Eligible employers may now be able to conduct a self-audit of certain wage practices, thanks to a pilot program from the Department of Labor's Wage and Hour Division (WHD). This program — called Payroll Audit Independent Determination (PAID) — was recently launched as a tool for employers to uncover payroll errors on their own. Employers who use the PAID program and discover that they've underpaid some employees can correct their payment errors and coordinate with WHD to avoid penalties.
As a reminder, the Labor Department can pursue administrative solutions or, if necessary, court action to recover back wages when employees have been underpaid. "Violations may result in civil or criminal action, and employers may be assessed civil money penalties of up to $1,100 for each willful or repeated violation of the minimum wage or overtime pay provisions of the law," according to the Labor Department. The ability to avoid such penalties should prompt employers to seek answers and correct their own errors.
To be eligible to use the PAID program, the following must be true:
Important note: This is only a partial list.
To become certified to participate in this program, you'll first need to read through information about the FLSA (called a "compliance assistance review") and PAID on the WHD website (https://www.dol.gov/whd/paid/). This information includes videos and links to WHD webpages that explain overtime pay requirements and who's exempt from overtime eligibility. Also available is an explanation of exemptions for executives, administrative employees, highly compensated employees, computer employees and outside salespeople.
The PAID program provides a list of FLSA recordkeeping requirements to properly document your payroll. This resource specifies which records you must keep and for how long.
Once you've completed the "compliance assistance review," gather the following information to conduct your self-audit:
After you've identified these elements, calculate the amount of back wages owed to each employee.
If a self-audit reveals that your company owes back wages to some employees, simply paying the amounts due before reporting the issue to the WHD doesn't mean that those employees have forfeited their rights to take you to court. Why? In this scenario, WHD didn't supervise the process of the determining the amounts owed, so the agency might still weigh in.
When your self-audit is complete, supply the following data to the nearest WHD office:
What happens after you've submitted all the required paperwork? You're not off the hook until WHD says so. But, according to the PAID program's description, "If WHD accepts you into PAID, WHD will provide you with the proposed scope of the release of liability for the potential violations presented."
Specifically, WHD will tell you how much it thinks you owe employees who were underpaid (which might be exactly what you already determined), and supply "settlement terms for each employee, which employees may sign to receive payment." Once you've paid all back wages due by the end of the next full pay period and provided proof to the WHD that you have done so expeditiously, then you're done.
Consult with a labor attorney before deciding to participate in the PAID program to ensure that you aren't overlooking any potential legal hazards in doing so.
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