The U.S. Department of Labor’s Wage and Hour Division (WHD) has announced a new nationwide pilot program, called the Payroll Audit Independent Determination (PAID) program, which is designed to facilitate resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). According to the WHD’s website describing the program, the program’s primary objectives are to resolve wage and hour claims expeditiously and without litigation, to improve employers’ compliance with overtime and minimum wage obligations and to ensure that more employees promptly receive any owed back wages.

WHD states that it 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.

Once the pilot program launches, all FLSA-covered employers will be eligible to participate. The program will cover 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. But, employers will not be able to 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 will not be able to initiate the process when an employee’s representative or counsel has already communicated an interest in litigating or settling the issue.

The potential benefit to employers that choose to participate is that, although they will be required to pay all back wages due, they will be able to avoid liquidated damages or civil monetary penalties that otherwise might have been due in litigation. Employees will not be required to accept the back wages determined to be owed to them and will not waive their right to a private cause of action should they decline. Employees who do accept the amount determined to be owed to them will only be required to release claims related to the specific alleged violation over the specific period of time that is addressed.

Employers that are concerned about the compliance of their payroll practices will want to follow this development closely, but the program may not be a fit for everyone. We plan to do another post on Employer Law Report when the actual launch is announced.