The U.S. Department of Labor (DOL) announced in a field assistance bulletin that it will no longer seek liquidated damages in its wage and hour investigations.
This change, effective immediately, marks a significant departure from the agency's previous enforcement approach.
Under the Fair Labor Standards Act (FLSA), an employee is entitled to seek unpaid wages for violations of the law. Moreover, the FLSA provides for liquidated damages in an amount equal to any unpaid wages when an employer fails to prove it violated the FLSA in good faith and on reasonable grounds.
The DOL's Wage and Hour Division (WHD) investigates FLSA violations. If the audits are not resolved, the WHD refers matters to a regional division of the Office of the Solicitor (SOL) for litigation purposes. According to the guidance, the DOL did not automatically seek liquidated damages at the investigation stage until 2010. However, liquidated damages were routinely sought after referral to SOL as well as in litigation. Various administrations took different positions regarding seeking liquidated damages during the investigation stage. The first Trump administration limited the DOL's ability to seek liquidated damages prior to referral. Subsequently, the Biden administration removed those limits and authorized the pursuit of liquidated damages in the pre-litigation phase.
The field assistance bulletin returns to the first Trump administration's position. According to the guidance, the FLSA does not authorize the DOL "to compromise claims for or recover liquidated damages except where an enforcement action is brought in litigation." The DOL further explained in a news release that this policy change is designed to "foster more effective dispute resolution and ensure more fair, timely outcomes for American workers and businesses."
For employers, this shift reduces the potential financial exposure associated with wage and hour investigations and, importantly, could foster quicker resolutions of violations at the investigation stage. Employers should review their wage and hour practices to ensure compliance and be aware that, while the financial risk associated with wage and hour investigations has been reduced, liquidated damages are still available after referral to the agency's lawyers.
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