Liquidated Damages in Settlements in Lieu of Litigation

A worker stands in a restaurant.

The Wage and Hour Division of the U.S. Department of Labor is responsible for ensuring that over 148 million workers across the country are getting paid for the work they do every day to keep our economy moving forward. Enforcing the minimum wage and making sure workers get time and a half after 40 hours a week are fundamental protections provided under the Fair Labor Standards Act. When a worker doesn’t get paid, it hurts them, their families, and the community. That’s not fair and that’s not right.

That’s why, under the Fair Labor Standards Act, employers who violate minimum wage, overtime and protections for employees who receive tips are liable for the unpaid wages or unlawfully kept tips and for an additional equal amount in liquidated damages.

Prior to June 2020, the U.S. Department of Labor’s Wage and Hour Division, working with the department’s Solicitor’s Office, had successfully leveraged pre-litigation liquidated damages in the settlement of cases in lieu of litigation, with impactful results. From fiscal year 2016 through fiscal year 2020, the division assessed more than $200 million dollars in liquidated damages for approximately 250,000 affected workers. However, in June 2020, the department paused the use of this enforcement tool.

Effective April 9, 2021, the Wage and Hour Division will return to pursuing pre-litigation liquidated damages and leveraging this enforcement tool where appropriate.

Each year, the Wage and Hour Division concludes approximately 21,000 Fair Labor Standards Act cases, impacting over 200,000 workers. Over the last five years, Wage and Hour has collected more than $1 billion in back wages for workers in America. But the Department of Labor recognizes that back wages alone provide insufficient compensation to employees for lost wages. Therefore, liquidated damages are intended to compensate workers for damages they may have incurred as the result of not having been paid timely for all the wages they legally earned.

The department’s use of this enforcement tool will provide an incentive for employers to comply with the law, to level the playing field for those that play by the rules, and to help alleviate the inequities exacerbated when low-wage, essential workers face the additional and too common burden of wage theft.

Like the COVID-19 pandemic, wage theft affects many essential workers disproportionately, with our division historically finding more violations in low-wage industries than in other economic sectors. Providing incentives for employers to pay these workers their rightful wages, and providing economic relief to workers when they do not, greatly benefits this crucial and undervalued sector and helps to close the workplace gap in economic equity.

As we move toward the economic recovery our country so desperately needs, we also need to ensure that the workers our nation relies on are paid for their work.

Jessica Looman is the principal deputy administrator for the U.S. Department of Labor's Wage and Hour Division. Follow the division on Twitter @WHD_DOL.