In July, the U.S. Department of Labor announced that it was bringing back the Payroll Audit Independent Determination (PAID) Program to help companies resolve violations of the Fair Labor Standards Act, notably the minimum wage and overtime rules, as well as the Family and Medical Leave Act.
What is the PAID Program?
Initially launched in 2018, the PAID program was designed to help companies resolve certain liabilities under the FLSA. It was discontinued under the Biden administration but is now back with new coverage for the FMLA.
Under this voluntary program, companies conduct a self-audit to determine where they are currently in violation of these laws. The company will then submit a report and work with the DOL to resolve these violations, pay back wages to employees, and implement other remedies.
What Types of Violations are Eligible for Resolution?
Minimum wage, overtime, and FMLA leave are the targeted laws under this program. This means if you are not in compliance with these laws, this is a great time to make it right with the US government and your employees.
It is important to note that this program will only resolve your federal level claims, and potentially not all of them. Affected employees would be able to reject your offer and refuse to settle. Also, there could be claims at the state or local level that remain open.
Who is Eligible to Participate in the PAID Program?
First, your company must be a “covered employer” under the FLSA or FMLA.
Almost every employer is covered under the FLSA, whether by enterprise or individual coverage. Basically, as long as your product or service involves interstate commerce, then you are covered by the FLSA.
However, many small businesses are not a covered employer under the FMLA. To be covered, you must have had 50 or more employees in 20 or more weeks (so this does apply to many seasonal businesses) either this year or last year.
There are also additional requirements, such as:
- No court or the DOL has found applicable violations within the last three years.
- Not currently under investigation by the DOL, any private litigation, or state enforcement actions for the applicable FLSA and FMLA procivions.
- Not participated in PAID in the last three years (unclear if that is three calendar years or three years when program was active)
During the course of the self-audit and resolution process, companies will be required to inform the DOL if they receive complaints about pay or leave issues, including from employees or state or federal agencies.
What Violations are Resolved under the PAID Program?
Any violations of minimum wage, overtime, or FMLA leave rules identified during the self-audit would be eligible. However, prior violations where the employer has already paid back wages would not be resolved under the program.
Any state or local claims dealing with the same issues would not be resolved either. So if your state or county have certain liquidated damages, the employee could still make a claim under those laws. By participating in the PAID program, you may be highlighting to the employee that there is an issue. However, paying the back wages may limit the damages under state or local laws.
We can help you determine your risks under state and local laws if you have violations eligible for resolution under the PAID program.
It is important to note that other employment-related laws are not impacted. So if an employee has a claim under the Americans with Disability Act or the Pregnant Workers Fairness Act, the releases obtained under this program will not release those claims.
Is the PAID Program Right for My Business?
Unfortunately, that will be a business-by-business analysis. There are a lot of factors here, including potential liability under state and local laws.
Also, it may depend on the number and dollar value of the violations. For example, if you have few violations, you may want to resolve them on your own, as working through any governmental agency is a time consuming process. There will be a certain cost in hiring your legal and financial experts, as well as conducting the self-audit process.
However, if you have a large employee population that would be subject to these rules and you suspect that the company is not in compliance, the exposure could be very high. This makes the PAID Program attractive as a process to resolve these liabilities and mitigate your risk.
Furthermore, it is important to note that the US DOL has announced that it will not seek liquidated damages in connection with pre-litigation resolution of the FLSA violations that the PAID program covers. As a result, your exposure risk may be limited already, such that the PAID Program doesn’t offer additional benefits.
Springboard Legal Helps Companies Stay Compliant and Mitigate Risks
Employment related risks represent potentially large exposures for companies. Employees are often the largest expense category for a company — large dollars means potential for large penalties and interest.
It’s not just the back wages that might be owed. Often, laws impose additional penalties, such as treble liquidated damages, and even personal liability on the owners and officers of a company found to have violated these laws.
It is important that companies comply with FLSA and FMLA rules (and state equivalents), as well as other employment related laws.
One of the big advantages to working with Springboard Legal is our deep experience in both legal and financial audits and resolution programs. We can not only help you conduct your self-audit, but also represent you in your dealings with federal agencies to resolve your employee-related (and other) liabilities.
Want to see if the PAID Program is right for your company? Contact Springboard Legal today!