Labor Department to Resume Supervised Settlements of Admitted Wage and Hour Violations

Labor Department to Resume Supervised Settlements of Admitted Wage and Hour Violations

The US Department of Labor’s Wage and Hour division announced last week that it would soon begin a six-month pilot of the Payroll Audit Independent Determination (PAID) program, which will give employers an avenue for resolving potential overtime and minimum wage violations under the Fair Labor Standards Act by self-auditing and voluntarily reporting these violations to the division:

This program will ensure that more employees receive back wages they are owed—faster. Employees will receive 100% of the back wages paid, without having to pay any litigation expenses or attorneys’ fees. The program requires employers to review WHD’s compliance assistance materials, carefully audit their pay practices, and agree to correct the pay practices at issue going forward. These requirements improve the employers’ compliance with their minimum wage and overtime obligations and further protect the rights of workers. …

It is purely the employee’s choice whether to accept the payment of back wages due, and employers are prohibited from retaliating against the employee for his or her choice. If the employee chooses to not accept the payment, the employee will not release any private right of action. Additionally, if the employee chooses to accept the payment, the employee will not grant a broad release of all potential claims under the FLSA. Rather, the releases are tailored to only the identified violations and time period for which the employer is paying the back wages.

Wage and hour disputes already being litigated or investigated by the Labor Department will not be eligible for resolution through the PAID program. Employers also cannot use the program to repeatedly resolve the same violation. The six-month pilot is expected to launch in April; once it concludes, the department will assess its effectiveness and decide whether to maintain it going forward.

A program similar to PAID was offered under the Bush administration during the 2000s, but the Wage and Hour division changed course under President Barack Obama and adopted a more aggressive approach to enforcement with an emphasis on thorough, targeted investigations that often assessed double damages. That Labor Secretary Alexander Acosta would revive the employer-friendly program is in keeping with the pro-employer politics of the Trump administration. Many observers, including both advocates and opponents of voluntary reporting, saw this change coming last year, as Ben Penn reported at Bloomberg BNA last July.

Critics of the PAID program’s approach call it “a get out of jail free card for employers,” as Judy Conti, federal advocacy coordinator for the National Employment Law Project, put it in comments to the Wall Street Journal. Speaking to Politico’s Morning Shift, David Weil, the head of the Wage and Hour division under the Obama administration, compared it to a self-reporting system for traffic tickets:

“If [police] had people report every time they went over the speed limit on the highway … and you got a note saying ‘Oh, you shouldn’t do that’ — what purpose does that serve for an enforcement agency?” Weil said. He characterized DOL’s message this way: “We want you to comply with the law, but when you don’t comply with the law, we’re going to make you pay what you should have anyway.” He continued: “I don’t see it moving the needle at all.”

Libby Hendrix, who retired in 2013 as an assistant administrator of the division, told Bloomberg BNA’s Penn last year that she worried about the division’s resources being pulled away from “what might be a more important violation that needs to be investigated” and about putting investigative authority in the hands of the management attorneys conducting the voluntary self-audits. “The upside, obviously, is people are getting money that they might not otherwise receive,” she noted.

The Labor Department and supporters of the program, however, say it’s a win-win for employers and employees. As Alfred B. Robinson, Jr., a shareholder at Ogletree Deakins, noted at the National Law Review, the PAID process is considerably speedier and less expensive than Wage and Hour investigations or litigation:

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.

The purpose of the program is to encourage more employers to self-report, sparing the division’s time and investigative resources while helping employees get paid the back wages they are owed more quickly. Workforce columnist Jon Hyman is a fan of voluntary reporting, but fears that employers might hesitate to participate out of fear that doing so will make them targets for future investigations:

I worry that participating in this program may fast-track an employer onto some super secret DOL list for future FLSA audits. As the DOL itself flags, “By allowing employers to participate in the PAID program, WHD does not waive its right to conduct any future investigations of the employer.” Unless and until the DOL confirms that it will not use violations resolved under this program against employers in future audits to find repeat violations and willfulness, I have some concerns about employers using this program.