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On June 27, 2025, the Department of Labor (DOL) published a two-page memorandum, Field Assistance Bulletin (FAB) No. 2025-3, changing DOL policy to prevent Wage & Hour Division (WHD) investigators from seeking liquidated damages in administrative proceedings and investigations. Now, investigators are limited to only pursuing payment of unpaid minimum wage or overtime compensation. This change aligns DOL policy more closely to the statutory language of the Fair Labor Standards Act (FLSA) and limits settlement costs for employers.

WHD Investigators No Longer Can Seek Liquidated Damages before Litigation

Before FAB No. 2025-3, WHD investigators were allowed to seek liquidated damages, without restriction, prior to formal litigation commencing. Liquidated damages, sometimes referred to as double damages, are damages equal to any back wages owed. These damages imposed a heavy burden on employers settling investigations because liquidated damages “double” the cost of settlement.

In 2020, the DOL restricted investigators’ ability to seek these damages during investigations, noting that the practice of seeking liquidated damages extended the time of the administrative investigation by 28%. In 2021, the DOL reversed course and reinstated unrestricted use of seeking liquidated damages before litigation commences. It has now changed course again with the change in Administrations.

Legally, the policy shifts result from a disagreement about what authority the DOL has during administrative proceedings. The DOL now interprets Section 16(c) of the FLSA, which grants the WHD its investigative powers, to not include the ability to seek liquidated damages during investigations because the statute is silent on this point.  In contrast, it notes that other sections of the FLSA explicitly grant the DOL and employees the right to seek liquidated damages in court litigation.

The DOL’s shift away from liquidated damages reflect its concerns about how to best utilize available resources. FAB No. 2025-3 reiterates the DOL’s interest in expediting recovery for employees as well as efficient administrative proceedings. Eliminating double damages at this stage frees up resources for other FLSA compliance and enforcement initiatives because the change should reduce settlement friction and accelerate reaching settlement agreements.

Looking Ahead: Less Costs to Settle

Employers who have settled cases with the WHD before June 27th must pay liquidated damages if a term of the settlement agreement already requires it because FAB No. 2025-3 is not retroactive; however, employers should challenge an investigator seeking these damages going forward. Of course, employers should have employees release claims when engaging in supervised settlements with the WHD. As noted, however, if no settlement is reached at the administrative stage, liquidated damages may still be pursued in court litigation brought by the DOL or employees.

Overall, this new policy is a welcome change for employers. By getting rid of double damages at the administrative stage, an employer’s potential exposure is significantly reduced. Because liquidated damages cannot be sought, investigators are limited to only seeking payment of unpaid minimum wage and overtime compensation—essentially a potential 50% discount off the “top number” they could demand. Who doesn’t love that deal?

Additionally, because seeking liquidated damages was discretionary, employers will now be able to better predict and control the costs associated with settlement. Finally, employers are still statutorily empowered to have employees release all relevant FLSA claims when settlement is reached; thus, settling with the WHD can greatly limit exposure to liquidated damages in litigation.

In total, the DOL’s shift away from liquidated damages marks a beneficial policy change. The memorandum dials back WHD investigator authority to more closely align with the FLSA’s statutory language and emphasizes efficiency and predictability in administrative proceedings.  

If you have questions about how this policy change may affect your business, please contact your Michael Best attorney or a member of our team listed in this alert.