The U.S. Department of Labor has a new Payroll Audit Independent Determination or “PAID’’ pilot program. Under it, the DOL invites employers to voluntarily audit their pay practices and disclose compliance issues. The DOL will then review the employer’s calculations and make its own determinations. The employer then pays its employees, and employees normally would be expected to sign a release of any wage claims. The primary benefit of the program is that participating employers are not subject to other civil penalties and liquidated damages.
In some cases, this could clear up wage violations without the extra costs involved in DOL audits or a lawsuit. But (and you had to know there would be several buts), since the DOL conducts its own review, what happens if the employer and the DOL disagree on the back-wages owed? Has the employer just given the DOL a basis to take action or impose additional penalties? We don’t know yet. The DOL may answer this question in the future, but right now it is a real issue.
Even if the DOL is willing to accept an employer’s proposal, affected employees remain free to reject an offer. While in some cases that is not likely, in others there may be significant incentive for employees to do so. Settlements under the program normally go back two years. However, willful violations under the law can go back three years. Establishing a “willful” violation is fairly easy in many cases. So employees who get any guidance may reject a settlement offer so they can press for a third year of pay. Or, they may accept the settlement, but still file suit to collect that third year of back pay. The program does not preclude employees from pursuing claims arising outside the period covered by any payment. And now the employer has essentially acknowledged some error in its pay practices.
In addition to full back wages, employees who sue typically recover an equal amount as liquidated damages, as well as attorney’s fees. Employees who are offered a settlement may well decide that, while an immediate payment is nice, double that amount at no cost to them is much better.
The PAID program is not the clear choice in all cases. If the amount of wages owed is small, an employer may get the low-cost benefit of participating in the program. An employer facing more significant wage issues, like employee misclassifications or systemic problems with off-the-clock work, may create more problems than it solves by participating in the program.