Self-reporting DOL program could expose employers on violations

Employers will want to think carefully about potential ramifications of joining the Department of Labor's new self-reporting program.

There are lots of unanswered questions about PAID (Payroll Audit Independent Determination Program), the Department of Labor’s self-reporting wage violationprogram. The pilot program encourages employers to audit their pay practices and self-report any Fair Labor Standards Act violations they uncover.

According to an HRDive report, there is the potential for problems arising for employers who self-report—but there are solutions, too. However, all is not clear cut and employers will want to think carefully about potential ramifications of joining the program.

For instance, PAID doesn’t resolve state issues around pay, and some states have tougher laws or longer statutes of limitation than the FLSA. California, for instance, has a four-year statute of limitations, while New York has six. The FLSA, on the other hand, has a two-year statute of limitations—three if an employer has acted willfully.

Still, that doesn’t mean that an agreement can’t be reached with a state DOL that essentially duplicates a federal agreement. But that’s something employers need to take into account.

Then there’s the scope of the waivers that will be used. Wage and hour claims can build on one another, as in the case of unpaid overtime that leads to a claim for unpaid back wages—and that claim can bring about an investigation of pay stubs and recordkeeping practices.

Joel O’Malley, a shareholder at Nilan Johnson Lewis, P.A., is quoted saying in the report, “If there’s no full release, you could be releasing some claims but not others.” There’s also the potential issue with an employee who has held two positions at a company, and agrees to a release for one of them. That’s not necessarily a release for both.

And while some employers worry that if they self-report under PAID, the DOL will keep an eye on them for future violations. But Tammy McCutchen, former administrator of DOL’s Wage and Hour Division and current principal at Littler Mendelson, P.C., says in the report that that’s not the way it was done in the past under a similar program, so unlikely to be the way it shakes out now.

While employees don’t have to sign a release of claims to get their back wages, while they may still sue, an individual suit is unlikely to attract much attention among plaintiff’s attorneys—making going to court less likely.

There are some dangers inherent in the independent audits conducted under the program, since attorney-client privilege is waived and some materials surrendered to the DOL will be discoverable under a Freedom of Information Act request.

Naturally, not all employee advocates are in favor of the program, even though it does represent the opportunity to recover wages. Christine Owens, executive director of the National Employment Law Project, for instance, a research and advocacy group for low-wage workers and unemployed workers, says in the report, “This is an antiworker solution without an actual problem—there’s nothing stopping employers from reviewing their practices and giving workers any back wages they’re owed.” Owens adds, “They don’t need DOL to do that now. The only thing that this program does is give employers a get-out-of-jail-free card, which insulates them from responsibility for damages and penalties.”