What are liquidated damages?
These are damages an employee is entitled to receive if he or she brings a successful claim. The amount of damages are defined by the FLSA law as being double the unpaid wages due to the employee. Thus, if an employee is awarded $10,000 in unpaid wages, he or she may be entitled to get an additional $10,000 as liquidated damages, bringing the total recover up to $20,000. These damages are essentially awarded instead of lost interest. An employer can avoid paying liquidated damages only if it shows that it acted in good faith and that it had a reasonable basis to believe its practices complied with the law. “Good faith” has a special meaning under the FLSA, and requires that employers have made specific investigation into the application of the FLSA to the particular situation.
Sometimes business contracts contain a “liquidated damages” provision, providing for payment of a certain fixed amount in the event of a breach. These provisions typically are upheld if the actual damages would have been extremely difficult to ascertain and the amount of the liquidated damages is reasonable. Courts generally do not enforce liquidated damages that are intended to serve as a penalty or are far in excess of the amount of damages the parties may reasonably forecast.
