State Attorneys General Push Back on Labor Department’s PAID Program

State Attorneys General Push Back on Labor Department’s PAID Program

Last month, the US Department of Labor’s Wage and Hour division announced that it was preparing a six-month pilot of the Payroll Audit Independent Determination (PAID) program, to launch this month, which will allow employers to self-report potential overtime and minimum wage violations under the Fair Labor Standards Act and resolve them by paying employees the back wages they are owed, avoiding additional fines and the expensive and time-consuming process of litigation. A similar program was offered under the Bush administration during the 2000s, but the Wage and Hour division took a more aggressive enforcement approach under former President Barack Obama, often assessing double damages.

Wage and hour disputes already being litigated or investigated are not eligible for resolution through the PAID program, nor can employers use it to resolve the same violation twice. Advocates of the PAID program consider it a win-win for employers and employees, allowing underpaid workers to be made whole much more quickly, without having to pay attorney fees. Critics, however, say it goes against the division’s role as an enforcer of employment law and lets unscrupulous employers off the hook, while also expressing concern over having voluntary self-audits take the place of Labor Department investigations.

Among those critics are a number of state attorneys general, who co-signed a letter sent by New York’s Attorney General Eric Schneiderman on Wednesday to Labor Secretary Alexander Acosta informing him that they had serious concerns about the PAID program and would not refrain from pursuing wage and hour investigations under state law against employers who participate in it:

The PAID Program releases employers from the obligation to pay liquidated damages, interest, or penalties. This is troubling on all counts. First, failure to include interest means that employers who commit wage theft are, in effect, getting an unlawful, interest-free loan from their employees – including from low-wage workers who rely on their hard-earned wages to pay for rent, groceries, and childcare. Second, failure to include liquidated damages removes an essential deterrent for employers not to break the law. Third, federal law provides that willful or repeated violations warrant the imposition of civil monetary penalties, but this Program leaves penalties out of the equation. Additionally, it appears that the PAID Program will not require employers to pay employees at any applicable higher state or local minimum wage or overtime wage rates, or to pay wages owed during longer state statute of limitations periods. …

Please be advised that we will continue to prosecute labor violations to the fullest extent of our authority, both civilly and criminally, regardless of whether employers have participated in the PAID Program.

In addition to Schneiderman himself, the letter is signed by the attorneys general of California, Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, Pennsylvania, Washington state, and Washington, DC. Allan Bloom, a partner at Proskauer and head of the firm’s wage and hour practice group, had previously expressed concern about the efficacy of the PAID program, noting that would not protect employers against state-level claims. “Unless you employ workers in states without their own wage and hour laws,” Bloom now adds, “Attorney General Schneiderman’s letter should make you think even more carefully about whether the PAID program makes business sense.”