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July 7, 2025
Effective June 27, 2025, the United States Department of Labor’s Wage and Hour Division (WHD) will seek only unpaid wages at the pre-litigation stage.
A recent WHD Field Assistance Bulletin (2025-3) clarifies that the Fair Labor Standards Act (FLSA) authorizes the WHD to “supervise the payment of the unpaid minimum wages or the unpaid overtime compensation owing to any employee.” The FLSA does not authorize the WHD to compromise claims for or recover liquidated damages, except when the WHD commences an enforcement action in court, which affords the parties due process protections.
Liquidated damages under the FLSA essentially are double damages. They are meant to compensate employees for the losses that they experience due to an employer’s violation of the law.
In the past, the WHD has sought liquidated damages to resolve matters before commencing litigation against an employer. Going forward, liquidated damages no longer will be a bargaining chip for the WHD.
This change allows employers to resolve matters with more leverage, less exposure, and more speed. In fact, the WHD admits that seeking liquidated damages in the administrative investigation stage extended the length of this stage by 28 percent and, thus, delayed recovery to affected workers.
Liquidated damages still remain a viable claim under the FLSA once litigation commences. To avoid the assessment of liquidated damages, an employer must prove good faith and reasonable grounds for the wage violations.
The WHD’s policy change applies prospectively and does not affect matters where liquidated damages have been agreed to in writing before June 27, 2025.
This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice. Always consult an attorney with specific legal issues.
