The U.S. Department of Labor, Wage and Hour Division (WHD) recently announced it will no longer automatically pursue pre-litigation liquidated damages from employers.  WHD now takes the position that recovering pre-litigation liquidated damages should only occur in a limited number of cases and it will more selectively pursue such additional recoveries.

WHD issued this new guidance in response to Executive Order 13294.  Per WHD’s announcement, the policy shift represents an effort to help spur economic recovery.  The change also is intended to reduce the time needed to conclude Fair Labor Standards Act (FLSA) administrative cases to facilitate faster payment of back-wages to aggrieved employees.

More specifically, effective July 1, 2020, WHD will no longer assess pre-litigation liquidated damages 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) shows 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, so-called “white collar” exemptions under section 13(a)(1) and (13)(b)(1) exemptions concerning employees regulated by the Department of Transportation.
  • The matter involves state and local government agencies or other non-profits.

Additionally, any request for pre-litigation liquidated damages will need to be submitted to and approved by both the WHD Administrator and the Solicitor of Labor on an investigation-by-investigation basis.

This change dramatically alters the landscape of WHD enforcement. Employers face significantly reduced exposure and should have a much easier time reaching pre-litigation resolutions.  In fact, this shift may result in an increase in employer self-reporting to secure make-whole payments to correct good faith errors while eliminating the risks of private litigation and the threat of attorneys’ fees.

Despite these changes, employers should still exercise great care in updating their wage-and-hour compliance regimens, including with respect to COVID-19.  WHD’s guidance does not change the risks employers face in private litigation, nor does it vitiate the WHD’s ability to again change its policy in the coming months and years with little notice.

Employers with questions about how these developments impact their business should reach out to legal counsel.