From JDSpura, David Baron, Michael DeLarco and Zachary Siegel describe the Department of Labor’s (DOL) initiative to encourage employers to engage in a self-audit and resolve potential violations. They also raise a number of questions about the program that may inhibit participation in the program. This program might provide an opportunity for employers who misclassified workers as independent contractors to correct any misclassifications. They write:
During a Congressional hearing on March 6th, Labor Secretary Alexander Acosta unveiled a six-month pilot program intended to encourage employers to self-audit and self-report accidental violations of the Fair Labor Standards Act (“FLSA”). Under the program, called Payroll Audit Independent Determination (PAID), the Wage and Hour Division (WHD) of the U.S. Department of Labor will attempt to facilitate settlement agreements between employers who self-report and affected employees. Employers who qualify for PAID and agree to pay back wages due will not be subject to liquidated damages or civil penalties and attorneys’ fees (all of which an employee could get if he or she files a lawsuit) under the FLSA. Affected employees will have the right to choose whether to accept back payment in exchange for a release of claims.
There are several open questions about PAID that employers should keep in mind at this time. First, what effect, if any, will an employer’s participation in PAID have on potential claims under applicable state and local law, even if a settlement is reached? Second, will employees apprised of potential violations by WHD be inclined to accept a settlement agreement that does not include liquidated damages or interest? Third, is there anything preventing such employees from using the information gleaned from a self-reporting employer to file a lawsuit? Fourth, will the information and data employers provide to the WHD be discoverable and deemed an admission in future lawsuits, especially by employees who choose not to participate? Finally, it is not clear whether and to what extent WHD will examine a self-reporting employer’s records for violations in addition to what is self-reported, and whether employers should open themselves up to that scrutiny.