New PAID Act Formalizes Voluntary Wage Settlement Program: Faster Back Pay, But Workers Waive Damages

The “Ensuring Workers Get PAID Act of 2025” (PAID Act) takes a successful Department of Labor (DOL) pilot program and makes it permanent. Essentially, this bill creates a formal, voluntary pathway for employers to fix their own mistakes regarding minimum wage and overtime under the Fair Labor Standards Act (FLSA). If a business realizes it accidentally underpaid workers, it can conduct a self-audit, submit the findings to the DOL’s Wage and Hour Division (WHD), and if approved, settle the debt quickly with the affected employees. This process is designed to be much faster and more efficient than traditional investigations, which the WHD found took twice as long and recovered significantly less back pay per hour spent.

The Self-Correction Fast Track

This program is a big deal for employers who want to clean up their books without facing a full-blown investigation or a lawsuit. To participate, an employer must be acting in “good faith”—meaning they can’t already be under investigation or sued over the specific violations they are trying to fix. They submit a detailed application, including the results of their self-audit, the exact calculation of back wages owed to each employee, and a promise that they’ve already corrected the underlying payroll problem. The WHD Administrator then verifies the accuracy of the calculations. If an employer is approved, they avoid the risk of a lengthy, costly legal battle, and the information they submitted is protected from being used against them in future court cases, unless they consent.

The Trade-Off: Speed vs. Damages

For an employee, the benefit is clear: faster money. The DOL’s pilot program showed that back wages were recovered much quicker through this method. Once the settlement is approved, the employee receives the full amount of back wages owed for the specific violation. However, this is where the trade-off comes in. By accepting the payment, the employee signs a release that waives their right to sue the employer later for those exact violations, including any potential liquidated damages under Section 16 of the FLSA. Liquidated damages are often equal to the amount of back wages owed, essentially doubling the recovery in a successful lawsuit. An employee has the right to refuse the settlement and pursue a traditional lawsuit, but they must weigh the certainty of fast payment against the potential for a larger, but delayed, recovery.

Who Gets Left Out of the Program?

The bill is very specific about who can be an “affected employee,” and it explicitly excludes certain groups. If you are an employee covered by prevailing wage rules under H1B, H2B, or H2A visa programs, or certain federal contracting rules, you cannot participate in this expedited settlement process. This means that if an employer using these visa programs underpays a worker, that worker still has to rely on the traditional, slower WHD investigation or private litigation to recover their wages. For those workers, the efficient, fast-track option simply isn't on the table.

What This Means for the Everyday Worker

If you work for a company that messes up your overtime—say, you’re misclassified as a manager but work 60 hours a week on the floor—this bill could be good news. If your employer realizes the mistake and uses the PAID program, you could get a check for the back wages much faster than waiting for the DOL to launch a full investigation, which can take months or years. However, you need to understand that accepting that check means closing the door on the possibility of getting double that amount in a lawsuit. The bill does include strong anti-retaliation protections, making it illegal for an employer to punish a worker for either accepting or declining the settlement offer, which is a necessary safeguard for employees making this critical decision.