PAID Program: False Promise or Smart Strategy for Employers?

The US Department of Labor's Wage and Hour Division (WHD) recently relaunched a self-audit program for US private employers called the Payroll Audit Independent Determination (PAID) program. It bills itself as a "program to help employers resolve potential minimum wage and overtime violations under the Fair Labor Standards Act (FLSA), as well as certain potential violations under the Family and Medical Leave Act (FMLA)." Sounds like a great idea to resolve pay issues quickly without penalty, right?

However, while the program purports to "allow[] employers to correct mistakes efficiently and ensure employees receive back wages or other remedies promptly, all while avoiding litigation," THIS IS FALSE ADVERTISEMENT and the program should be avoided by employers, except in very limited circumstances. 

Employers should be warned that PAID cannot waive employee's federal FLSA / FMLA / Discrimination related claims and does not even address state claims, such as NYS Paid Family Leave or state wage and hour suits under the New York State Labor Law. Here is the rub, while PAID is designed to "quickly provide 100% of the back wages due" to employees, under applicable federal law employees who bring suit can recover liquidated damages, or 200% of the back wages, plus attorneys' fees and costs. In fact, under the NYS labor law, if unpaid wages are found to have been willful, recovery jumps to a possibility of 400% of the back wages. So, ask yourself, would you be happy, as an employee, in only getting 100% when you can recover 400%. For employers, it seems like a much better strategy in mitigating exposure to negotiate tailored settlements with each individual employee who is owed wages where the employer should obtain a release prior to ever considering revealing evidence to the government and alerting those employees as to their rights, no? 

Don't forget that an employee can seek a penalty under paid family leave and potentially, if there is also discrimination involved, which is frequently the case when paid family leave is wrongfully denied, an employee can also recover emotional support damages. 

So, if an employer utilizes the PAID program, an employee should immediately consult with an employment attorney and pursue getting paid the damages that they are due. 

If you’re facing wage, leave, or discrimination issues, consult with the experienced employment attorneys at Lieb at Law, P.C. to protect your rights and develop a winning strategy.

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SCOTUS Makes It Harder for Workers to Recover Wages

On January 15, 2025, the U.S. Supreme Court ruled in E.M.D. Sales, Inc. v. Carrera that employers only need to prove that employees are exempt under the provisions of the Fair Labor Standards Act ("FLSA") by a "preponderance of the evidence" (more likely than not) to defeat a wage and hour claim. This decision replaces the tougher "clear and convincing" standard that had been applied by some courts prior to this decision.

The FLSA requires an employer to pay overtime to employees unless the employer can prove that the employees fall under an exemption, such as being an Executive, Administrative, Professional, Computer & Outside Sales Employees.

In the case before SCOTUS, the employees claimed that they were misclassified as outside salesmen and sued their employer for overtime pay, liquidated damages (double damages), and attorneys' fees. 

The lower court sided with the employees, in using the tougher "clear and convincing" standard, but the employer appealed while arguing that it only had to prove that the exemption applied by a preponderance of the evidence. SCOTUS agreed with the employer and sent the case back to the lower court to reexamine the facts to determine the applicability of the exemption under the preponderance of the evidence standard. 

Regardless, the message is clear: Employers now have a lower hurdle when defending a wage and hour case in proving that an exemption applies to a wage and hour claim under the FLSA. 

College Athletes Are Employees Due Minimum Wage

In ruling that College Athletes may be entitled to sue for unpaid compensable work and recover minimum wages, plus double damages called liquidated damages, and attorneys' fees, for the prior 2-years (3-years if violations were found to have been willful), the 3rd Circuit Court of Appeals, in Johnson v. NCAA, held "that college athletes may be employees under the FLSA when they (a) perform services for another party, (b) “necessarily and primarily for the [other party’s] benefit,” Tenn. Coal, 321 U.S. at 598, (c) under that party’s control or right of control, id., and (d) in return for “express” or “implied” compensation or “in-kind benefits,” Tony & Susan Alamo Found., 471 U.S. at 301 (quotation omitted)."

This is the biggest decision to impact college sports since the NCAA responded to the SCOTUS decision in NCAA v. Alston by allowing athletes to profit from their name, image, and likeness (NIL) with direct endorsement deals followed by the National Labor Relations Board (NLRB) taking the position that college athletes are employees for purposes of the National Labor Relations Act (NLRA) and forming unions / engaging in concerted activity. 

Yet, the biggest takeaway from Johnson v. NCAA isn't the newsworthy headline about college athletes, but instead, its analysis of what types of work must be paid, for everyone. 

Simply, the Circuit Court has instructed us that in most instances, "efforts that provide tangible benefits to identifiable institutions deserve compensation." In fact, the Circuit Court dispensed with the NCAA's nonsensical argument that the students were paid in other forms by receiving "increased discipline, a stronger work ethic, improved strategic thinking, time management, leadership, and goal setting skills, and a greater ability to work collaboratively" because those benefits "are all exactly the kinds of skills one would typically acquire in a work environment." In all, the Circuit instructed to always "look to the economic realities of the relationship," "upon the circumstances of the whole activity," when determining if a person is defined as an employee entitled to payment for work. Additionally, it is true that an employee must be promised or expect compensation for their work, but importantly, that compensation is not limited to money and can be instead, the receipt of in-kind benefits, where the promise or expectation can be implied and needn't be expressly stated / written. 

Johnson is a big win for unpaid workers everywhere in the US. 

New Overtime Time and a Half Final Rule under the Fair Labor Standards Act

Ready for a big jump in being entitled to overtime pay, which is 1.5 times pay?

The Department of Labor has set new effective earnings thresholds to be entitled to overtime pay per 29 CFR 541.  

Starting on January 1, 2025, we are moving the Fair Labor Standards Act (FLSA) from an entitlement to overtime pay for those making under $35,586 to those making under $58,656 per year ($1,128 per week). Note that this threshold does not apply to employees who are "bona fide executive, administrative, or professional capacity . . . or in the capacity of [an] outside salesman," which terms are defined at 29 CFR 541.

These numbers are particularly important because a worker who is not paid properly can recover 2X back wages (liquidated damages) on unpaid overtime from the prior 2 years. 

New Independent Contractor Standard Proposed by Department of Labor for FLSA

If you are interested in wage and hour claims, or better yet if you are a business owner or manager, you are going to want to read this. 

On October 13, 2022, the Department of Labor opened the comment period, which runs through November 28, 2022, for it's revised analysis to determine if an individual is an employee or an independent contractor for a wage and hour claim (i.e., misclassification claim). As a reminder, independent contractors are also known as self-employed workers and freelancers, and are considered to be in business for themselves and therefore, not entitled to minimum wages and overtime pay under the Fair Labor Standards Act (FLSA). 

However, if an employer gets this wrong, by considering an employee an independent contractor, tht employer can be subject to penalty, called liquidated damages, and more. It's a catastrophic mistake that really needs to be avoided at all costs. 

The Proposed Rulemaking is available here in full.

Comments can be made electronically at Federal eRulemaking Portal at https://www.regulations.gov.

In summary, the Proposed Rulemaking is attempting to reassert the Economic Reality Test, where "[t]he ultimate inquiry is whether, as a matter of economic reality, the worker is either economically dependent on the employer for work (and is thus an employee) or is in business for themself (and is thus an independent contractor)." In analyzing the test, the following, non-exclusive facts are generally examined, including: "the opportunity for profit or loss, investment, permanency, the degree of control by the employer over the worker, whether the work is an integral part of the employer's business, and skill and initiative." Under the Proposed Rulemaking, the Department of Labor will examine the factors in the Economic Reality Test by returned to a totality-of-the-circumstances analysis rather than focusing on core factors. No longer will two factors be considered most probative and carry greater weight. Now, all factors matter and should be analyzed when determining whether a worker is an independent contractor or an employee who is subject to rights under the FLSA. 

Are Your Staff Employees or Independent Contractors? A New Regulation Answers The Question

During the last two weeks of his Presidency, Trump's Department of Labor just revised the test for whether an individual is an independent contractor or employee under the Fair Labor Standards Act. 

This is significant because employees are entitled to minimum wage and overtime whereas independent contractors are not. 

If an employer misclassifies a staff member as an independent contractor when such staff member should be classified an employee, it can result in a devastating blow to the employer who will be exposed to statutory penalties, back pay, attorneys' fees and more. 

Now, Trump's government is using the "economic reality" test to determine employee status. 

According to the government, "the ultimate inquiry is whether, as a matter of economic reality, the worker is dependent on a particular individual, business, or organization for work (and is thus and employee) or is in business for him- or herself (and is thus an an independent contractor)." 

Under this test, the Department of Labor or a Court hearing the case will look to five distinct factors to answer the test. However, two of those factors now have more probative value in answering the question than the rest. These two key factors are:

1. The nature and degree of the worker's control over the work; and
2. The worker's opportunity for profit or loss. 

The other factors, of less importance, are:

1. The amount of skill required for the work;
2. The degree of permanence of the working relationship between the individual and the potential employer; and 
3. Whether the work is a part of an integrated unit of production.

Regardless, employers better take note of this change and analyze their staff's true work to ascertain if they are classified properly. If this is too much, you better hire a consultant to do the job NOW.

 

Here's a question - 

While the government argued in support of this new test by pointing to the need for clarity for business, is this the time to tax companies with new rules in the middle of a pandemic where small businesses are closing every day? 

More so, with a change in the Presidency less than two weeks away, will Biden just change this back next month? 

This new regulation isn't effective until March 8, 2021, so Biden could theoretically undo it before it even takes off. 

Should he? 

Wage & Hour Litigation is Coming from Remote Workers

The US Department of Labor's Wage and Hour Division recently issued "guidance regarding employers’ obligation under the Fair Labor Standards Act (FLSA or Act) to track the number of hours of compensable work performed by employees who are teleworking or otherwise working remotely away from any worksite or premises controlled by their employers" that is a must read by employers / HR professionals. 

We addressed this issue on the Lieb Cast on 8/2/2020's segment 3 at the 9 minute mark well before the guidance was ever issued as this advice was a no brainer for a quality employment attorney like Mordy Yankovich. 

We advise you now that Fair Labor Standards Act lawsuits are coming. 

Are you prepared? 

To get prepared, you need to immediately establish "a reasonable process for an employee to report uncompensated work time."