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DOL Dumps Trump-Era Limits on Double Damages in Wage Cases

April 9, 2021, 6:47 PM

The U.S. Labor Department will increase its use of liquidated damages—or double the amount of back pay an employer owes—when enforcing wage laws, retreating from a Trump-era policy that scaled back application of the punitive tool.

DOL’s Wage and Hour Division stated in a memo Friday that the Trump policy was revoked, effective immediately, and that investigators—with approval from their regional office leaders—once again have greater discretion in when to seek liquidated damages as part of settlements for unpaid minimum wages or overtime.

The Trump administration in June 2020 curtailed use of the technique in pre-litigation settlements, after management attorneys complained double damages were utilized inconsistently and too often, starting during the Obama administration.

Former WHD administrator Cheryl Stanton, a Trump appointee, had directed enforcers to not assess liquidated damages when there wasn’t clear evidence of bad faith and willfulness on the business’s part, or if the employer had no prior history of violations, among other qualifying reasons. And if an investigator decided double damages were warranted, they needed to first get approval from Stanton and the DOL solicitor.

Now, regional offices across the country will have much more flexibility in determining when liquidated damages are necessary. The use of liquidated damages now requires approval from a regional solicitor or someone else the solicitor designates.

“Liquidated damages shall not be assessed by WHD where the employer has set forth credible evidence of a good faith defense,” or the where the regional solicitor “deems the matter inappropriate for litigation,” Jessica Looman, the Biden-appointed principal deputy administrator of WHD, said in the memo.

Worker advocates and plaintiffs’ lawyers previously applauded use of double damages as a way to make workers whole, given the long waits many face to receive settlements for pay they are owed. Supporters also argued the practice serves as a deterrent against bad-intentioned employers, who’d otherwise realize they might as well skirt the law and not pay the worker, because if they get caught, they need only pay the wages they were originally responsible for.

The business community complained that Obama-era investigators abused the technique, contending its frequent use hurt workers by encouraging employers to take cases to court, delaying or preventing altogether recovery of their pay.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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