or other remedies to affected employees.
PAID offers employers a framework to proactively resolve potential minimum wage, overtime, and FMLA violations quickly without expensive, drawn out litigation. While employers may still be required to pay back wages, those who voluntarily participate in the PAID program and work with DOL to resolve issues will not be subject to additional civil monetary penalties that might otherwise be imposed through litigation.
Participation in the PAID program is limited to eligible employers, which include:
- Employers who are not subject to federal “prevailing wage” laws
- Employers who have not been held in violation of the FLSA or FMLA within the previous three years
- Employers who are not involved in pending litigation or state or federal investigations involving the same compliance violations at issue in the PAID program
- Employers who have not utilized the PAID program within the previous three years
Employers considering participation in the PAID program should be aware of the risks. First, there is no guarantee of acceptance into the PAID program, and the DOL could initiate investigations of employers who are rejected. Additionally, employees who are owed wages under a PAID determination are not required to accept the wage settlement and may instead choose to pursue a claim through private litigation. Significantly, participation in the PAID program does not resolve potential liability under state wage or leave laws.
These risks are not insignificant but the PAID program may be the best option for resolving troubling wage, overtime and leave compliance issues without being subjected to significant penalties. Any decision to participate in the PAID program should be made only after consultation with legal counsel.
This article originally appeared on DBusiess.com(goes to new website) on August 4, 2025.
