On April 3, 2018 the Department of Labor implemented a new pilot program, in effect for the next six months, under which employers may correct inadvertent minimum wage and overtime violations without the imposition of penalties or liquidated damages (employers must still pay 100% of any back wages owed). Under the new program - Payroll Audit Independent Determination (PAID), employers are encouraged to conduct self-audits, and if they discover any violations, to report them to the Wage and Hour Division, which will work with the employer and affected employees to correct them.
Here is how the program works. Employers are directed to the PAID website (www.dol.gov/whd/paid/), where they must first walk through a number of questions to confirm that they are covered by the FLSA and eligible to participate in the program. If so, the employer must then to review a number of online FLSA compliance materials (a total of 12 screens of information and videos) and obtain a certificate of completion. Once the review is complete, the employer must audit the company's compensation practices and identify any potential violations that may have occurred in the past two years; which employees were affected by the violations; the timeframes in which each employee was affected; and, the amount of back wages believed to be owed to each employee.
After completing the self-audit, the employer must contact the WHD, which will request the names, addresses and phone numbers of the affected employees; the back pay calculations and supporting evidence; payroll records and related information; confirmation that the practice has been corrected; an explanation of the scope of potential violations to be included in a release of liability; and, certification that the employer has reviewed the PAID compliance assistance materials and meets the eligibility requirements for the program. The WHD will then evaluate the information, assess the back wages due, and issue a summary of unpaid wages, along with a release employees will be required to sign in order to receive the payment. The employer must then pay all back wages due by the end of the next full pay period.
What's in it for the employer? Generally, penalties for wage and hour violations include liquidated damages equal to the amount of the liability (i.e., double the back wages), penalties, interest and attorney fees (if applicable) - as well as the employer's attorney fees if litigation is involved (and these types of violations are often the subject of class action lawsuits). In addition, if violations are found to be willful, the employer's liability can go back three years. As a result, it is a way to remedy inadvertent mistakes without risking exposure for double damages, penalties and attorney fees.
If you have any questions about the PAID program, conducting a self-audit or wage and hour compliance issues, feel free to contact Attorney Alan E. Seneczko at (262) 560-9696, or [email protected].