The U.S. Department of Labor’s Payroll Audit Independent Determination program, called PAID, lets an employer that finds its own overtime or minimum wage errors pay back wages under federal supervision in exchange for an FLSA release. For a California employer, that release is narrow. The DOL’s PAID page requires participants to acknowledge that the program “does not cut off employee rights under other state or local laws.” Daily overtime, meal and rest premiums, and PAGA penalties remain open, which limits what PAID can do here.
How does PAID work?
Self-audit, report, and pay under supervision. According to the Wage and Hour Division, employers review compliance materials, identify violations in the last two years, calculate back wages, and present them to WHD. After review, “Employers must pay all back wages due within 15 days of receiving the summary of unpaid wages.”
Employees then choose whether to accept. WHD issues a settlement form, and the program page says “The employee may freely choose to accept or decline the payment.” The employer can’t retaliate against anyone who declines.
What does the federal release cover?
Only the FLSA claims paid. The statutory basis is 29 U.S.C. section 216(c), which says an employee’s agreement to accept a supervised payment “shall upon payment in full constitute a waiver” of the right to sue for those unpaid wages “and an additional equal amount as liquidated damages.”
WHD’s page says the release “will be limited to the potential violations for which the employer had paid back wages.” It also warns that paying before WHD reviews the amounts means employees “will not have waived their rights to pursue a private lawsuit.”
Why is PAID less useful in California?
Because California law usually drives the exposure. State overtime rules include daily overtime under Labor Code section 510, and state claims carry waiting time penalties, wage statement penalties, and PAGA. None of those are released by an FLSA waiver.
California also restricts wage releases directly. Labor Code section 206.5(a) says an employer “shall not require the execution of a release of a claim or right on account of wages due” unless “payment of those wages has been made.” A release that violates it “shall be null and void.”
So a California employer that pays federal back wages through PAID can still face a state lawsuit over the same pay periods, with the payment credited but the state penalties still in play.
Who is eligible?
Employers that meet several conditions. The DOL page requires certification that neither WHD nor a court has found an FLSA wage violation “within the last three years,” that the employer isn’t in litigation, including with “a state enforcement agency,” over the same practices, and that WHD isn’t investigating them. The employer must also disclose recent employee complaints, and can’t have used PAID within the last three years for the same kind of violation.
WHD decides case by case. The pending-litigation bar means PAID is a prevention tool, not a response to a lawsuit already filed.
PAID versus California law at a glance
| Issue | PAID (federal) | California |
|---|---|---|
| Claims resolved | FLSA minimum wage and overtime paid | None released by PAID |
| Lookback in self-audit | Two years | State claims reach further back |
| Liquidated damages | Waived on accepted payment | Separate state remedies remain |
| Penalties | Not addressed | Waiting time, wage statement, PAGA remain |
| Release rules | Supervised payment under 29 U.S.C. 216(c) | Lab. Code 206.5 limits releases |
The firm’s page on defending wage claims for California employers describes its work on federal and state wage disputes.
Before self-reporting a wage error
- Preserve the payroll, timekeeping, and policy records for the full period of the suspected error, including the state lookback period.
- Calendar any pending demand or agency deadline, since litigation or a state complaint may make PAID unavailable, and check EPLI notice requirements.
- Identify who discovered the error and who set the pay practice, and make sure no employee who raised it is treated differently.
- Pull a state-law damages calculation alongside the federal one, so the full exposure is clear before any payment.
- Talk to a lawyer before paying anyone or contacting WHD, since the order of steps affects which releases are valid.
PAID questions from employers
Is participation confidential?
WHD offers confidential questions by phone, but entering the program means disclosing the violation and employee information to a federal agency. Employers should assume the information may surface later and plan accordingly.
Can we pay California claims at the same time?
Yes, as a separate step. California-law amounts can be paid alongside the federal back wages. Releases of state claims are limited by section 206.5 and by PAGA rules, so those payments should be structured with counsel.
Does PAID cover FMLA problems?
The program now includes certain FMLA violations. California’s CFRA claims are separate and aren’t released.
What if an employee declines the payment?
That employee keeps the right to sue under the FLSA. The employer still benefits from having fixed the practice and documented its good faith, which matters for liquidated damages arguments.
If your company has found a wage error
If your company has discovered an overtime or minimum wage problem, or has received a claim after one, the choice between PAID, a direct state-law payment, and waiting for a claim is worth making carefully. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving unpaid overtime and back wage settlements. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The federal statute is 29 U.S.C. section 216. The California statutes are Labor Code sections 206.5 and 510. The agency page is the Wage and Hour Division’s Payroll Audit Independent Determination program.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.