So how did we get here?Liquidated Damages 101The original version of the Fair Labor Standards Act (FLSA)—signed by President Franklin D. Roosevelt on June 25, 1938 and a centerpiece of New Deal legislation—contained the following language, which appears verbatim today in 29 U.S.C. § 216(b):Any employer who violates the provisions of section 6 [minimum wage] or section 7 [overtime] of this Act shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages.In section 11 of the Portal-to-Portal Act of 1947 (29 U.S.C. § 260), Congress amended the FLSA to add a specific safe harbor against liquidated damages claims:In any action … to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the [FLSA], if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the [FLSA], the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed [the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be].The DOL has the authority investigate alleged violations of the FLSA (see 29 U.S.C. § 211(a)), as well as to supervise settlements of FLSA claims and litigate against employers charged with violating the statute (see 29 U.S.C. § 216(c)).Trump DOL Abandons LDs… in Most CasesIn May 2020, President Donald J. Trump signed Executive Order (EO)

The imposition of liquidated damages during USDOL investigations has long been a source of contention and frustration for businesses and attorneys who advise and represent them. Technically, the law states a court should decide whether and to what extent an employer must actually pay liquidated damages, not the USDOL. 29 U.S.C. § 260. The FLSA does not include authority for the USDOL to impose FLSA liquidated damages on its own authority; these sums can only be the outgrowth of a judgment in a lawsuit.

The imposition of liquidated damages during USDOL investigations has long been a source of contention and frustration for businesses and attorneys who advise and represent them. Technically, the law states a court should decide whether and to what extent an employer must actually pay liquidated damages, not the USDOL. 29 U.S.C. § 260. The FLSA does not include authority for the USDOL to impose FLSA liquidated damages on its own authority; these sums can only be the outgrowth of a judgment in a lawsuit.

Such a defense, if established, shall be a bar to the action or proceeding, notwithstanding that after such act or omission, such … interpretation … is modified or rescinded or is determined by judicial authority to be invalid or of no legal effect.” In addition, under 29 U.S.C. § 260, “[i]n any action … to recover unpaid minimum wages, unpaid overtime compensation, or liquidated damages, under the [FLSA], if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that [it] had reasonable grounds for believing that his act or omission was not a violation of the [FLSA], the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed [the amount of the unpaid wages].”U.S. Regions: Nationwide [View source.]

The safe harbor will apply even if the DOL regulation, order, ruling, approval, interpretation, practice, or enforcement policy on which the employer relied is later modified, rescinded, or determined by a court to be invalid. The second safe harbor, codified at 29 U.S.C. § 260, empowers a court in its “sound discretion” to award less than 100% liquidated damages—or no liquidated damages at all—if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that it had reasonable grounds for believing that the act or omission was not a violation of the FLSA. (Absent such a showing, a prevailing plaintiff could recover liquidated damages in an amount equal to the unpaid minimum wages or overtime, under 29 U.S.C. § 216(b).) Employers whose acts or omissions conform to those deemed lawful by DOL opinion letters can take advantage of both safe harbors.

29 U.S.C. § 259; see also 29 C.F.R. Part 790. Reliance on an Opinion Letter can also form the basis of a good faith defense against the double liquidated damages available under the FLSA, 29 U.S.C. § 260, and the third-year of damages for willful violations. The best option for establishing these FLSA defenses is to request and obtain an Opinion Letter that addresses your company’s specific practice and factual situation, although employers can also rely on any guidance addressing similar circumstances.

The provision to which that sentence refers says that a court has the discretion to reduce or eliminate liquidated damages "if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the [FLSA] . . .." 29 U.S.C. § 260. In addressing what the defense requires, USDOL and the Division reveal some considerations that might cause them not to seek liquidated damages in a settlement.

The liquidated damages are an additional penalty against those employers who misclassify workers. But, the dance clubs successfully raised a “good faith defense” under the FLSA (29 U.S.C § 260) to liquidated damages after September 2011. In September 2011, the club owners sought legal advice and acted in accordance with the advice given to use independent contractor agreements, which were represented to be FLSA compliant.

The Commissioner will then distribute the amount recovered to the appropriate person.Recommendations for Employers Employers should have experienced employment counsel review their pay practices. As noted above, there may be a safe harbor defense if the employer can establish it had a good faith belief that the wages were paid in compliance with the law.3 Consultation with and reliance on counsel is advisable under the new state law.1See e.g. Sansone v. Clifford, 219 Conn. 217, 229 (1991); Ravetto v. Triton Thalassic Techs., 285 Conn. 716, 724 (2008).2The FLSA’s “good faith” defense, as codified at 29 U.S.C. § 260, allows courts to exercise their discretion to award single damages if the employer had a reasonable, good faith belief that it was not violating the FLSA. “‘Good faith’ in this context requires more than ignorance of the prevailing law or uncertainty about its development.

Thus, employers can only avoid double damages for unpaid overtime if they can show that (1) their actions were taken in good faith and (2) they had reasonable grounds for their belief that they were complying with the FLSA. 29 U.S.C. § 260. So how do employers meet those two tests?