Rich Meneghello, BridgeTower Media Newswires
Let’s say you have a lingering concern that you have a wage and hour problem on your hands. Perhaps it has suddenly dawned on you that a certain pay practice you’ve had in place for years could be legally suspect. Or let’s say that you come to realize that you have been underpaying some of your employees for quite some time, but so far, no one has complained about it. What are your options?
Before last year, you had two main choices. You could stick your head in the sand and hope that the status quo continues without any problems. Or you could try to fix the problem going forward, making a determination about whether to also clean up any existing messes. Then a new option arose last year: you can take part in the federal government’s PAID program. So, what do you need to know about PAID? And should you give it a shot?
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What is the PAID program?
Let’s start with some basics. The formal Payroll Audit Independent Determination (PAID) program is run by the U.S. Department of Labor (USDOL) and provides an avenue to pay back wages, achieve compliance with federal wage and hour law, and move forward without the time and effort necessary to do battle in litigation or suffer through an agency-initiated investigation. In essence, an employer can agree to cooperate with the USDOL and voluntarily correct wage and hour errors that might violate the Fair Labor Standards Act (FLSA).
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You’ve screwed up; now what?
The traditional way an employer will find itself considering whether to take part in PAID is after it has uncovered an error – whether in understanding, application or computation – that has caused FLSA violations. Sometimes employers choose to take the “ignorance is bliss” approach, crossing their fingers and hoping nothing ever comes of the possible problem. This approach is certainly less risky if the employer has already discontinued the practice that led it down the rabbit hole in the first place, but it’s still fraught with some element of peril.
Other times, an employer might decide that it is best to change the practice prospectively and eliminate the risk of forward-looking liability. That’s great, and it’s the right approach for most employers, but there still is a big decision to make: will you simply fix things going forward, or will you also try to clean up past errors and make things right by way of employees who may have been underpaid for some period of time in the past?
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This is where PAID fits in ...
Let’s start by agreeing that if you decide to cross your fingers and hope for the best, you likely won’t want to call upon the government to help you fix any problems. And let’s also agree that if you simply want to fix things going forward and don’t have any intention of trying to remedy any past violations, PAID is not a good option.
But what if you fall into that third camp, where you are seeking not only a prospective fix to correct future problems but also a retroactive resolution to errors that you might have made in the past? PAID may be a good fit.
Here it’s important to remember that it may not be possible to simply “settle” potential FLSA claims based on such errors, because the law says parties cannot fully resolve FLSA claims without the “supervision of” the USDOL or court approval. So short of inviting litigation or a full-blown government investigation, the only way you will be able to rest easy for the future is by taking part in the PAID program. It has been approved by the government as an official tool to resolve such claims.
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PAID in full
The PAID program provides a framework for you to proactively resolve potential FLSA claims. At its core, the program entails a limited review where you control the scope of government scrutiny, perform the related calculations to ensure proper payments are made, and present your final findings to the agency. That isn’t to say the USDOL might not want to discuss a further specific point with you, but that’s a risk you have to face if you open yourself up to the USDOL’s review.
Once the formal review is finalized, the USDOL will supervise the necessary payments to your employees and tailor its documentation – such as the breadth and scope of any release language – to the specific circumstances at hand.
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Pros and cons of PAID
Why take part in PAID? First off, once your review is completed, you will be able to sleep at night knowing that you have eliminated a real risk to your business. And the costs will most likely pale in comparison to anything you’d have to face if the dispute arose through a USDOL investigation or a federal lawsuit. That’s because you wouldn’t have to dispute liquidated damages, let alone deal with attorneys’ fees that are entitled to aggrieved employees who bring private lawsuits in court.
The downside? Let’s face it – there is something intrinsically odd about self-reporting potential legal violations to the federal government. But peeling back the fears you might have and taking a closer look might demonstrate that the downsides are minimal. Are you worried that a PAID matter will leave a black mark on your record? In reality, a prior PAID matter should only reflect favorably on you should the government subsequently receive an employee complaint that necessitates investigation. Are you worried that inviting the government into your workplace will evolve into an investigation on the spot? According to the USDOL, if another issue comes to its attention during the process, it will promote – but not demand – resolution.
Deciding whether to take part in PAID will vary depending on circumstances, but I recommend at least considering it, or talking with your attorney about it. While PAID is not always the ideal solution, it is the best tool that USDOL can offer employers for proactively resolving matters.
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Rich Meneghello is a partner in the Portland office of Fisher Phillips, a national firm dedicated to representing employers’ interests in all aspects of workplace law. Contact him at 503-205-8044 or rmeneghello@fisherphillips.com, or follow him on Twitter – @pdxLaborLawyer.
