Department of Labor to Pull Back on Seeking Pre-litigation Liquidated Damages from Employers

As one of the measures calling for economic relief for those affected by COVID-19, in May, 2020, President Trump’s office issued an Executive Order (Regulatory Relief to Support Economic Recovery) calling for ease of administrative barriers/complexities and greater regulatory flexibility, with focus on the job sector and economic growth. In addition, the order calls federal agencies to “consider the principals of fairness in administrative enforcement and adjudication”.

Less than a month later, the Wage and Hour Division (“WHD”) of the U.S. Department of Labor (“DOL”) issued a Field Assistance Bulletin (FAB) regarding the practice of seeking liquidated damages in pre-litigation settlements of matters involving wage claims. In such matters, liquidated damages are paid to the affected employees to compensate for the violations. Typically, they are in the amount equal to the back wages.

As per the new policy, effective July 1, 2020, DOL will not seek liquidated damages from employers in Fair Labor Standards Act (“FLSA”) administrative matters. This policy change will apply to matters where any of the following conditions are met:

  • no clear evidence of bad faith or willfulness on part of the employer;

  • if the explanation by the employer indicates that the violation was due to a bona fide dispute of an unsettled law under the FLSA;

  • the matter involves an employer with no history of violations;

  • the specific matter involves individual coverage only;

  • the matter involves complex section 13(a)(1) exemptions (known as “white collar” exemptions) and 13(b)(1) (“motor carrier”) exemptions; or

  • if the matter involves State and local government agencies or other non-profits.

Even for those instances where none of the above-mentioned conditions are present, liquidated damages can be sought from the employer only if a request for seeking liquidated damages is approved by the administrator of WHD and the Solicitor of Labor on a case-by-case basis.

In response to the DOL’s practice of seeking the liquidated damages as a rule and not an exception, the new policy aims at quick conclusion of the overtime and minimum wage matters involving liquidated damages. That benefit is extended only to those employers that do not have history of violation or have not violated overtime and wage requirements willfully.

As a part of DOL’s previous practice, employers had two options in dealing with wage and labor violation claims. Employers were expected to either pay liquidated damages along with back wages to settle the claims or spend time and litigation costs for in-court proceedings. The new policy is in the positive direction for employers facing wage-related disputes or investigations. Not only are the employers now less likely to pay double damages (i.e., liquidated damages coupled with back wages), they will also benefit from the swift conclusion of matters. For those employers who are not facing such claims or investigations, the policy change is a reminder to conduct timely compliance audits to avoid any overtime or minimum wage claims.

In addition, the new policy is a welcome change for employees as well, since they will benefit from effective conclusion of their claims and consequent payment of damages to them. For those employees whose employers were willful in their violation or are habitual violators, things have not changed much as those employees are still likely to be awarded liquidated damages. The new policy, therefore, is seen as a positive step towards bolstering the employment rate in the U.S. and an attempt to keep employers, and employees for that matter, from any further economic hardship.

Our Firm has extensive experience counseling employers and businesses on employee and labor law issues, and preparing applicable employee policies, particularly relating to the evolving regulations during the COVID-19 pandemic. If you have any questions related to this Legal Briefing or questions related to COVID-19 reopening rules and procedures, please contact any member of our Firm at 585-730-4773.

This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2020 Law Offices of Pullano & Farrow PLLC

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