The Department of Labor Suspends Practice of Seeking Liquidated Damages in Pre-Litigation Settlements in Certain Circumstances

On June 24, 2020, the Department of Labor (DOL) issued Field Assistance Bulletin No. 2020-2 addressing the suspension of the DOL’s usual practice of seeking pre-litigation liquidated damages in certain settlements in lieu of litigation in response to President Trump’s Executive Order (E.O.) 13924, Regulatory Relief to Support Economic Recovery, “requiring the Department to continue removing certain regulatory and enforcement barriers to economic prosperity as America strives to defeat the economic effects of COVID-19.”

During the Obama Administration, the DOL had a regular practice of seeking liquidated damages in most Fair Labor Standards Act (FLSA) settlements with employers, which are equal to the amount of compensation due to employees and former employees owed back wages. In its Field Assistance Bulletin, effective July 1, 2020, the DOL indicated it will no longer assess liquidated damages in settlements if any of the following circumstances exist:

  • there is no 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.

Although liquidated damages may not be sought from the DOL in some pre-litigation settlements, both the DOL and employees may still seek liquidated damages in a lawsuit filed against the employer.

Employers Council attorneys can assist members with DOL investigations. Please reach out to us if you have any questions.