DOL Makes FLSA Mistakes More Costly for Employers

On April 9, 2021, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD)—the arm of the DOL responsible for enforcing the FLSA—officially rescinded a controversial employer-friendly enforcement practice implemented less than a year ago. As a general rule, the FLSA requires liquidated damages be assessed after finding an employer violated the Act’s minimum wage or overtime requirements. Liquidated damages are equal to the amount of wages owed to underpaid employees. This is often referred to as “double damages” or “double back-pay.” For example, if an employer was found liable to an employee for $500 in unpaid or underpaid overtime, as a general rule, the employer would be required to pay both the back wages and an equal amount in liquidated damages. This results in the worker actually receiving $1,000 for a $500 mistake.

While the assessment of liquidated damages is common in most FLSA litigation, not all FLSA violations result in litigation. In fact, according to the U.S. DOL, the Wage and Hour Division conducts more than 20,000 FLSA investigations across the country annually. The agency claims to have recovered more than $1 billion in back wages over the past 5 years as a result of wage and hour investigations. Historically, the DOL included liquidated damages in the majority of pre-litigation settlements after conducting an FLSA investigation and finding violations. In other words, if the DOL investigator found that the employer violated the FLSA and owed workers back wages, the agency required both back wages and liquidated damages included in any settlement agreement.

This practice came to abrupt end in June 2020, when the DOL changed its enforcement policy and removed the assessment of liquidated damages from pre-litigation settlements brokered by the DOL. Business-friendly sources hailed this as a welcome change designed to invigorate the economy at the height of the COVID-19 pandemic. Labor-friendly organizations argued the liquidated damages assessment served as an important incentive for employers to follow the law. For more on that story, click here.

Now, fast forward to earlier this month. The DOL has officially ended this short-lived experiment of removing the liquidated damages assessment for pre-litigation settlements. As a result of this change, any settlement agreement brokered by the DOL following an investigation that found FLSA violations, will most likely include an assessment of liquidated damages in addition to any back wages owed. This is just another shift in DOL policy away from business-friendly policies and initiatives towards worker-friendly policies and initiatives following the 2020 presidential election.

The key take-away for public safety employers is to avoid the pitfalls associated with potential FLSA violations. While the financial impact of a DOL investigation and finding of FLSA violations is likely less than a full-blown lawsuit, the costs associated with even an unintentional error or errors has likely just doubled.

Do you have FLSA questions? Please consider joining us at the upcoming FLSA for Fire Departments live-webinar May 11-14, 2021. This 4-day 24-hour live webinar addresses important FLSA topics impacting today’s fire departments. This includes properly calculating an employee’s regular rate of pay, comp time, maximum hours and overtime, substitutions, recordkeeping, off-the-clock work, best firefighting schedules to minimize FLSA overtime, and even what to do in the event an error is discovered.

For more information on the FLSA for Fire Departments Live Webinar, click HERE.

Click here for more information on this policy change from the DOL.