On July 24, 2025, the U.S. Department of Labor (DOL) released new guidelines under the Payroll Audit Independent Determination program (PAID).
Allegedly, PAID is designed to help employers avoid costly litigation by self-reporting any violations of the Family and Medical Leave Act and the Fair Labor Standards Act so that they can promptly correct any past mistakes and employees can receive their remedies quickly.
But there are risks and concerns to a voluntary program like PAID. Employers should weigh all risks and benefits before participating in any government program.
The PAID program initially was rolled out in 2018 during President Trump’s first term, then terminated in January 2021 after criticism that it “deprived workers of their rights and put employers that play by the rules at a disadvantage.” PAID now has been revived and expanded to include FMLA claims.
The DOL is promoting PAID by saying that employers can proactively resolve wage, hour and leave violations outside of litigation.
PAID’s Four-Step Process
There’s a four-step process for participating in PAID:
• Step 1 – Check Eligibility. According to the DOL’s Wage and Hour Division (WHD), any employer that’s covered by the FMLA and/or the FLSA, is interested in proactively resolving labor related disputes, and is willing to commit to future compliance is eligible for PAID.
“Covered” employers under the FMLA include:
- Private sector employers that employ 50 or more employees in 20 or more work weeks in a current or previous calendar year,
- Federal, State, or local agencies, and
- Schools
“Covered” employers under FLSA include:
- Employers that have two or more employees,
- Federal, State, or local government agencies,
- Hospitals,
- Schools, and
- Companies with annual sales or receipts of $500,000 or more.
PAID excludes certain employers in the following situations. Stated differently, these employers aren’t eligible to participate in PAID, even if they wanted to:
- Employers found in a WHD investigation or court decision in the last three years to have violated the FLSA or FMLA,
- Employers currently involved in litigation, whether private lawsuits, WHD actions, or State enforcement, related to the same compensation or leave practices,
- Employers that already are being investigated by WHD for FLSA or FMLA practices, and
- Employers that have already participated in PAID within the past three years to resolve FLSA or FMLA violations
Employers also must inform WHD of any recent FMLA or State law leave law complaints against them, if they’re aware of them.
• Step 2 – Compliance Review. Employers must review certain DOL materials relating to compliance with both the FLSA and the FMLA. They include videos to watch in order to receive a certificate allowing it to continue to the next step of the process.
For the FMLA, the employer is required to review documents about:
- What the FMLA is,
- Whether employees are eligible,
- The reasons employees may take FMLA leave,
- What employers must do when an employee requests leave,
- What to do during an employee’s leave, and
- How to protect employees’ rights.
For the FLSA, the employer must watch videos involving:
- An overview of the FLSA,
- Understanding who is covered,
- Hours worked,
- Overtime, and
- Recordkeeping
• Step 3 – Conduct A Self-Audit. The self-auditing process involves identifying any potential FLSA or FMLA violations that may have occurred in the last two years, identifying the specific employees who were affected, identifying the time frame, and calculating the amount of back wages the employer believed it owes to the employee. Be careful here. Any back wages paid prior to the WHD’s getting involved doesn’t waive the employees’ rights to pursue a private lawsuit. The WHD has to supervise the settlement to protect the employer from private lawsuits. So guidance and support from experienced legal counsel at this stage is critical.
We recently discussed calculating proper overtime under the FLSA, simplifying it so that it’s reasonably straightforward.
Here’s a checklist to keep in mind. This is what WHD will ask employers to provide as part of the process:
- Names, addresses & phone numbers of all affected employees,
- Back Wages/FMLA Remedies
- Calculations for back wages owed or other FMLA remedies
- Supporting evidence & methodology for each
- Payroll & Work Records
- Payroll records and other relevant documentation
- For FLSA: hours worked per employee during the relevant period
- For FMLA: nature and impact of the violation per affected employee
- Compliance Corrections
- Records showing correction of compensation and/or leave practices to comply with either the FLSA or FMLA
- Potential Scope of Anticipated Violation
- A concise explanation of scope for possible release of liability
- Employer Certifications attesting that it:
- Reviewed all program materials, information, terms, and compliance assistance
- Met all of PAID’s eligibility criteria
• Step 4 – Payment and Other Remedies. Once the WHD reviews all the employer’s documentation and the back wages that may be required, it will send a summary of the unpaid wages to the employer. The WHD will also provide documents describing the settlement terms which the employee may accept or decline.
If the employee declines the payment, the employer cannot retaliate against the employee.
If the employer proceeds and its employee accepts the payment, the employer must pay all back wages within 15 days of receiving WHD’s summary of unpaid wages. Any other remedies also must be implemented within 15 days of the WHD’s self-audit results.
The “Trap” Concern
As an employer, it’s natural to feel uneasy about a self-reporting process. It can seem like a trap – and sometimes it is. WHD provides guidance to help employers understand FLSA and FMLA obligations, but it still may be difficult to know for sure what’s worth reporting and what’s not.
That’s why it’s important to be deliberate if you’re considering participating. Having your experienced employment attorney by your side makes a ton of sense.
Waiver of Employee Rights
Participation in PAID does not waive employee rights under other laws, including the ADA, Pregnant Workers Fairness Act, or State or local regulations. But the PAID process automatically waives employees’ right to pursue FMLA and FLSA claims if they accept the offer approved by WHD.
Litigation Cost Considerations
For some companies, the amount saved in litigation costs may outweigh the risk of disclosing information that could be raised in other lawsuits. For other companies, it’s best to stay proactive and settle any claims as soon as possible while making sure that ongoing compliance and best practices are implemented in the future.
Final Thoughts & Practice Pointers
Either way, it’s critical to work with an attorney who’s experienced in FMLA and/or FSLA claims to figure out the best path for your business. Is PAID for you or not? It’s a big decision and one that can have ramifications moving forward.
If you have any concerns related to the newly-resurrected PAID program, contact us at 716.839.9700 or info@coppolalegal.com.
We’re always happy to help.
