If an employer fails to comply with federal overtime or minimum wage requirements imposed under the Fair Labor Standards Act, it can be held liable not only for unpaid wages, but also for liquidated damages equal to that amount. During the Obama Administration, the U.S. Department of Labor sought these double damages as its default position when negotiating settlements with employers during administrative investigations. Last week, DOL announced that it was changing this policy in part to assist businesses with COVID-19 recovery efforts.

Beginning July 1, DOL will not seek liquidated damages in cases that do not involve instances of bad faith or intentional wage payment violations, assuming that the employer does not have a history of wage violations. In addition, DOL says that it will not seek double damages against nonprofits or state and local government agencies.

Under the FLSA, employees have the option of filing private lawsuits and seeking payment of liquidated damages and attorney’s fees. The DOL policy change may provide employers with significant incentive to settle wage claims with DOL instead of risking a lawsuit that could result in far higher damages.