DOL Dumps Underused “PAID” Self-Reporting Program for FLSA Violations

Back in 2018, the U.S. Department of Labor’s Wage and Hour Division (WHD) debuted its “Payroll Audit Independent Determination” or “PAID’’ pilot program. Under this program, WHD invited employers to voluntarily audit their payroll practices and disclose any “non-compliant practices” to the DOL. WHD then audited the employer’s records and calculations of what the employer owed to employees, and would tell the employer what it thought the employer should pay. The employer then paid its employees, and employees signed a release of any FLSA claims against the employer for the covered periods. Participating employers were not subject to civil monetary penalties and were not required to pay liquidated damages to employees.

The program was less useful than it seemed. Among the pitfalls of the PAID program included:

1. The PAID program release was limited to “potential violations for which the employer had paid back wages,” meaning employees could still pursue claims arising outside the period covered by any back wage payment.
2. The release covered claims under the FLSA only, and not necessarily wage claims under state law.
3. The PAID program was not available to resolve issues already being investigated by the DOL or, more importantly, raised in a lawsuit or threatened litigation. It helped in cases where an employer had identified problems on its own, but offered no help to employers seeking to settle current disputes over alleged FLSA violations.

In short, the PAID program was far from an easy way to avoid liquidated damages and attorney fees. After WHD announced the pilot program, several states’ attorneys general objected to the program, concerned that it would undermine state enforcement of their own wage and hour laws. Employers didn’t embrace PAID, either: DOL reported to the Senate that just 74 employers used it in the first 18 months.

Now, employers don’t have to consider whether PAID is an option. Last Friday, January 29, the DOL abruptly ended the program. The DOL did not explain the “immediate” demise of the program, saying only that it “will rigorously enforce the law, and . . . use all the enforcement tools we have available.” The swing from a baby step toward self-enforcement to more rigorous agency-directed enforcement is part of the shift expected with the Biden administration. The trend to watch from here will be what happens to WHD’s audit and enforcement efforts. Do not expect the DOL to replace this pilot.