U.S. Department of Labor to Stop Seeking Liquidated Damages in Wage and Hour Investigations

On June 27, 2025, the U.S. Department of Labor Wage and Hour Division (WHD) issued Field Assistance Bulletin No. 2025-3 (FAB 2025-3), advising that it will no longer request or attempt to collect liquidated damages in connection with the pre-litigation resolution of wage and hour investigations for unpaid minimum wages and overtime compensation. This is welcome news for employers seeking to correct past payroll errors by voluntarily paying minimum wages and overtime compensation found to be owed as part of a WHD investigation as it removes the deterrence that such payments must also include an equal amount as liquidated damages.

Historically, WHD did not seek liquidated damages in wage and hour matters resolved prior to litigation. In 2010, however, WHD began to seek liquidated damages when attempting to resolve investigations. WHD continued its practice until 2020, when the first Trump Administration’s WHD issued FAB 2020-2. Therein, WHD found that its efforts to obtain liquidated damages delayed the recovery of wages for employees because employers resisted WHD’s insistence that they also pay liquidated damages in addition to the wages owed. As a result, WHD suspended the practice in 2020. After the change in administration in 2021, however, WHD resumed the practice of seeking liquidated damages, operating under what WHD’s June 27th Press Release called “vague guidance on whether such damages would be sought, giving the agency virtually unfettered discretion.” Now, following another change in administration, the second Trump Administration’s WHD is once again electing not to seek liquidated damages as part of pre-litigation supervised payments of unpaid minimum wages or overtime compensation.

Interestingly, although the practice to seek liquidated damages was originally suspended by President Trump’s WHD on account of delays in payments to workers, the current Trump Administration’s WHD explains that its decision to stop the practice this time is based on its conclusion that it is not legally authorized to seek liquidated damages under the Fair Labor Standards Act (FLSA) section that authorizes the Secretary of Labor to supervise the payment of unpaid minimum wages or overtime compensation prior to the initiation of litigation.

Specifically, FAB 2025-3 explains that while FLSA Section 216(b) authorizes the Secretary of Labor and private litigations to file suit for unpaid wages and liquidated damages, Section 216(c) only permits and authorizes the Secretary to “‘supervise the payment of the unpaid minimum wages or the unpaid overtime compensation owing to any employee or employees under section 206 or 207’ prior to the initiation of litigation.” Moreover, WHD explains that Section 260 confirms its approach, suggesting that only a court is permitted to decline awarding liquidated damages in the presence of facts demonstrating the employer acted in good faith. Accordingly, WHD concludes that the absence of reference to the Secretary’s authority to supervise payment of liquidated damages and the statutory authority vesting consideration of whether to award liquidated damages with a court renders the Secretary of Labor without the authority to seek liquidated damages under the FLSA prior to litigation.

Such a conclusion is not surprising, considering the Administration’s approach to limiting administrative agency authority. In fact, FAB 2025-3 expressly “recognizes this limitation [of liquidated damages to only litigation proceedings]” as “based on a fundamental principle of administrative law: a federal agency may act only when Congress has clearly granted it the authority to do so.” Nonetheless, WHD’s explanation that it is not authorized to seek liquidated damages prior to litigation has been rejected by at least one court, which agreed with WHD’s prior insistence that it possessed such authority.¹

While FAB 2025-3 is welcome news for employers seeking to resolve claims of unpaid wages prior to litigation, nothing in FAB 2025-3 limits WHD’s ability to seek and collect liquidated damages resulting from an award from a court or settlement during litigation. As such, it remains critical for employers and their counsel to pay close attention to current and developing legal authority concerning compensation and payment of wages and overtime. In addition, employers with current U.S. Department of Labor Wage-Hour audits should assess how the Department’s announced change will impact their ongoing matters and should consider consulting counsel with respect to same.