DOL Will No Longer Automatically Seek "Double Damages" in FLSA Settlements

Author: Michael Cardman, XpertHR Legal Editor

June 29, 2020

Starting July 1, the US Department of Labor (DOL) will no longer automatically seek "double damages" when it negotiates settlements with employers it believes have violated the Fair Labor Standards Act (FLSA).

The change in the DOL's enforcement posture was made in response to an executive order from President Trump directing federal agencies to remove regulatory "barriers to economic prosperity" as the nation works to recover from the coronavirus (COVID-19) pandemic.

When DOL investigators determine that an employer has violated the FLSA, they usually first try to reach a voluntary settlement with the employer. This generally involves paying back wages for two years and agreeing to pay wages in accordance with the FLSA in the future. But, since 2011, DOL also has followed a default policy of seeking liquidated damages - an amount equal to the amount of unpaid compensation due under the statute - which in effect doubles the amount of back wages to which employees are entitled.

Under Field Assistance Bulletin 2020-2, issued June 24, DOL will no longer assess pre-litigation liquidated damages if any one of the following circumstances exists:

  • There is not clear evidence of bad faith and willfulness;
  • The employer's explanation for its violations show that they were the result of a bona fide dispute of unsettled law under the FLSA;
  • The employer has no previous history of violations;
  • The matter involves individual coverage only;
  • The matter involves complex exemptions for executive, administrative, professional or transportation employees; or
  • The matter involves state and local government agencies or other non-profits.

In a memo accompanying the bulletin, Deputy Labor Secretary Patrick Pizzella said:

Continuing to recover pre-litigation liquidated damages as the rule, rather than the exception in limited cases, appears to be an administrative enforcement practice that [President Trump's executive order] describes as potentially inhibiting economic recovery in these challenging times for American workers. In particular, this rigid enforcement policy does not appear to sufficiently allow for 'the efforts of businesses to comply with often-complex regulations in complicated and swiftly changing circumstances.' ... This is especially true as employers face novel and practical challenges in applying the FLSA to new conditions in response to the coronavirus pandemic.

Although the DOL's policy offers some relief to employers, it should be noted that:

  • The DOL retains the statutory authority to pursue liquidated damages against employers in court if a settlement is not reached;
  • Employees may still seek liquidated damages in a lawsuit (unless a settlement is reached); and
  • Employees still may seek liquidated damages under many state wage and hour laws.