In a win for employers, the United States Department of Labor (DOL) announced earlier this week that it will end its default policy of demanding liquidated double damages to resolve administrative investigations into Fair Labor Standards Act (FLSA) violations. In other words, its default rule going forward will be to pursue only back pay in pre-litigation FLSA settlements. The new practice is effective July 1, 2020.
Although broad, the policy change is not universal. The DOL will continue to pursue liquidated damages unless one of the following is true:
- there is not clear evidence of bad faith and willfulness;
- the employer’s explanation for the violation(s) show that the violation(s) 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 section 13(a)(1) and 13(b)(1) exemptions, which includes the white collar exemptions most employer rely on to classify their employees as non-exempt; or
- the matter involves State and local government agencies or other non-profits.
In all other cases, each pre-litigation request for double damages must be approved by both the Wage & Hour Division Administrator and the Solicitor of Labor.
The policy change followed President Trump’s May 2020 executive order ordering the DOL to remove regulatory and enforcement hurdles to job creation and economic growth in the wake of the COVID-19 pandemic. In response, the DOL determined that seeking pre-litigation double damages “as the rule, rather than the exception in limited cases” was the type of administrative enforcement practice inhibiting economic recovery. According to the Field Assistance Bulletin, FLSA investigations take 28% more time to resolve when the DOL pursues liquidated damages on top of back pay. It also recognized that employers who are generally in compliance and cooperate with the DOL to return unpaid wages to workers expeditiously through the administrative process should not saddled with doubled damages designed for the litigation context. Doing so might “jeopardize the ongoing existence of these employers and, as a result, the jobs of American workers.”
The policy change applies to pre-litigation resolutions only. In federal court, the DOL may continue to pursue double damages as a matter of course even in cases falling into one of the categories listed above. Of course, the new policy could change if presumptive nominee Joe Biden wins in November. Michael Best will keep you apprised of any developments.