February 05, 2021
The Department of Labor ended a program that allowed employers to avoid litigation by self-reporting wage and hour violations, while setting the stage for repealing Trump-era regulations on independent contractor status and tip rules.
The Payroll Audit Independent Determination (PAID) program allowed employers to self-report wage and hour violations to the DOL in exchange for the agency’s assurance that it would supervise a settlement of the violations, instead of pursuing liquidated damages and/or imposing penalties. The PAID program essentially allowed employers to avoid litigation on the federal level if they self-reported violations and met certain other conditions, although it did not preclude affected employees from pursuing state law claims. As of July 2020, fewer than 100 employers had participated in the program, which began in 2018.
Meanwhile, the DOL officially delayed the effective dates of two rules recently finalized by the Trump DOL. The first rule clarified independent contractor status under the Fair Labor Standards Act (FLSA), while the second rule clarified tip pooling regulations under the FLSA. The move to freeze the effective dates of the two rules is unsurprising, and a full repeal is expected. On the independent contractor front, the Biden administration is expected to issue a new rule significantly restricting the scope of independent contractor status.
Outlook: The move to end the PAID program is somewhat inconsequential from a practical standpoint, as few employers made use of it and the program itself had questionable effectiveness. Nevertheless, coupled with the delay and expected eventual repeal of the tip pooling and independent contractor status rules, the move signals a much more pro-worker, less employer-friendly approach from the Biden DOL.