Why now is a great time for a wage and hour self-audit. Wait! Hear me out on this…

Near the end of last month, I blogged here about this Wage and Hour Division (WHD) Field Assistance Bulletin. The  U.S. Department of Labor announced that, in most instances, it would no longer pursue pre-litigation liquidated damages arising out of a wage and hour investigation of your company.

No more liquidated damages.

Previously, for every dollar in back wages that your company owed for an FLSA wage-and-hour violation, you’d owe an additional dollar in liquidated damages. And that doesn’t include any assessment for civil money penalties.

But, as of July 1, 2020, the WHD stopped assessing pre-litigation liquidated damages if any one of the following circumstances exists:

  • there is no clear evidence of bad faith and willfulness;
  • the employer’s explanation for the violation(s) show that the violation(s) were the result of a bona fide dispute of unsettled law under the FLSA;
  • the employer has no previous history of violations;
  • the matter involves individual coverage only
  • the matter involves complex section 13(a)(1) and 13(b)(1) exemptions; or
  • the matter involves State and local government agencies or other non-profits.

Consider getting PAID instead!

Let’s assume that you are one of those companies that has a squeaky clean record with the WHD. BUT, you’re concerned that there may be a few questionable pay practices going on at work. Or maybe coronavirus has hit your business so hard that you’ve missed payroll once or twice, which is technically a wage and hour violation.

You can conduct your own wage and hour audit now and self-report those violations to the WHD.

Why the heck would we do this, Eric?

It’s all part of the WHD’s Payroll Audit Independent Determination (PAID) program, which facilitates the resolution of potential FLSA violations. Employers may then work in good faith with the WHD to correct their mistakes and to quickly provide 100% of the back wages due to their affected employees and avoid the imposition of liquidated damages. Here is a PAID Program FAQ.

Indeed, the WHD is touting PAID now as a way for employers that missed payroll, or otherwise inadvertently found themselves in violation of the FLSA as they dealt with the effects of the coronavirus, to pay their workers the wages they earned, and get back to business.

What’s the alternative?

You do nothing, clutch your pearls, and hope that your wage and hour violations — like something as simple as missing payroll — get swept under the rug. The problem with that is that maybe one or more of your employees get wise, consult a lawyer, and all of a sudden, your business is staring down the barrel of a wage and hour class/collective action where there will be no break on liquidated damages. Plus, you’ll pay interest and attorney’s fees — theirs and yours.

Me? I’d go with door number one.

Even without PAID, self-audits to proactively avoid wage and hour issues are a great way to mitigate risk. I know that you’ve got so much on your plate right now, but given the WHD’s willingness to work with companies that take wage and hour matters seriously, consider consulting your employment lawyer to see if now is the right time for a self-audit.

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