One less option for employers managing FLSA risk

Amid the flurry of executive actions taken in the Biden administration’s first weeks, the U.S. Department of Labor (DOL) rescinded the Trump era Payroll Audit Independent Determination (PAID) program. While it lasted, the PAID program gave employers a chance to self-report and settle Fair Labor Standards Act (FLSA) violations without paying enhanced penalties typically associated with the law. With that option off the table and stepped-up FLSA enforcement likely, let’s briefly review the significant penalties associated with violations of the Act, the unique limitations on employers’ ability to settle such claims, and the remaining options to mitigate liability.

FLSA penalties

An employer that violates the FLSA is automatically liable for twice the amount owed in underpaid wages. But courts may reduce the penalty if the employer proves the violations occurred despite its good-faith efforts to comply with the law.

The lookback period for which an employee may recover the unpaid wages (and associated penalties) is generally two years. But in cases of willful conduct that manifests a reckless disregard for the law, an employee can recover unpaid wages for three years instead of two.

The FLSA also allows employees to join together in pursuing a collective action. In other words, one individual’s lawsuit can blossom into a larger case involving coworkers (or former employees) whose rights also were affected by the FLSA compliance issue.