The Department of Labor's New PAID Program: Is it a Win for Employers & Employees?

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On March 6, 2018, the U.S. Department of Labor (DOL) shared a press release informProfessional Coworkers Sitting at Tableing employers, employees, and taxpayers of its new Payroll Audit Independent Determination (PAID) pilot program. The pilot will be launched by the Wage and Hour Division (WHD) of the DOL in an effort to resolve potential overtime and wage violations under the Fair Labor Standards Act (FLSA) more quickly and less expensively. The PAID pilot program will be implemented for approximately six months and both employers and employees covered under the FLSA should take notice of the new program, its advantages, and potential disadvantages.

How does the PAID program work? Employers covered by the FLSA have the option of participating in an audit to identify any potential overtime and wage violations of any current and former employees, in addition to calculating the amount of back wages owed to employees. Employers may then resolve the potential violations by paying the affected current and former employees back wages in return for a release of private claims by the employees.

At first glance, the PAID program seems to be a win for both employers and employees. Employers avoid litigation costs and violations as well as potentially paying employees higher damages from FLSA claims and other private claims. Employees benefit from the PAID program by avoiding litigation costs and expediting the process to receive their unearned wages or overtime. The overall turnaround time for the process is around 90 days.

Although this program looks beneficial to both employers and employees, there may be some disadvantages. First, employers whom the DOL observes to act in bad faith in its potential wage violations do not qualify for the program. Additionally, employers cannot choose to pay only current employees back wages. Employers must also include the impacted former employees and track down their most current addresses to pay them.

Employees may not want to participate in the PAID program because they prefer to file a private action. Thus, employees may not want to release all future claims against their employers. Furthermore, under the PAID program, employees cannot recover liquidated damages, a remedy applied under the FLSA. Still, employees who want an expedited process to receive their unpaid wages without accruing litigation costs would better benefit from the PAID program.

The WHD encourages employers to self-report during the pilot program so more employees will be paid quickly. After the six month pilot program, the WHD will further assess and make necessary adjustments to the program. Please refer to the below links for more information and resources regarding the PAID program and its anticipated effects on employers and employees.

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