One of the biggest costs in most Wage and Hour enforcement cases is “liquidated damages.” Liquidated damages are effectively a penalty imposed on the violating employer equal to 100% of the wages that were unpaid. On June 27, 2025, the US Department of Labor (DOL) Wage and Hour Division (WHD), prohibited its regional solicitors (RSOLs) from seeking liquidated damages in administrative settlements under the Fair Labor Standards Act (FLSA). WHD ‘s Field Assistance Bulletin (FAB) No. 2025-3 prohibits the WHD from recovering liquidated damages for unpaid minimum wages or overtime compensation “except where an enforcement action is brought in litigation.” This is a policy reversal of a Biden FAB and a practice that goes back to 2010.
Details
FAB No. 2025-3 emphasizes the DOL, as a federal agency, may only act when Congress has clearly granted it the authority to do so. WHD states that under § 216(c) of the FLSA, the award of liquidated damages may not take place in an administrative setting.
Most FLSA claims may be resolved via § 216(b). Under this section employees are authorized to bring private lawsuits to recover unpaid minimum wages or overtime compensation and “an additional equal amount as liquidated damages.” Mandatory liquidated damages are authorized “unless the employer proves good faith and reasonable grounds under 29 U.S.C. § 260.” Damages may be awarded through an employee lawsuit or litigation initiated by the Secretary of labor.
The Trump FAB No. 2025-3 came into effect on June 27, 2025, and applies prospectively. Any matters involving liquidated damages which were agreed to in writing before July 27, 2025, will not be affected.
Background
Historically, the DOL sought liquidated damages for FLSA violation through lawsuits or “litigation-related settlements.” This changed in 2010, after which the WHD began seeking liquidated damages at the administrative stage. The practice was temporarily curtailed upon the issuance of FAB 2020-2. The 2020 FAB explained that seeking liquidated damages at the administrative investigation stage extended the pre-litigation process by 28%, delaying recovery to affected workers. However, the practice was expanded once more when FAB 2020-2 was replaced with FAB 2021-2.
Key Takeaways
The new FAB should expedite the administrative process, leading to a quicker resolution. In part this is due to the fact there is less financial risk for employers in the administrative stage of DOL enforcement proceedings. For multiple reasons, it is advisable to act quickly to resolve such proceedings, before they reach litigation. While employers can avoid liquidated damages if they can show “good faith and reasonable grounds” for their actions, this is normally a very tough standard to meet.
Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
