Overview of the Department’s Policy Shift
On June 27, 2025, a new enforcement directive from the U.S. Department of Labor (DOL)’s Wage and Hour Division (WHD) took effect, formally eliminating the agency’s policy of seeking the payment of liquidated damages in any administrative matter conducted under the Fair Labor Standards Act (FLSA). This shift, announced in Field Assistance Bulletin (FAB) No. 2025-1, rescinds the DOL’s prior position set forth in FAB 2021-2, which permitted WHD to pursue liquidated damages in pre-litigation investigations with approval from the Solicitor’s Office.
The new bulletin affirms that WHD’s authority under Section 216(c) of the FLSA is limited to supervising payments of unpaid minimum wages or overtime compensation and does not extend to punitive remedies. Moving forward, liquidated damages may only be recovered through litigation initiated by the DOL or through private lawsuits brought by employees under the FLSA’s Section 216(b).
Statutory Framework: Sections 216 and 260
The FLSA provides distinct pathways for the recovery of back wages and liquidated damages, depending on the context of enforcement. Under Section 216(c), the Secretary of Labor is authorized to supervise the payment of unpaid minimum wages and overtime compensation without filing a lawsuit. This process is commonly used to resolve violations in a more streamlined, informal manner. However, the statutory text of Section 216(c) contains no reference to liquidated damages.
By contrast, Section 216(b) provides that employees may file private lawsuits to recover unpaid wages and “an additional equal amount as liquidated damages.” Section 260 further specifies that courts may decline to award liquidated damages where the employer demonstrates good faith and reasonable grounds for its conduct. Importantly, this language makes clear that only courts may determine whether liquidated damages are appropriate, as the evaluation of an employer’s good faith is a judicial function. WHD, as an administrative agency, does not possess the authority to make these determinations or to supervise the payment of liquidated damages prior to litigation.
Background and Reversal of Prior Practice
Although WHD historically limited its administrative supervision to back wage payments, in 2010 the agency began expanding its practice to include liquidated damages during the investigation phase. This approach was justified on the basis that Section 216(c) permitted such recovery, even though the statute did not expressly authorize it. The practice became increasingly common across WHD offices, raising concerns within the DOL and among employers.
In FAB 2020-2, the Department temporarily paused this practice, citing internal data showing that investigations involving liquidated damages took 28% longer to resolve and delayed restitution for workers. Nevertheless, WHD reauthorized the practice in FAB 2021-2, requiring concurrence from the Solicitor’s Office before liquidated damages could be pursued.
FAB 2025-1 now definitively concludes that this approach exceeds the DOL’S statutory authority. This emphasizes that federal agencies may act only when Congress has clearly granted the authority to do so. In this case, the absence of any reference to liquidated damages in Section 216(c), combined with the judicial nature of Section 260, confirms that WHD cannot pursue liquidated damages during the administrative process.
Scope and Application of the New Guidance
The revised enforcement position applies broadly to all pre-litigation activity under Section 216(c). WHD may no longer request, encourage, negotiate, accept, or approve the payment of liquidated damages at any point prior to filing a lawsuit. This prohibition covers all forms of administrative resolution, including informal settlements, investigative interviews, and correspondence with employers. The restriction also applies to the Regional Solicitor of Labor, who may no longer collaborate with WHD to secure liquidated damages in any matter that the Department does not intend to litigate.
The policy does not apply retroactively. If liquidated damages were agreed to in writing before June 27, 2025, those agreements remain enforceable. Additionally, the Solicitor’s Office retains full authority to seek liquidated damages through litigation, and this policy does not affect the DOL’s enforcement powers once a complaint is filed in court.
Legal Significance and Due Process Considerations
The DOL’s reasoning also highlights fundamental principles of administrative and constitutional law. Because liquidated damages function as a punitive remedy and depend on findings related to an employer’s intent or good faith, they implicate procedural due process concerns. Courts are uniquely suited to adjudicate these factual and legal questions. The structure of the FLSA reinforces this distinction by limiting WHD’s role to the supervision of back wage payments and reserving all determinations regarding punitive relief for judicial forums.
By returning to a narrower reading of Section 216(c), the Department seeks to reinforce the legal distinction between administrative enforcement and formal litigation. Employers now face less ambiguity regarding the types of remedies that may be pursued during WHD investigations and will be better positioned to evaluate their exposure based solely on unpaid wage calculations.
Implications for Employers
This policy change carries meaningful implications for employers currently subject to WHD investigations or preparing for potential enforcement actions. The elimination of liquidated damages from the administrative process may reduce pressure to settle quickly and provide more room for asserting defenses in good faith. Employers can now enter administrative discussions with the understanding that WHD may only request payment of back wages and cannot leverage the threat of duplicative penalties without initiating litigation.
Employers, however, should not interpret the DOL’s revised enforcement posture as a reason not to prioritize compliance. WHD investigations may still lead to lawsuits where liquidated damages, attorney’s fees, and injunctive relief are available. Businesses should continue to maintain accurate payroll records, audit employee classifications, and proactively address wage and hour risks.
Conclusion
FAB 2025-1 marks a significant change in the Department of Labor’s wage and hour enforcement strategy. By rescinding FAB 2021-2 and restricting WHD’s authority to the supervision of back wages under Section 216(c), the Department is realigning its practices with statutory limits and reaffirming that punitive remedies are the responsibility of the courts. Employers navigating WHD investigations should take note of this change and consult with counsel to assess their risk exposure and strategic options under the revised framework. Going forward, the absence of liquidated damages from administrative matters may shift how both employers and the Department approach early-stage resolution of FLSA claims.
