We Know What You Are Doing – And You’d Better Knock It Off DOL’s New “Warning Letter”

Posted on 03/20/2019 at 02:35 PM by Mike Staebell

Recently, an employer came to the firm with a letter  from the DOL’s Wage and Hour Division (WHD).  The letter was unlike any other I had seen WHD send out during my career or since I retired.  After checking, I learned it is a new approach to compliance by the WHD.

The letter’s key paragraph explains its purpose this way:

“This office has information that you may be engaged in compensation practices that do not comply with FLSA Section 6, resulting from the failure to pay employees at least the applicable minimum wage for all hours worked because of an invalid tip pool. Based on that information, we recommend that you proactively visit our website, review the compliance assistance materials there, and evaluate whether your compensation practices comply with the law.”

Although this particular letter is specific to minimum wage and tip pool issues, I learned that it may be used for any industry and for any FLSA issue.

Having started my WHD career in 1982 as an investigator, and moving up to assistant district director and finally to District Director for Iowa and Nebraska, several aspects of the letter surprised me.  

  • The letter implies WHD received a complaint about the subject employer.  It is hard to imagine where else WHD would obtain “information that you may be engaged in compensation practices that do not comply with FLSA Section 6.”
  • WHD historically did not reveal or hint at the reason for a particular investigation when communicating with an employer.  WHD would not even disclose whether an investigation was triggered by a complaint or whether the employer was selected for investigation at the discretion of the agency.  (Employers should realize that they may not want to know whether a complaint had been had lodged, let alone the identity of the complainant, because that knowledge could open the door for claims of unlawful retaliation if the complainant was an employee.)  
  • Most surprising to me, this letter does not say an investigation has been opened.  Indeed, no investigation appears to be contemplated by WHD.  Rather it is an invitation to the employer to conduct its own internal investigation and make changes if warranted for FLSA compliance.      

 

My research revealed that WHD is using this letter nationally.  It has become known as “the PAID Letter”, in reference to WHD’s PAID program.  (That program  was the subject of a previous Wage and Hour Watch blog post. PAID is a WHD initiative that began as a six-month pilot program, but was later made permanent by the DOL.  It is designed to encourage employers to self-report FLSA violations and work with WHD to resolve the issues, come into compliance, and pay any back wages resulting from the self-audit.   Advantages of this program, according to WHD, include avoiding liquidated damages and civil money penalties, avoiding the stress and disruption of an investigation, and coming to a timelier resolution that benefits both employees and employers.   Here’s how the letter puts it:

“You may also consider whether to perform a self-audit under the Payroll Audit Independent Determination (PAID) program. Under PAID, employers are encouraged to review the compliance materials available at www.dol.gov/whd/paid/ , conduct self-audits, and inform us of any potential violations they uncover. We will then work with good faith employers in PAID to correct non-compliant practices and expeditiously resolve the potential violations-without litigation.”

The Wage and Hour grapevine tells me there was a less-than-enthusiastic response from employers to the PAID program.  Apparently, employers are not lining up to utilize it, as WHD had hoped.  The new letter is seen by WHD as a way to inform and encourage employers to use PAID.  However, as I mentioned in the post on PAID, there are a number of reasons why employers might not want to volunteer to WHD that they have violated the FLSA.

Finally, neither the letter nor WHD mention anything about what the agency will do if the employer simply tosses the letter in the wastebasket.  Will WHD send a second, more ominous letter, à la a debt collection agency?  Will a WHD investigator show up at the employer’s doorstep?  One thing is for sure: any business  that receives this letter should seek the counsel of a legal professional who knows about the FLSA before responding to WHD or 86’ing it.  

 

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