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Law360 (June 24, 2020, 10:07 PM EDT) -- The U.S. Department of Labor said Wednesday it will no longer pursue prelitigation liquidated damages, which double unpaid overtime and minimum wages for Fair Labor Standards Act violations, in response to Trump's push to rollback Obama-era regulations and cut red tape to help the economy rebound from the pandemic.
In a notice published online by the DOL's Wage and Hour Division, the agency said pursuing prelitigation liquidated damages in settlements in lieu of litigation is no longer the government's "default policy." The policy change comes after President Donald Trump signed an executive order in May requiring federal agencies to lift certain regulations and enforcement procedures that could impact businesses and impede their economic recovery during the pandemic.
The department noted that DOL investigations into alleged FLSA violations that involve liquidated damages take 28% more time to complete than those involving back wages only. Therefore, the notice said, the division will shift its policy away from the policy to cut down on the time it takes to conduct the investigations and to return back wages to employees more quickly.
Under the new policy, which is effective July 1, the agency will no longer pursue prelitigation liquidated damages if there is not clear evidence of bad faith and willfulness; if the employer explains the violations were the result of a "bona fide dispute of unsettled" FLSA law; if the employer doesn't have a history of violations; and if the case only involves individual coverage. Additionally, the DOL won't pursue such damages in disputes involving local governments or nonprofits, the notice said.
According to a memo by DOL deputy secretary Patrick Pizzella dated Tuesday, the DOL has sought liquidated damages to resolve FLSA claims before a complaint has been filed as a "de facto" policy since 2011. But Pizzella wrote that such a "rigid enforcement policy" does not allow businesses to comply with complex regulations in "complicated and swiftly changing circumstances."
"This is especially true as employers face novel and practical challenges in applying the FLSA to new conditions in response to the coronavirus pandemic," the memo says.
Therefore, the memo says, the policy is precisely the type of policy that Trump's order directs the department to revise, so that employers who genuinely work to understand their obligations under the FLSA return unpaid wages to workers quickly and are not also hit with doubled damages that might jeopardize the business.
Trump, who said he has done "more regulation cutting than any president in history," touted his executive order in May and told his cabinet that it gives them "great authority to cut regulations," and a right to "do something that nobody would ever have thought you would have the right to do that."
Since then, environmental groups and other advocates have argued that more harm than good will come from the president's order, and that cutting red tape means removing protections for people that were put in place by Congress.
--Additional reporting by Michael Phillis. Editing by Breda Lund.
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