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DOL Pulls Back From Use of ‘Double Damages’ in Wage Cases (1)

June 24, 2020, 9:47 PMUpdated: June 24, 2020, 11:33 PM

The Labor Department is curtailing its use of liquidated damages, which double the amount of back pay workers receive in wage settlements, erasing an Obama-era policy that applied the technique more frequently to collect employer penalties for employees shorted on pay.

The policy change stems from an executive order President Donald Trump signed last month directing agencies to use deregulatory actions to help spur economic recovery, the department said in an online notice Wednesday. The DOL’s Wage and Hour Division said in the notice to field staff that it “will no longer pursue pre-litigation liquidated damages as its default policy from employers.”

The division said it won’t assess double damages if there’s no clear evidence of bad faith and willfulness on the business’s part or if the employer has no prior history of violations, among other qualifying reasons. It will instead only seek to recover regular back wages. The notice also said requests for pre-litigation liquidated damages must be approved by two top agency officials: the WHD administrator and the Solicitor of Labor.

The move was reflected on the WHD’s website on Wednesday afternoon, but hadn’t been formerly announced by the department. The new policy delivers on one of the business community’s top labor advocacy priorities since Trump took office.

Business attorneys expressed frustration earlier in the Trump administration that the agency was continuing the Obama administration’s policy of routinely applying liquidated damages in most cases—an approach the management bar views as bullying businesses that didn’t realize they were violating the law. Management lawyers also have complained of inconsistent application across the country.

‘Hurts Workers’

News of the policy shift was opposed by advocates for workers, and former Obama administration officials. They say the agency is stripping itself of an effective enforcement tactic used to make workers whole for time spent without being properly paid that also serves to deter employers from violating the law.

“Liquidated damages directly compensate workers for the losses they incur—often going back to uncompensated work that goes from over several years,” said David Weil, the WHD chief during the Obama administration who oversaw the agency’s heightened use of the enforcement tool.

“The Trump administration’s decision to walk away from assessing liquidated damages hurts workers who deserve that compensation,” he added. “It is another sad example of policies pursued by the administration that flout the Wage and Hour Division’s mission of assuring that workers get a fair day’s pay for a fair day’s work.”

DOL media representatives didn’t immediately respond to a request for comment.

The agency’s bulletin argued the change will help workers by giving them faster access to wages they’re owed when employers violate minimum wage and overtime laws. Investigations involving liquidated damages take 28% more time to conclude than those seeking back wages only, the notice said.

‘Rigid Enforcement Policy’

“As a matter of pure common sense, when employers know they might have to pay liquidated damages, in addition to back wages, they will fight harder to prove that they should not have to pay either,” said Brett Bartlett, who co-chairs the national wage-hour practice at management-side firm Seyfarth Shaw. “In my view, making liquidated damages the exception to the rule will make it easier for Wage and Hour Division investigators to do their jobs.”

The bulletin was supplemented by a memo from Deputy Labor Secretary Patrick Pizzella. In it, he said the Obama Labor Department adopted expansive use of liquidated damages “in a departure from its long-standing prior policy” and without publishing any guidance specific to the circumstances under which pre-litigation double damages would be sought.

Pizzella’s memo argued that “continuing to recover pre-litigation liquidated damages as the rule, rather than the exception in limited cases, appears to be an administrative enforcement practice that” Trump’s executive order “describes as potentially inhibiting economic recovery in these challenging times for American workers.”

Further, he said, “the rigid enforcement policy does not appear to sufficiently allow” for efforts businesses are making to comply with complicated regulations during the pandemic.

(Updated with additional reporting throughout.)

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; Meghashyam Mali at mmali@bloombergindustry.com

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