The US Department of Labor is trying to become a much friendlier agency when dealing with employers, really they are. They have reinstituted opinion letters, where employers can reach out to the USDOL and get information about a situation, that handled incorrectly could result in a lawsuit. These opinion letters can then act as guidance for other employers to help them avoid making similar mistakes. Additionally, Secretary Acosta has announced a program called PAID that will allow employers to voluntarily report unintentional wage and hour violations. By doing so voluntarily, the employer, while having to pay the back wages, will avoid penalties, assessments and lawyer fees. Sounds like a winning program doesn’t it? Or does it? That may depend on how much you trust the government.

Trust? Now and in the future.

Attorneys David Baron and Michael DeLarco, of Hogan Lovells, raise questions about the use of this program that all employers should consider before entering into PAID. The acronym stands for Payroll Audit Independent Determination (PAID).

The PAID program provides a framework for proactive resolution of potential overtime and minimum wage violations under the FLSA. The program’s primary objectives are to resolve such claims expeditiously and without litigation, to improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.

The incentive for the employer to engage in this is:

This program enables employers to expeditiously resolve inadvertent minimum wage and overtime violations without litigation. Additionally, although WHD will require payment of all back wages due, WHD will not require additional payment of liquidated damages or civil monetary penalties when employers choose to participate in the program and proactively work with WHD to fix and resolve the compensation practices at issue.

Considerations

However, according to Baron and DeLarco, the following considerations should be made by employers:

1. First, what effect, if any, will an employer’s participation in PAID have on potential claims under applicable state and local law, even if a settlement is reached?
2. Second, will employees apprised of potential violations by WHD be inclined to accept a settlement agreement that does not include liquidated damages or interest?
3. Third, is there anything preventing such employees from using the information gleaned from a self-reporting employer to file a lawsuit?
4. Fourth, will the information and data employers provide to the WHD be discoverable and deemed an admission in future lawsuits, especially by employees who choose not to participate?
5. Finally, it is not clear whether and to what extent WHD will examine a self-reporting employer’s records for violations in addition to what is self-reported, and whether employers should open themselves up to that scrutiny.

Both them say that the consideration of these questions may have a “chilling” effect on employers using this program. For employees, would the bigger question be whether they want their back pay quickly, or do they want to roll the dice and take a chance of getting more money as a result of a lawsuit, just much, much later? Employers may have to assess that likelihood before proceeding. That may change my initial question from how much do you trust the government to how much do you trust your employees?