Last month, the U.S. Department of Labor (DOL) Wage and Hour Division’s Payroll Audit Independent Determination (PAID) program went into effect. The pilot program allows employers to quickly pay back wages to workers in full for any accidental overtime or minimum wage violations of federal law under the Fair Labor Standards Act (FLSA). We previously wrote about what questions the PAID program left open (here), and, at least for now, the question of how this would affect New York state law has been closed shut.

Shortly after the federal PAID program went into effect, New York Attorney General Eric Schneiderman released a strong statement to employers in New York that his office would “continue to prosecute labor violations to the fullest extent of the law, regardless of whether employers choose to participate in the PAID program.” He reasoned that State investigations into wage and hour violations would continue because “the PAID program allows employers to avoid any consequences for committing wage theft.”

New York and Federal law not only require employers to pay employees any unpaid wages, but the laws establish additional liquidated damage penalties on top of any unpaid wages. Employers who enroll in the PAID program may avoid Federal FLSA liquidated damages, but AG Schneiderman’s statement ensures that this won’t be the case for New York state labor law violations and vowed to continue bringing lawsuits for wage and hour violations under New York state law. Guidance on the U.S. DOL’s Wage and Hour Division’s website doesn’t provide any help, either, stating that any releases signed by employees in exchange for payment would be “limited to the potential violations for which the employer had paid back wages.”  In other words, any release of claims under the Federal PAID program likely would not cover New York Labor Law claims, and the New York Attorney General Schneiderman has made it clear that his office would investigate “to the fullest extent of [state] law.”

New York employers are officially on notice. By opting in to the Federal PAID program, New York employers may inadvertently open the back door to a New York State wage/hour investigation. Before making the decision to self-report, any employer with employees in the state of New York is urged to seek legal advice.