On June 27, 2025, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued a major policy change that will significantly impact how wage and hour cases are resolved before litigation. Under Field Assistance Bulletin No. 2025-3, the WHD announced it will no longer seek or collect liquidated damages as part of the pre-litigation resolution process for unpaid minimum wages or overtime compensation. The change is effective immediately and marks a return to a more traditional enforcement approach.
A Shift Away from Liquidated Damages in Administrative Resolutions
For many years, liquidated damages were commonly included in DOL-supervised settlements. That will no longer be the case unless the agency initiates formal litigation. According to the WHD, it lacks the authority to impose these damages outside of court, and the updated policy reflects that legal interpretation.
This change eliminates a significant layer of risk for employers engaged in administrative wage investigations. Rather than negotiating both repayment and an additional penalty, employers may now resolve cases by simply restoring owed wages. This will potentially reduce the likelihood of prolonged disputes and encourage faster resolutions.
What This Means for Employers
For employers, the Department of Labor’s new policy represents a significant shift in both risk exposure and strategic decision-making during wage and hour investigations.
Under the previous enforcement practice, employers faced a difficult choice: either agree to a DOL-brokered settlement that included both back wages and liquidated damages or risk litigation. This frequently led to delays in resolving cases, as employers were reluctant to accept settlements that imposed punitive damages without a court’s involvement.
By eliminating the automatic pursuit of liquidated damages in pre-litigation settlements, the DOL is signaling a more cooperative and pragmatic approach. Employers now have a clearer, more manageable pathway to resolving disputes: they can repay any owed wages without the added burden or penalty damages, as long as the matter stays out of court.
However, while this policy shift eases the burden of administrative settlements, it does not remove the underlying compliance obligations. Employers should continue to review wage and hour policies, ensure proper classification of workers, maintain time records, and consult legal counsel when facing an investigation or enforcement action.
It is important to note that this policy shift applies only to liquidated damages in pre-litigation settlements. The DOL remains full authority to impose civil monetary penalties under the Fair Labor Standards Act (FLSA) for willful or repeated violations. Employers should continue to take compliance seriously, as the risk of penalties remains, even if certain financial liabilities are reduced.