Wage and Hour Division (WHD)
Coming Soon: PAID
The Wage and Hour Division (WHD) has announced a new nationwide pilot program, the Payroll Audit Independent Determination (PAID) program, which facilitates resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (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.
WHD will implement this pilot program nationwide for approximately six months. At the end of the pilot period, WHD will evaluate the effectiveness of the pilot program, as well as potential modifications to the program, to determine its next steps.
Please sign up for WHD Key News Alerts to learn when PAID will launch and for additional details about the program.
Questions and Answers about PAID
Program Overview and Participation
- What is the purpose of this pilot program?
- Who can participate in this pilot program?
- May employers use this program to resolve claims that are already being investigated or litigated?
- What types of violations does this program address?
Benefits of Participation
- How does this program benefit employees?
- Does this program require employees to surrender any rights?
- Why should employers participate in this program?
How Does the Program Work?
- What must an employer do to participate in the program?
- What does the employer do after it reviews and assembles the above information?
- What happens after the employer provides the requisite information and acknowledgments?
- After confirming the back wages what happens next?
- By when must employers pay the back wages to employees?
Program Overview and Participation
1. What is the purpose of this pilot program?
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.
WHD will implement this self-audit pilot program nationwide for approximately six months. At the end of the pilot period, WHD will evaluate the effectiveness of the pilot program, potential modifications to the program, and whether to make the program permanent.
2. Who can participate in this pilot program?
All FLSA-covered employers are eligible to participate in the pilot.
3. May employers use this program to resolve claims that are already being investigated or litigated?
No. An employer may not initiate the process to resolve any issues for which WHD is already investigating the employer, or which the employer is already litigating in court, arbitration, or otherwise. An employer likewise may not initiate the process when an employee’s representative or counsel has already communicated an interest in litigating or settling the issue.
4. What types of violations does this program address?
This program covers potential violations of the FLSA’s overtime and minimum wage requirements. This could include, for example, violations based on alleged “off-the-clock” work, failures to pay overtime at one-and-one-half times the regular rate of pay, or misclassification of employees as exempt from the FLSA’s minimum wage and overtime requirements.
Benefits of Participation
5. How does this program benefit employees?
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.
6. Does this program require employees to surrender any rights?
It does not. 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.
By allowing employers to participate in the PAID program, WHD does not waive its right to conduct any future investigations of the employer. Also, employers cannot use the program to repeatedly resolve the same violations, as this program is designed to identify and correct non-compliant practices.
7. Why should employers participate in this program?
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.
How Does the Program Work?
8. What must an employer do to participate in the program?
To participate in the program, employers must first review the requisite information about the program and compliance assistance materials—all of which will be available on this website. This material will not only help employers understand the program, but also help them more fully understand their minimum wage and overtime obligations under the FLSA before conducting their self-audit.
After reviewing the materials, employers must then audit their compensation practices for potentially non-compliant practices. If the employer discovers any non-compliant practices, or if the employer believes its compensation practices may be lawful but wishes to proactively resolve any potential claims anyway, the employer must then:
- specifically identify the potential violations,
- identify which employees were affected,
- identify the timeframes in which each employee was affected, and
- calculate the amount of back wages the employer believes are owed to each employee.
9. What does the employer do after it reviews and assembles the above information?
The employer then contacts WHD to discuss the issues for which it seeks resolution. Unless WHD denies the employer’s request to participate in the program at the outset, WHD will then inform the employer of the manner in which the employer must submit required information, including the following:
- each of the calculations described above—accompanied by both evidence and explanation concerning how the calculations were made;
- a concise explanation of the scope of the potential violations for possible inclusion in a release of liability;
- a certification that the employer reviewed all of the information, terms, and compliance assistance materials;
- a certification that the employer is not litigating the compensation practices at issue in court, arbitration, or otherwise, and likewise has not received any communications from an employee’s representative or counsel expressing interest in litigating or settling the same issues; and
- a certification that the employer will adjust its practices to avoid the same potential violations in the future.
10. What happens after the employer provides the requisite information and acknowledgments?
WHD will then evaluate the information and contact the employer to discuss next steps, including the collection of any other information necessary for WHD to assess the back wages due for the identified violations.
11. After confirming the back wages what happens next?
After WHD assesses the back wages due, it will issue a summary of unpaid wages. WHD will also issue forms describing the settlement terms for each employee, which employees may sign to receive payment. The release of claims provided in the form will match the previously agreed-upon language and, again, must be limited to only the potential violations for which the employer had paid back wages. Employers are responsible for issuing prompt payment; WHD will not distribute the back wages.
12. By when must employers pay the back wages to employees?
Employers must pay all back wages due by the end of the next full pay period after receiving the summary of unpaid wages, and provide proof of payment to WHD expeditiously.
Additional information is forthcoming.