Effective July 1, 2020, the U.S. Department of Labor (DOL) will pull back on seeking liquidated damages in pre-litigation settlements of wage claims and investigations.  The change in policy, announced in Field Assistance Bulletin 2020-2, is significant, as liquidated damages can equal 100% of the back pay deemed to be owing, potentially resulting in “double damages” for wage violations.

The policy change comes on the heels of an executive order President Trump signed in May 2020, directing federal agencies to use deregulatory actions to spur economic activity in light of COVID-19 shutdowns.  In line with that order, the DOL’s Wage and Hour Division (WHD) will stop seeking liquidated damages in most pre-litigation disputes, finding that resolutions involving liquidated damages take 28% longer to conclude than those that seek only back wages.  WHD may still assess and seek liquidated damages in cases involving bad faith and willfulness on the part of the employer, but seeking such a remedy will now be the exception, not the rule.

Per the new guidance, WHD will not assess pre-litigation liquidated damages if any of the following circumstances exist:

  • there is no evidence of bad faith or willfulness;
  • the employer’s explanation for the violation shows that it was the result of a bona fide dispute of unsettled law under the Fair Labor Standards Act (FLSA);
  • the employer has no previous history of violations;
  • the matter involves individual coverage only;
  • the matter involves state and local government agencies or other non-profits;
  • the matter involves “complex” FLSA § 13(a)(1) or § 13(b)(1) exemptions.

FLSA § 13(a)(1) exempts from both minimum and overtime pay protections bona fide executive, professional, and administrative employees, as well as outside sales employees.  The § 13(a)(1) exemptions, often referred to as the “white collar” exemptions, have been the subject of considerable litigation since 2004, when the federal regulations interpreting those exemptions were revised significantly.  FLSA § 13(b)(1) provides an overtime exemption for certain employees who are subject to Department of Transportation regulations.

The guidance requires that requests for pre-litigation liquidated damages be submitted to both the WHD Administrator and the Solicitor of Labor for approval.

Liquidated damages are costly, and as the DOL acknowledges, can often be a barrier to a pre-litigation solution to a wage dispute.  The DOL’s change in enforcement position should be a welcome development for employers facing federal wage investigations.

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Photo of Allan Bloom Allan Bloom

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended…

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended many of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration, before government agencies, and in private negotiations. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York Times, Reuters, Bloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved billions of dollars in potential damages.

Allan is regularly called on to advise operating companies, management companies, fund sponsors, boards of directors and senior leadership on highly sensitive matters including executive and key person transitions, internal investigations and strategic workforce planning. He has particular expertise in the financial services industry, where he has litigated, arbitrated, and mediated disputes for more than 20 years.

A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA), Employment Discrimination Law (ABA/Bloomberg BNA), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE).

Allan has served as longtime pro bono counsel to Lincoln Center for the Performing Arts and The Public Theater, among other nonprofit organizations.  He is a past Vice Chair of Repair the World, a nonprofit organization that mobilizes volunteers and their communities to take action to pursue a just world, and a past recipient of the Lawyers Alliance Cornerstone Award for extraordinary contributions through pro bono legal services.

Allan is a Fellow of the College of Labor and Employment Lawyers and has been recognized as a leading practitioner by Chambers since 2011.