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Businesses Slow to Self-Report Wage Offenses Under New Plan (1)

Sept. 26, 2019, 3:05 PMUpdated: Sept. 26, 2019, 7:52 PM

Only a sliver of employers are taking the Labor Department up on a new program to self-report wage-and-hour violations so far, but the program already is paying off in the form of $4.1 million recovered for workers, the DOL said Sept. 26 in a report to Congress.

The Labor Department processed 74 cases in the first 18 months of the voluntary program, or about 1 percent of its total compliance actions over the same time, according to the report. State and local governments accounted for nearly a quarter of employers that self-reported violations. Participants paid roughly $55,000 per audit, more than four times the amount of back wages recovered per investigation department-wide.

“WHD launched the PAID program as a nationwide pilot with confidence that well-intentioned job creators would use it to do the right thing, get wages into the hands of their employees more quickly, and move forward in compliance,” Cheryl Stanton, the department’s Wage and Hour Division administrator, said in a statement announcing the report’s release. “That is exactly what has happened. The efficiencies created by this program enable WHD to recover more wages for American workers by focusing on violators.”

The Payroll Audit Independent Determination program is designed to allow employers to voluntarily comply with federal wage and hour laws. It’s drawn criticism from worker advocates who say the program lets businesses off the hook without having to pay additional, liquidated money damages for shortchanging employees.

“It seems like the administration continues to look for creative get out of jail free cards for employers,” said Bryan Schwartz, a California lawyer who represents workers in wage-and-hour cases. “If the idea is that employers acting in good faith are going step forward to alert the Labor Department that they have violated the law, it’s just hard for me to imagine.”

Many of the 7,400 workers who received back pay as a result of a PAID audit got significantly less than the $55,000 average payout touted in the report. Half of those workers were paid less than $8,000 for unpaid minimum wages and overtime, according to the report.

Some management attorneys also have expressed skepticism about the program. They say self-reporting federal violations could open companies up to lawsuits under similar state and local laws. Attorneys general in blue states like California and New York have slammed the program, pledging to continue to go after employers accused of wage violations in state court.

“I think that it can be a good program in the right circumstances,” said Brett Coburn, a partner at Alston & Bird who represents businesses in employment matters. “One of the pros is that if you identify a problem and you decide you want to get it fixed, you can do that and avoid some legal fees and penalties. But I think a lot of companies are just very reluctant to raise their hand and say, ‘I did something wrong,’ even if the outcome might make sense financially.”

The Labor Department enforces the federal law that requires employers to pay certain employees at least $7.25 an hour and time-and-a-half overtime wages for all hours worked beyond 40 a week. The DOL recently finalized a rule to make some 1.3 million workers newly eligible for overtime pay. The regulation peels back an Obama-era proposal to extend overtime protections to some 4 million workers.

Compliance Shift

The PAID program is part of a broader effort by the Labor Department to help employers understand and comply with a number of legal responsibilities. The department last year launched a new office of compliance initiatives, designed to reach out to employers and workers to clarify their rights and obligations.

DOL investigators and lawyers also have continued to combat wage-and-hour violations through the courts and other enforcement mechanisms. The department said it recovered a record $304 million in back pay for workers during the previous fiscal year.

Wage-and-hour enforcers mostly target “low wage, high violation industries,” including the retail, food services, construction, and health-care sectors.

The department said in the report that the PAID program is in part intended to reach employers in industries that aren’t within that target. The largest monetary award under the program so far was from an unidentified employer that agreed to pay workers $746,000.

To contact the reporter on this story: Chris Opfer in New York at copfer@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com