Is the DOL's New Voluntary Wage Violation Program an Opportunity or a Trap?

Earlier this week the Department of Labor (DOL) announced a new program that would allow employers to voluntarily disclose their own violations of the Fair Labor Standards Act (FLSA). Through this voluntary program, referred to by the DOL as the Payroll Audit Independent Determination (PAID), over the next 6 months employers can perform their own self-audits and, if they find they have violated the FLSA, they can notify the DOL and work to repay the employees or former employees. Once notified the DOL will facilitate repayment of any unpaid wages to employees and have employees sign various waiver forms agreeing not to sue the honest employers for further damages under federal law. Whether employees could still bring a lawsuit to collect penalties available under state laws is uncertain.

WHY WOULD AN EMPLOYER VOLUNTARILY DISCLOSE VIOLATIONS OF FEDERAL LAW?

Under the FLSA if an employer fails to pay employees the wages they are entitled to, whether it's overtime pay, straight time wages, or minimum wages, if the employee successfully goes to court to seek redress they could be awarded not just the unpaid wages, but likely liquidated damages equal to the unpaid wages, and their attorney's fees, which could be more than the amount of unpaid wages. Thus, an employee who goes to court and recovers $1,000 in unpaid wages, would likely then receive another $1,000 in liquidated damages, and potentially tens of thousands more in attorney's fees, depending on the situation. Under the PAID program employers would only be liable to pay the back-wage amount, thereby avoiding the liquidated damages and attorney's fees.

In essence, the PAID program gives employers a narrow window over the next 6 months in which they could mitigate their potential losses.

WHAT SHOULD EMPLOYERS DO?

  1. Conduct a full wage audit - now. Employers should routinely have outside legal counsel examine their wage and hour compliance. If you haven't conducted an audit in the past 2 years now is the time. There is no reason to wait, and if you do find something over the next 6 months you will at least have the option of repaying the money as part of this program.

  2. Engage Thompson Coe or another law firm with experience and expertise in conducting compliance audits. Routinely employers will conduct their own internal HR audits. While cost effective it is often difficult to recognize your own mistakes. If you're serious about compliance a fresh set of legal eyes is most effective.

  3. Analyze the results. If mistakes were made and wages are owed have a strategic conversation about whether to use the PAID program or take the risk by not paying. But do it soon because in 6 months the PAID option of mitigating potential risk may be removed.    

Questions about self-audits and the PAID pilot program? Contact Thompson Coe or the HR Hotline at (844) 291-1540.      

 
 
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