In a press release dated September 26, 2019, the DOL Wage and Hour Division announced that since implementing its PAID Program in April of 2018, it has completed 74 cases, with back wage findings of $4,131,238 found due to 7429 employees.
Under the PAID program, employers were to conduct self-audits and self-report FLSA violations they find to the WHD. If accepted into PAID, employers then worked with WHD to correct the violations and to pay 100% of the back wages due to affected employees. WHD would not impose penalties or liquidated damages for employers who choose to participate in the program – which is a BIG plus for employers. Still, employers were slow to warm up to PAID, likely because the idea of admitting to violations and turning yourself into the WHD was hard to accept. You can see previous Wage and Hour Watch blog posts on the Paid Program here, and here.
Resolution of violations under PAID involves WHD supervision of back wage computations and payment, including the use of WHD-issued release/receipt forms. Employees who sign the DOL forms and accept the back wage payments release their FLSA rights to privately sue the employer for the unpaid wages. Thus, employers obtain official DOL approval of the settlement through PAID, which cannot be achieved by employers who try to fix issues found in self-audits on their own and outside of the program.
Although the press release trumpeted the success of PAID, a comparison of its numbers to WHD’s overall numbers indicates PAID results are relatively insignificant. During the period from April 1, 2018 through September 15, 2019, WHD completed 39,991 investigations, 74 of which were PAID cases. That’s only .02%. WHD collected a total of $454,080,497 in all cases during the same 18-month period, $4,131,238 of which was recovered in PAID cases, equal to only 1% of all back wages collected. In all, for the period WHD found back wages for 449,412 employees, and 7429 employees received back pay resulting from PAID cases (1.7%). All statistics come from WHD’s report on PAID to the Senate Appropriations committee.
These low percentages are partially explained by the fact that the PAID Program is in its pilot stage. Additionally, DOL states, “WHD learned that employer outreach and education required more time than anticipated to attract employers to the program, particularly in response to the employer and legal communities’ cautious approach to the pilot”. Not surprisingly, employers apparently are reluctant to voluntarily admit to violating the FLSA and open their books to WHD, for reasons discussed in our previous posts. Interestingly, it appears that public sector employers may have fewer reservations about the program. State and local government employers represented 23 percent of all concluded PAID cases—the largest group of employers within a single industry.
According to WHD’s report, the efficiencies of the PAID Program stand out, and warrant continuation of the program. For example, back wages per investigator hour for PAID cases ($2,864) were more than ten times greater than for all investigations ($279). Moreover, PAID self-audits averaged 19 investigator hours per case as compared to 41 hours per investigation agency-wide. (Isn’t it strange but wonderful to be talking about increased efficiencies in a federal agency?) In light of these findings, and in keeping with its pro-business approach to compliance, WHD has announced that it will continue using the PAID self-audit program, collecting and analyzing program data, and determining how WHD can improve and refine the process.
If this positive report from WHD makes you think that someday you may consider utilizing PAID, keep in mind some words of caution from our previous posts: “An employer needs to be mindful that, even if it is operating under the PAID Program, an employee or group of employees can decline the proffer of payment and institute private FLSA litigation. And most likely the self-audit materials would be the subject of discovery in that litigation.” The DOL’s report does not indicate how often this occurred, but in fairness, the DOL might not track such data.
In order to protect the company, and to ensure the your effort complies with the intricacies of the program, any employer considering participating in PAID is well advised to get professional employment law assistance from the beginning. This advice also holds true for FLSA self-audits conducted without WHD involvement, outside of the PAID Program.