On March 6, 2018, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) announced a new nationwide program to resolve minimum wage and overtime violations under the Fair Labor Standards Act (FLSA). Referred to as the Payroll Audit Independent Determination (PAID) program, it is expected to be a six-month pilot initiative that allows employers to conduct self-audits of their payroll practices and voluntarily report underpayments to the DOL/WHD which, in turn, will supervise the back wage payments. A press release touting this pilot program said, “[t]he PAID program facilitates resolution of potential violations, without litigation, and ensures employees promptly receive the wages they are owed.” More information on the program, including a program overview and details on how the program will work is available on the WHD website.

Through this initiative, the DOL/WHD is once again exercising its authority in the FLSA to supervise back wage settlements in cases where employers voluntarily disclose minimum wage or overtime violations and submit to the agency’s authority in cases that meet certain minimum criteria for participation. In order to participate in PAID, an employer first must identify the violations, the impacted employees, and the time periods of the violations. The employer must also compute the back wages due each impacted employee. Then the employer can request to participate in the program and have the DOL/WHD supervise the payment of the back wages due. The FLSA expressly authorizes the Secretary of Labor to supervise the payment of unpaid minimum wages on unpaid overtime compensation due employees under sections 6 or 7 of the FLSA, respectively, in addition to providing for a private right of action to remedy FLSA violations. The statue further provides that the acceptance by any employee of this DOL/WHD supervised settlement amount acts as a waiver by that employee of his or her right to file an action to recover any alleged unpaid wages, liquidated damages, and attorneys’ fees.

In announcing the PAID pilot program, the DOL/WHD states that not all violations that employers discover and for which they voluntarily request DOL/WHD supervision are eligible for this program. A key qualification is that the relevant FLSA violation cannot be at issue in litigation or in arbitration between the employer and employee group or under investigation by the DOL/WHD.

This is a positive development for both employees and employers, as well as the DOL/WHD.  Settlement supervision is an efficient way the US DOL/WHD to achieve employer compliance with the FLSA because it will occur when an employer discovers a violation, commits to taking action to correct the violation going forward, and approaches the DOL/WHD to supervise the payment of back wages. All this can occur without having to wait for the DOL/WHD to investigate the employer. The supervision of settlements is a speedier process for employees and former employees to receive the back wages that they are due so they are made whole much more quickly. It is especially faster than more expensive private litigation, which can take years to resolve. Finally, an employee can refuse a back wages payment and retain his or her private right of action under the FLSA.

Secretary Acosta and his team at the DOL should be commended for reinstituting this initiative to supervise settlements of selected minimum wage and overtime violations that employers voluntarily disclose. This beneficial practice was ended during the last administration. Hopefully, the DOL/WHD’s experiences during this pilot program will convince the agency of the merits of the program so that it will become a standard operating procedure during the remainder of this administration.