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COVID-19 prompts DOL’s WHD to nix liquidated damages as default position in pre-litigation cases

By Pamela Wolf, J.D.

Administrative FLSA investigations involving liquidated damages take 28 percent more time than those involving just back wages, according to the WHD Administrator.

The Department of Labor will “no longer pursue pre-litigation liquidated damages as its default policy from employers in addition to any back wages found due in its administratively resolved investigations,” according to a June 24, 2020, Field Assistance Bulletin (No. 2020-02). The FAB, written by Wage and Hour Administrator Cheryl Stanton, follows a memorandum authored by Deputy Secretary Patrick Pizzella.

Prompted by COVID-19. As justification for the change, the FAB points to President Trump’s May 19 Executive Order 13924, “Regulatory Relief to Support Economic Recovery,” under which the DOL is required to continue removing “certain regulatory and enforcement barriers to economic prosperity as America strives to defeat the economic effects of COVID-19,” as Stanton put it.

It takes too much time. Apparently, the problem is that administrative FLSA investigations involving liquidated damages take 28 percent more time than those involving just back wages, WHD says. So, in response to EO 13924, and to cut back the amount of time it takes to conclude FLSA administrative cases to return back wages to employees more quickly, the WHD is going to stop pursing pre-litigation liquidated damages in addition to back wages from employers as a default policy in its administratively resolved investigations.

Implementation. Effective July 1, 2020, the DOL will not assess pre-litigation liquidated damages if any one these circumstances exist:

  • 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; or
  • The matter involves state and local government agencies or other non-profits.

Two approvals required. Each request for pre-litigation liquidated damages under the FLSA must be submitted to and approved by both the WHD Administrator and the Solicitor of Labor (or either of her designees) on an individual basis.

What does the FLSA say? Notably, under the FLSA, employers that violate minimum wage and overtime provisions “shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages” (emphasis added, 29 U.S.C. 216(b)).

However, at the litigation stage, under the liquidated damages provision, in any action to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages under the FLSA, “if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the [FLSA], as amended, the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in section 216″ (29 U.S.C. 260).