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DOL Ends Trump Plan to Let Employers Report Wage Violations (1)

Jan. 29, 2021, 7:31 PMUpdated: Jan. 29, 2021, 10:53 PM

The Biden administration nixed a Trump-era initiative that encouraged businesses to self-report wage-and-hour violations to the Labor Department in return for protection against further legal liability, an early signal of a stricter enforcement posture.

The DOL’s Wage and Hour Division launched the self-reporting test pilot in 2018, a move that some management-side lawyers welcomed as a method to make workers whole while safeguarding their clients from private litigation and additional back-wage penalties.

By terminating the Payroll Audit Independent Determination program in President Joe Biden‘s first full week in office, the department’s new leadership demonstrated an inclination to return to the Obama-era approach of relying on the stick more than the carrot to achieve compliance with minimum wage and overtime laws. Plaintiff lawyers and Democrats criticized the pilot system for depriving workers of their chance at private right of action.

“Workers are entitled to every penny they have earned,” Wage and Hour Division Principal Deputy Administrator Jessica Looman said in a statement Friday. “The Payroll Audit Independent Determination program deprived workers of their rights and put employers that play by the rules at a disadvantage. The U.S. Department of Labor will rigorously enforce the law, and we will use all the enforcement tools we have available.”

The program was slow to take off, due in part to employer fears that self-reporting back pay owed to workers would lead to employees suing under state laws, particularly in blue states where attorneys general mounted opposition to the Trump administration’s plan. But it had started to show an uptick in participation, with the most recent data from 2020 revealing it led to the collection of more than $7 million in wages for some 11,000 workers.

“By eliminating the voluntary PAID program, the Biden Administration put trial lawyers’ interests over workers’ benefits,” Cheryl Stanton, the Trump appointee who formerly ran the Wage and Hour Division, said in a prepared statement. “This is blatant payback for their friends in the trial bar and will force WHD investigators to waste thousands of hours searching for violations rather than getting workers their money right away. Workers deserve better.”

‘Interest-Free Loan’?

Program defenders also argued that workers weren’t obligated to foreclose their right to sue when employers reported violations to WHD. Employees got the option of declining the back pay in exchange for retaining legal options.

But worker advocates pointed out previously that while employees would benefit from receiving the money their employers initially shorted them on, they also would lose out on potentially recovering double damages had the agency uncovered the violation through a normal investigation. Under the Obama administration, WHD could pursue liquidated damages—or double the amount the employee was owed—in back-pay cases. The Trump administration cut back on that practice last year.

“The PAID Program releases employers from the obligation to pay liquidated damages, interest, or penalties. This is troubling on all counts,” said 11 Democratic state attorneys general in a letter to then-Labor Secretary Alexander Acosta in 2018. “Failure to include interest means that employers who commit wage theft are, in effect, getting an unlawful, interest-free loan from their employees—including from low-wage workers who rely on their hard-earned wages to pay for rent, groceries, and childcare.”

(Updated with additional reporting, starting in the 6th paragraph.)

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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