Labor Dept. Still Doubling Down on Most Wage Settlements

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By Ben Penn

An Obama-era wage enforcement policy to charge businesses double the back pay owed to workers has so far survived the Trump administration’s business-friendly makeover.

The Labor Department’s philosophy has shifted under Secretary Alexander Acosta to emphasize teaching employers to comply with minimum wage and overtime laws rather than relying on punitive enforcement. However, the agency still seeks to recover liquidated money damages for workers—or double the amount of unpaid wages—in the majority of cases in which it finds violations. That gives investigators significant leverage in settlement negotiations that take place before the DOL actually sues a business.

Although it’s taken a back seat to other regulatory matters that the business community is pressing the DOL to relax, employer representatives have asked Trump-appointed officials at the department’s Wage and Hour Division to return to a pre-Obama stance of limiting the use of double damages to lawsuits filed against particularly bad actors. If the department heeds this advice, it would serve as a further sign of the Trump DOL’s willingness to check items off the business lobby’s wish list.

“We have definitely raised it with officials in the Wage and Hour Division,” Jonathan Keselenko , chair of the Wage and Hour Defense Institute, told Bloomberg Law. “The feedback that we got was that they are very much aware of our concerns and were looking into it.”

“I think that they understood, appreciated it, and maybe even agreed with it, but there was a process that needed to play out in terms of changing policy, and apparently that hasn’t happened,” said Keselenko, who also represents employers as a partner at Foley Hoag in Boston.

President Donald Trump ‘s nominee for administrator of the division, South Carolina attorney Cheryl Stanton , has been awaiting Senate approval for 10 months. That has slowed an expected policy overhaul in the WHD, but , Bryan Jarrett —the politically appointed acting administrator, who hails from the management bar—could move to walk back the policy before Stanton arrives.

“WHD fully and fairly enforces the law by investigating and pursuing the appropriate corrective action where violations are found,” a Labor Department spokesman told Bloomberg Law. “Remedies include the assessment of back wages, penalties, and liquidated damages with respect to the facts of a case.”

“We also engage in robust education and outreach programs to prevent violations from occurring in the first place,” the spokesman said.

Management Pushback

The Obama WHD, under the leadership of David Weil , revised the field operations handbook used by investigators, to expanding the circumstances in which employers were on the hook for double damages paid directly to workers as a means of making them whole while also seeking to deterring businesses from violating the law. Text of the policy was never publicly disclosed, and the WHD doesn’t release data on the frequency with which liquidated damages have been required as part of settlements. But behind the scenes, the prior administration viewed it as a significant move to improve how the division discharged its mission to fully protect workers’ paychecks.

“It is a tool that does help restore those back wages to the workers and also sends a signal to employers who are bad actors, who are not paying people fairly, that they cannot have an interest-free loan by hanging onto their workers’ wages,” Laura Fortman, a deputy WHD administrator during Obama’s presidency, told Bloomberg Law in a 2017 interview.

Although the Obama administration’s new approach to double damages drew grumbles from trade groups and management attorneys, the opposition focused its ire on WHD regulations to expand time-and-a-half overtime eligibility or a guidance memo on joint employment liability. Still, some business and legal groups have put the issue on the administration’s radar by pushing a return to a narrower use of liquidated damages.

The Fair Labor Standards Act grants the DOL discretion to collect liquidated damages for wage and hour violations. An employer can avoid the extra damages in court if the business can prove it acted in good faith and had “reasonable grounds for believing that his act or omission was not a violation” of the FLSA.

There are varying legal interpretations as to what constitutes a good-faith showing. The uncertainty has prompted some lawyers to advise their business clients to fight the liquidated damages in court where a judge may then pressure the parties to strike the damages. This process can often take several years to unfold in court, a delay that business advocates point to as a reason to drop the Obama policy.

Tammy McCutchen, a WHD administrator under President George W. Bush, now defends businesses faced with investigations from her old agency as an attorney with Littler Mendelson in Washington. McCutchen, echoing a pattern described by her management bar peers, described varying rigidity throughout the nation in how the liquidated damages policy is applied. In some offices, when an employer self-corrected an employee complaint before the WHD investigation began, that local Labor Department office would still require double pay. Other offices would find similar actions by other employers sufficient to avoid liquidated damages.

“What is needed is for WHD to issue a Field Assistance Bulletin to set forth standards on when LDs are appropriate; that would provide consistency in enforcement and transparency to the regulated community,” she said in an email.

Yet even without a formal new policy, some private attorneys are starting to notice anecdotal evidence that when they challenge liquidated damages to their regional solicitor’s office or the national office, the department’s lawyers will intervene to overrule the WHD.

“My advice to employers is push back hard, especially when there are factual disputes and Wage Hour is seeking full relief,” Salvador Simao, chair of FordHarrison’s wage-hour practice group, told Bloomberg Law. “Let the solicitor’s office determine if this is something that they willing to pursue rather than take a reasonable offer and preserve their resources.”

Be it from DOL attorneys caving to pressure or a new enforcement memo from the national office, any move to restrict the agency’s use of liquidated damages would be seen by some as abandoning the interests of low-wage, vulnerable workers.

“It’s a very productive model for employers to wait to be caught and only reimburse the money that should’ve been paid in the first instance,” Douglas Werman, a partner at plaintiff firm Werman Salas in Chicago, told Bloomberg Law. “It would be a huge gift to employers for the DOL to give up their current practice of insisting on liquidateed damages for violations.”

Next Steps

Although it remains unclear whether the WHD has begun or will soon take up a revision to the liquidated damages guidelines, the first year-and-a-half of the Trump administration has offered several signals that this item is more a matter of when than if.

The division in April launched a pilot initiative to let businesses self-report wage violations to the DOL in exchange for a release of private claims. The agency also assured businesses that report their back wage liability and are accepted into the program that they won’t need to pay double damages.

This program and other changes in philosophy to boost cooperation with businesses suggests to Jeffrey Brecher, who co-chairs the wage-hour practice at Jackson Lewis, that change is on the way.

“I do believe that under the Trump administration, the department will return to its more flexible policies and will likely impose liquidated damages not as an automatic penalty, but rather probably saving it for cases where the violations are particularly egregious,” Brecher told Bloomberg Law.

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