Department of Labor Pursues Their Updated Practice of Seeking Liquidated Damages for Settlements in Lieu of Litigation
"When you reach the end of your rope, tie a knot in it and hang on." -Franklin D. Roosevelt
On April 9, 2021, the Department of Labor (“DOL”) published Field Assistance Bulletin (“FAB”) No. 2021-2 which rescinded FAB No. 2020-2. FAB No. 2020-2 stated that DOL will not assess pre-litigation liquidated damages for violations of the Fair Labor Standards Act (“FLSA”) in several scenarios including situations where there is a lack of evidence pointing towards willfulness or bad faith, where the employer has no previous history of violations, or situations where the employer has a bona fide dispute about unsettled law.
DOL’s revocation of that policy, which Abrahams Wolf-Rodda wrote about here: https://www.awrcounsel.com/blog/2021/4/21/expect-the-unexpected-but-also-expect-the-expected-department-of-labor-updates-their-liquidated-damages-practices-for-settlements-in-lieu-of-litigation?rq=liquidated, evidenced a quasi changing of the guard between the Trump and Biden administrations.
The Trump administration justified their policy with evidence that DOL investigations seeking liquidated damages take 28% longer than those only involving backwages, but pursuing liquidated damages can double the payout that those employees receive.
Almost a year later, looking back at FAB 2021-2, it seems that DOL has followed through with this policy of seeking liquidated damages as part of the norm rather than in only a few circumstances. DOL publishes news of the settlements that they reach with violators of the FLSA as well as the amounts recovered for employees as News Releases. See https://www.dol.gov/newsroom/releases. In these releases, you can see DOL’s trends in real time.
This new policy accomplishes a primary goal of the FLSA, which is to discourage bad behavior and violations of the act. Employers are now encouraged to report and stop concurring violations as soon as possible. In the previous scheme, DOL sought liquidated damages in a smaller number of cases and so the consequences of a violation only extended to the unpaid backwages. Thus, in the majority of cases, the consequences of a violation only extended to the money gained by the violation. This likely did little to encourage good behavior. However, this new practice, which in reality is a return to the old practice, discourages bad behavior by heavily penalizing violator with up to double damages.
These investigations now represent a larger threat to employers covered by the FLSA. In these investigations it is very important to cooperate with DOL and to furnish correct payroll data. But, cooperation does not necessarily mean that there aren’t a few points an employer can push back on. For example, as stated above, evidence that the violation occurred as a result of a decision made in good faith allows DOL or a court to consider taking those double damages off the table. Additionally, keeping accurate payroll data is vital because without it, DOL will ask employees to estimate their hours worked and rely on their estimate, accurate or not.
The FLSA allows DOL to pursue liquidated damages in their endeavor to find and compensate employees who have been subject to violations of the act. This policy effectively accomplishes that goal, but also creates a challenge for employers who may have been unaware of the requirements of the act. It is important for DOL and the judicial system to find the right balance in interpreting DOL’s standard for good faith violations and willful conduct.