The U.S. Department of Labor (“DOL”) has relaunched a program that allows employers to resolve potential wage and hour violations through a self-audit. The program was popular under the first Trump administration but was then eliminated in 2021 under the Biden administration.

The program, Payroll Audit Independence Determination (“PAID”), begins with an employer self-reporting potential violations of either the Fair Labor Standards Act or the Family Medical Leave Act to the Department of Labor’s Wage and Hour Division (“WHD”). The DOL then evaluates the information provided by the employer and works with the employer to remedy any violations identified. The employer must pay any back wages owed within 15 days of receiving a summary of unpaid wages from the DOL.

The self-audit may be an attractive option for retailers to resolve liability regarding known FLSA violations, including possible overtime misclassification. PAID allows employers to resolve wage and hour liabilities while avoiding the potential of liquidated damages and the expenses of litigation. Importantly, however, employers should keep in mind that PAID does not resolve state law claims.

To utilize PAID, the employer cannot currently be a party to litigation or under investigation by the DOL regarding the compensation practices at issue in the self-audit. Moreover, the employer cannot have been found to have violated the FLSA within the past three years, and the employer cannot have participated in PAID within the past three years.

In light of the relaunch of PAID, retail employers should consider an internal wage and hour audit with counsel. Among other things, retail employers can review if positions are properly classified as exempt from overtime, if policies and practices allow off-the-clock work, and if independent contractors are properly classified. Employers can then determine whether to engage in PAID. Utilizing PAID can allow employers to budget and prepare for remedying misclassifications, rather than running the risk of paying out a settlement for an unanticipated lawsuit.