The U.S. Department of Labor announced it will reinstate its Payroll Audit Independent Determination (PAID) Program that was discontinued under the Obama Administration and has added certain FMLA coverage as well. The PAID program allows for:

• Employers to conduct self-audits to identify potential FLSA and FMLA violations.
• Employers to then work with the DOL Wage & Hour Division to correct those violations and pay back wages (if any) or implement other remedies.
• The program is voluntary and aims to promote compliance without litigation.
• The program may enable employer to quickly resolve compliance issues related to minimum wage, overtime and FMLA leave.

This program was expanded to also be used to resolve Family and Medical Leave Act (FMLA) issues.

Another Proactive Compliance Effort. It is recommended employers check their employee handbooks to determine if it contains a “Safe Harbor” Policy. Having this policy will inform employees that they should bring concerns about payment of wages, and in particular, concerns about exempt/non-exempt status to the attention of Human Resources or Management. Why? Long before engaging under the PAID program, an employer that may have erroneously underpaid overtime or misclassified a position as exempt when it was really non-exempt can also get an early warning about individual wage and hour problems even before a compliant comes up or they do a PAID program self-audit.

Under the PAID program this may show the DOL “good faith” compliance. In effect, with the PAID program an employer could get “two swings of the bat” to avoid more serious and costly compliance problems. But under the PAID program, you will have to disclose any problems per one of the rules below.

Should the DOL compliance issue become a formal complaint, the PAID program could then be used to resolve the problem if the employer qualifies. To do so, the employer must qualify by meeting the following criteria:

• The employer must be a “covered employer” under the FLSA or the FMLA.
• The employer must not be subject to certain federal prevailing wage requirements.
• Within the last three years, the employer must not have been found to have violated FLSA minimum wage or overtime requirements (or the FMLA, if applicable) by a court or the DOL.
• The employer may not currently be under investigation by the DOL, to the best of the employer’s knowledge, nor may the employer be party to any private litigation or state enforcement agency investigation asserting that the violations at issue for the PAID audit violate the applicable FLSA or FMLA requirements.
• The employer must inform the DOL of any recent complaints of which it is aware by employees or their representatives, to the DOL or to state enforcement agencies, challenging the compensation or leave practices at issue in the proposed PAID audit.
• The employer cannot have participated in a PAID audit related to the FLSA or the FMLA, as applicable, within the last three years. It is unclear whether the three-year lookback will be the last three calendar years, or the last three years that the PAID program was active.
• The employer will have a continuing duty during the audit to inform the DOL of any changes in the above information.
• The employer must acknowledge that participation in the PAID program will not cut off employee rights: (1) under other state and local laws as it relates to an FLSA self-audit; or (2) under other federal (e.g., the Americans with Disabilities Act, Title VII), state or local laws as it relates to an FMLA self-audit.

Additional rules around this program also apply. For example, the program will not be retroactively applied. Should the employer choose to self-audit it must self-identify with the DOL. Therefore, anonymity is lost. Employers will have to file a “certificate of compliance” with the FLSA or FMLA. However, it is not known what the employer will be certifying as yet. Further, there is no guarantee the employer will be approved to do a self-audit. If an employer identifies an error, employees have to accept the employer’s back-pay offer and may pursue a private claim against the employer. Any release of claims will be limited to the violations (FMLA or FMLA) found in the self-audit so other unknown claims would not be part of the PAID program settlement.

The PAID process involves:

1. Self-audit
2. Reporting to the Wage and Hour Division (WHD) of the Department of Labor
3. WHD review of the submission and provides guidance on next steps
4. Resolution – Pay any back wages or remedies withing 15 days of receiving WHD summary of unpaid wages. Proof of payment and documentation of other remedies must be reported back to the WHD.

The PAID program enables employers to avoid costly and distracting litigation. It is recommended that employers consult with qualified legal counsel before initiating a PAID program self-audit.

Sources: Lexology. Littler Mendelson PC. DOL Brings Back Payroll Audit Independent Determination (PAID) Program (7/24/2025); PAID Back: Lexology. Seyfarth Shaw LLP. DOL Revives Voluntary Self-Audit Program. (7/29/2025)