On April 9, 2021, the Department of Labor issued revised guidance on the agency’s use of liquidated damages to settle wage violations, rescinding limits imposed by the Trump administration less than a year ago.
Under the Fair Labor Standards Act (FLSA), employers who violate certain provisions of the Act pertaining to minimum wage, overtime, and tipped employees, are liable for unpaid wages plus an additional equal amount as liquidated damages. The DOL’s Wage and Hour division is responsible for investigating compliance with the Act.
In June 2020, the previous administration revised existing agency policy, making it more difficult for the WHD to seek liquidated damages as part of pre-litigation settlements. (FAB 2020-2 6/24/20.) Enforcers were directed not to assess double damages absent clear evidence of bad faith and willfulness on the part of the employer, or if the violation was a first for the employer. Approval was also required from both the WHD Administrator and the DOL Solicitor before the penalty could be made a condition of settlement.
The new WHD guidance issued on April 9, gives the WHD greater flexibility to impose liquidated damages in connection with pre-litigation settlements. Under the new standard, double damages are prohibited only in cases where an employer has set forth credible evidence of a good faith defense, or if the matter is deemed inappropriate for litigation. Additionally, approval for use of liquidated damages requires authorization by the regional solicitor or designee only.
The shift in policy is a good reminder to businesses to review wage and hour practices and policies to ensure compliance with applicable law.