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New 'PAID' Wage And Hour Audit Program Reduces Penalty For Errors

Thatcher logo.jpgThe Payroll Audit Independent Determination (PAID) pilot program is like "a get-out-of-jail-free card for employers" with wage-and-hour compliance issues, according to a federal advocacy coordinator for the National Employment Law Project.

If your company were audited by the Department of Labor, would the agency find any workers misclassified as exempt who are actually entitled to overtime? Are there any independent contractors who may be statutory employees? Have you compensated overtime with comp time? Have people ever worked off the clock?

If the Department of Labor's Wage and Hour Division finds these issues, there is a chance you could end up paying double damages -- twice any unpaid wages or overtime the agency uncovers.

Under the PAID pilot program, however, companies will have the opportunity to undergo a self-audit to uncover any potential violations of the federal Fair Labor Standards Act. State issues will not be covered but are often very similar to federal ones.

What does the PAID program offer self-auditing companies?

The program, which was announced March 6, offers companies the chance to settle FLSA violations without facing double damages. Under the FLSA, workers aren't allowed to waive their right to file a lawsuit unless the Department of Labor or a court approves a settlement. The PAID program sets up a mechanism for settlements outside the normal DOL investigation process.

The FLSA's double damages are meant to punish bad-faith actors. Those participating in a PAID program self audit to proactively discover violations are considered good-faith actors.

The PAID program is good for employees, too

According to the DOL, the purpose of the PAID pilot program is to resolve minimum wage and overtime violations "expeditiously and without litigation" in an effort to increase compliance among companies and to get employees their back pay faster.

Employees don't have to accept the settlement offer, and employers are legally prohibited from retaliating against workers who choose not to

Many details, including start date and deadlines, not yet known

The program has not yet been initiated and, as a pilot program, it will only last about six months before being reevaluated. Any employer covered by the FLSA is eligible to participate -- except those already involved in a DOL audit or lawsuit.

If you have any concerns about FLSA violations, this could be an exceptional opportunity to minimize the potential penalties associated with them. You can learn about the PAID program launch dates, deadlines and other details by signing up for the Wage and Hour Division's Key News Alerts, or by reaching out to your employment law or corporate counsel.

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