The U.S. Department of Labor issued a Field Assistance Bulletin on June 24, 2020, announcing that it will not routinely assess pre-litigation liquidated damages as part of the settlement process for claims under the Fair Labor Standards Act. Although this announcement has largely gone “under the radar,” it actually has historic significance. The bulletin is an important development and excellent news for both employers and employees as it will likely result in the expedited resolution of many wage and hour claims before the DOL. More importantly, this announcement completes the circuit of the DOL’s return to normalcy after nearly a decade where it was widely perceived as openly anti-employer.
What Does the Field Assistance Bulletin from June 24 Say?
Effective July 1, 2020, the DOL will not assess pre-litigation liquidated damages if any one of the following circumstances exist:
- There is not clear evidence of bad faith and willfulness;
- The employer’s explanation for the violations show that the violations 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 issues of white collar and motor carrier exemptions (under section 13(a)(1) and 13(b)(1) exemptions); or
- The matter involves state and local government agencies or other non-profits.
Furthermore, each request for pre-litigation liquidated damages under the FLSA must be submitted to and approved by both the Wage and Hour Division administrator and the solicitor of labor (or either of her designees) on an individual basis.
A Little History
Once upon a time (prior to 2009), the DOL used a three-pronged approach to address the FLSA’s wage and hour requirements. Prong one was to educate employers about the law and provide advice and assistance when asked. One of the primary ways the DOL accomplished this was by allowing employers to submit questions about wage and hour (or FMLA) issues, which the DOL answered with opinion letters. The FLSA is technical and full of grey areas, but employers could rely on opinion letters from the DOL to make decisions. As long as an employer asked, and followed the direction provided, it did not have to worry about liability. Prong two of the DOL’s approach was to investigate alleged violations and try to resolve them without litigation. The DOL was often able to expedite settlements because it did not seek liquidated damages (double damages) or attorney fees, both of which drive up the cost of litigation and resolution in federal court actions. Employers could resolve claims with the DOL, avoid litigation, and incur less cost. Employees could receive payment relatively quickly and without litigation when they settled cases through the DOL process. Prong three, which was the last resort, was for the DOL to sue employers for alleged violations. DOL litigation was the exception.
Things changed in 2009. After nearly 70 years of issuing opinion letters to answer questions, the DOL stopped the process, withdrew pending letters, and instead began issuing “general guidance” on topics of its choosing. The general guidance was almost always decidedly anti-employer. Not only could employers no longer ask questions about the FLSA and rely on the DOL’s response, but at the same time the DOL was fashioning guidance that often required employers to change existing practices or face liability. The DOL also changed its practice of not assessing liquidated damages during the settlement phase and began demanding that employers pay double damages to settle or the DOL would sue. The DOL was no longer seen by employers as an option for resources and education and instead was viewed as an agency with a clear anti-company agenda.
Why This Is Good News
The DOL’s recent decision to reinstitute opinion letters and this announcement to not seek liquidated damages in all matters are more than just a blip on the radar. These decisions signal an important return to normalcy and suggest that perhaps the DOL will approach matters in a less litigious manner. Of course, the DOL will still look for and pursue violations. With this new turn of events, however, perhaps it will allow employers to avoid and fix mistakes more effectively.