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:
When the US Department of Labor proposed a new rule in December concerning the treatment of tips under the Fair Labor Standards Act, the proposal drew fire from critics who said it effectively permitted employers such as restaurants to withhold their employees tips. The regulation, which would only apply to employers who pay a full minimum wage and do not take a tip credit, would allow these employers to require that tips be pooled and shared with back-of-house staff who do not traditionally receive direct tips, such as restaurant cooks and dishwashers—a practice banned by the Obama administration.
A stipulation in the regulation that managers could use pooled tip money to make structural improvements, like expanding the dining area, or to lower menu prices, led employee advocates to argue that it would result in many tips not accruing to employees at all. The Labor Department publicly contended that these fears were baseless, but last month, an internal analysis of the proposal’s impact came to light, showing that employees could indeed lose out on billions of dollars in tips. Senior officials in the department shelved the analysis and ordered staff to revise their methodology to produce a more favorable result. The revelation cast doubt on the future of the rule and led to calls from members of Congress to discard it and warnings from state attorneys general that the department may have broken the law in rolling out the proposal.
The rule is still pending, but now, if it does come into effect, it will do so with its critics’ main objection addressed.
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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.
Federal, state, and local minimum wages are a perennial point of contention in American politics, with conservative politicians and employers saying they suppress employment and hurt small businesses, while unions and labor activists say higher pay floors are necessary to ensure that low-wage employees are able to meet their needs. Less discussed is the matter of how strictly minimum wage laws are enforced in the first place. The answer? Not well, according to a recently concluded investigation by Politico, which found that “workers are so lightly protected that six states have no investigators to handle minimum-wage violations, while 26 additional states have fewer than 10 investigators,” Marianne LeVine writes:
Given the widespread nature of wage theft and the dearth of resources to combat it, most cases go unreported. Thus, an estimated $15 billion in desperately needed income for workers with lowest wages goes instead into the pockets of shady bosses.
But even those workers who are able to brave the system and win — to get states to order their bosses to pay them what they’re owed — confront a further barrier: Fully 41 percent of the wages that employers are ordered to pay back to their workers aren’t recovered, according to a POLITICO survey of 15 states.
The “Freelance Isn’t Free Act” passed by the New York City Council last October came into effect on Monday. The law entitles freelancers to a written contract when they have a relationship with a private sector business that pays them at least $800 within four months, and to damages if they request a contract and are denied one, or if the business fails to pay them on time or retaliates against them for asserting their rights under the law. At JD Supra, Bond Schoeneck & King attorney Richard Kass explains the new penalties New York City businesses could face:
There is no penalty for simply failing to provide a contract. Penalties are imposed only if the hirer refuses to provide a written contract after the freelancer requests one. It would be prudent, though, for hirers to provide written contracts to freelancers as a matter of routine.
The penalty for failing to provide a written contract upon request is $250. The penalty for failing to pay a freelancer as promised is double damages. The penalty for retaliation is the value of the contract. In each type of case, the freelancer’s attorneys’ fees can also be awarded. Hirers who are found to have engaged in a “pattern or practice” of violating this new law can be fined up to $25,000.
Hodgson Russ attorneys Peter Godfrey, John Godwin, and Emina Poricanin provide a detailed breakdown of the finer points of the Freelance Isn’t Free Act, also at JD Supra. One potentially thorny issue is how the new law will affect employers from outside New York who contract with freelancers living in the city, who in theory are covered by its protections. Gothamist’s Emma Whitford asked the law’s author and a local employment lawyer about that back in November:
On Thursday, the New York City Council unanimously passed a landmark bill aimed at protecting the city’s millions of freelance workers from wage theft. The New York Times has the details:
Known as the Freelance Isn’t Free Act, the measure requires anyone hiring a freelance worker to agree in writing to a timetable and procedure for payment, and increases the potential awards to freelancers bringing legal complaints against those who have failed to pay them promptly.
The bill represents one of the earliest policy efforts to grapple directly with the growth in the so-called gig economy — a term that typically refers to the likes of temporary workers, contract workers, independent contractors and freelance workers. According to one estimate by the economists Lawrence Katz and Alan Krueger, this group grew to almost 16 percent of the work force in late 2015 from roughly 10 percent in early 2005.
New York Mayor Bill de Blasio is expected to sign the measure into law. According to the Freelancers Union, which was heaving involved in crafting the legislation, half of US freelancers reported having trouble getting paid for their work in 2014, and more than 70% have dealt with the issue at least once in their careers.
The bill stipulates that freelancers be given a written contract when they have a relationship with a business that pays them at least $800 within four months, and awards them double-damages if they are not paid on time and win their court case. It will also force the losing company to pay the freelancer’s legal fees, which Freelancers Union executive director Sara Horowitz believes will lead to paradigm shift in how seriously the legal community, as well as companies, perceive the problem in the future.
In addition, companies that are repeat offenders could also face lawsuits from the city itself, with civil penalties up to $25,000.
New York Attorney General Eric Schneiderman believes so, and is suing the pizza chain, the Wall Street Journal reports, alleging that the company “mandated that [franchisees] use a payroll software system that under-calculated gross wages and failed to fix it when problems were brought to their attention”:
Mr. Schneiderman claims the company is liable for the alleged underpayment because it’s a joint employer with its franchisees, an argument at the heart of a broader industry fight over who’s responsible for the worker-related actions of franchisees. … The lawsuit against Domino’s and three of its franchisees, filed in state Supreme Court in Manhattan on Monday, claims that the company’s faulty payroll system led to workers being underpaid a total of at least $565,000 for 10 of its stores. Mr. Schneiderman says he is seeking that amount for employees but wants a full accounting of any wages owed.
Domino’s spokesman Tim McIntyre said Tuesday that the pizza chain’s franchisees, not the company, are solely responsible for the hiring, firing, and payment of their own employees but that the company had been working for more than three years to help its franchisees understand wage and hour laws. Regulators say they’re trying to keep up with labor market changes that are resulting in more fractured work arrangements that can leave employees and the government unsure about who’s responsible when a grievance arises.
The New York Times explains how this case is different than previous lawsuits against Domino’s franchisees: