DOL to Seek Liquidated Damages in Pre-Litigation Settlements

On April 9, 2021, the US Department of Labor (DOL) announced that its investigators will have more latitude to seek liquidated damages – twice the amount of back pay that an employer owes – in pre-litigation investigations. WHD FAB No. 2021-2. This new policy contravenes WHD FAB 2020-2, issued during the Trump Administration, that curtailed the use of this tool if there was no clear evidence of bad faith and willfulness by the employer or if the employer had no prior history of violations, among other reasons. We previously reported on FAB 2020-2 here.

Under the Fair Labor Standards Act (the FLSA or the Act), employers who violate the provisions of the Act concerning minimum wages, overtime compensation, and protections for employees who receive tips are liable for the unpaid wages or unlawfully kept tips and for an additional equal amount as liquidated damages. Prior to June 23, 2020, the policy of the Wage and Hour Division (WHD) was to seek liquidated damages in certain cases upon concurrence by the Solicitor’s Office. This policy was revised pursuant to a June 23, 2020 memorandum from the Deputy Secretary based upon Executive Order (E.O.) 13924, Regulatory Relief to Support Economic Recovery, and FAB 2020-2, issued on June 24, 2020.

According to the new FAB, both of those documents are rescinded and WHD will return to pursuing liquidated damages from employers found due in its pre-litigation investigations provided that the Regional Solicitor (RSOL) or his/her designee concurs with the liquidated damages request. The FAB also provides that WHD may not make a demand for liquidated damages without first obtaining concurrence from the RSOL or his/her designee. However, consistent with the language of the FLSA, “[l]iquidated damages shall not be assessed by WHD where the employer has set forth credible evidence of a good faith defense or the where the RSOL deems the matter inappropriate for litigation.”

This new FAB is consistent with the Biden Administration’s intent to vigorously enforce employment laws on behalf of workers.