Under the Fair Labor Standards Act, violations of overtime or minimum wage requirements can result in assessment of liquidated damages equal to the amount of unpaid wages. In recent years, the U.S. Department of Labor’s Wage and Hour Division has often assessed liquidated damages following investigation of employer pay practices — and insisted on such payment as a condition of settling claims.

Earlier this month, DOL announced that it will no longer seek assessment of liquidated damages prior to the filing of a lawsuit against the employer. This policy change means that employers will have the option of resolving FLSA claims by paying the wage amount in dispute without additional damages. The FLSA does not require plaintiffs to file claims with DOL, and they may proceed directly to court, seeking payment of unpaid wages, liquidated damages, attorneys’ fees and costs. This DOL policy change will incentivize employers to settle with employees through the DOL investigative process in order to avoid potential financial risks faced through a private lawsuit.

DOL retains the ability to assess civil monetary penalties for FLSA violations. The agency’s announcement does not address how and when such penalties are assessed. However, employers that unintentionally violate FLSA requirements and who cooperate with DOL’s investigation may be able to avoid paying more than the claimed unpaid wages.

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