The U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) recently announced a significant change in how it resolves cases under the Fair Labor Standards Act (FLSA).
Pursuant to the DOL’s new guidance (FAB 2025-3), issued on June 27, 2025, the WHD is no longer permitted to seek liquidated damages in any pre-litigation investigation or resolution unless a private lawsuit is filed by an employee or the secretary of labor.
Instead, WHD settlements are now limited to recovering unpaid minimum wages and overtime compensation. The new guidance reinforces that only courts may award liquidated damages and clarifies the WHD’s role in pre-litigation investigations and resolutions.
FLSA Background: Unpaid Wages, Overtime, and Liquidated Damages
The FLSA allows employees to recover unpaid minimum wages and overtime compensation from employers either by pursuing an administrative action with the WHD or by filing a private lawsuit. The statute also authorizes “liquidated damages” in an amount equal to the unpaid wages and overtime—effectively doubling the recovery in any successful unpaid minimum wage or overtime claim—unless the employer can prove it acted in good faith and reasonably believed its conduct was lawful.
Although courts have historically awarded liquidated damages, in 2010 the WHD began seeking them in its own administrative investigations and settlements. In 2020, the WHD stopped seeking liquidated damages after it determined that doing so extended the length of investigations by 28 percent and delayed recovery to employees; it resumed the practice a year later.
Under the new guidance, the WHD once again resolves that it will not seek liquidated damages in administrative investigations. The guidance reasons that federal agencies can only exercise authority clearly delegated by Congress and states the WHD’s opinion that the FLSA only authorizes liquidated damages through private lawsuits. Accordingly, it authorizes WHD regional offices to seek liquidated damages only when bringing litigation under the FLSA and not through pre-litigation investigations or settlements.
What Employers Should Know About Wage and Hour Settlements
The WHD’s new guidance is welcome news for employers who may seek to resolve claims of unpaid wages prior to litigation—resolving matters early with the WHD is likely more cost-effective than risking prolonged litigation and double damages down the road. Even if seeking an early settlement, employers should continue to maintain detailed documentation of wage and hour compliance efforts to avoid potential liquidated damages if a lawsuit is later initiated by an employee or the secretary of labor.
The guidance is not retroactive, so agreements entered before June 27, 2025 that included liquidated damages remain valid. Employers may also continue to face penalties for repeat or willful violations, as well as additional penalties under state and local laws.
Employers with questions regarding the DOL’s new guidance, its implications, or its application to specific employment practices are encouraged to contact the authors of this article or any attorney in Venable's Labor and Employment Group.