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New U.S. Department of Labor Payroll Audit Independent Determination (PAID) Program to Voluntarily Address Payroll Errors

The U.S. Department of Labor (DOL) has announced the imminent launch of the PAID program – Payroll Audit Independent Determination. The program’s intent is to permit employers to self-audit and correct as appropriate their minimum wage and overtime practices, thus avoiding federal government investigation, litigation, fines and penalties.

This is a six month pilot program. The DOL has not yet released full information or announced the starting date, but it has published an FAQ concerning the PAID Program. No employer already under DOL investigation or in litigation over alleged minimum wage and overtime violations is eligible to take part.

In order to participate, a business must:

  1. Review all available DOL information and compliance materials about the program;
  1. Audit its compensation practices for any non-compliance and identify violations, persons affected, timeframe of violations, and back wages owed; and
  1. Contact the DOL’s Wage and Hour Division to:
    1. Provide the information obtained through the audit;
    2. Certify what was done to correct any errors;
    3. Ensure these errors are not already the subject of pending litigation or investigation;
    4. Adopt compliant practices for the future; and
    5. Work with the DOL to complete back payments in the company’s next full pay period.

The program’s biggest plus, provided employees agree to sign waivers of their claims in exchange for the back payments, is avoidance of any potential fines and penalties from any such underpayments.

On the other hand, while an employer would be absolved from abuses of federal minimum wage and overtime standards, the program does not provide protection from employee claims for other payroll or workplace violations, including of course wage claims under California law.

There is also the prospect of one or more workers rejecting the back pay offer, choosing to report these employer-announced improper practices to one or more government agencies, including California’s Division of Labor Standard Enforcement, thus triggering a much wider investigation, assessments, etc.

Similarly, a business’s participation in the program is no guarantee the DOL will not initiate such a wider investigation on its own.

Any company contemplating taking part in PAID should discuss particular circumstances with a qualified employment attorney before making a final decision.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

March 30, 2018