If you’ve been keeping up with the latest news regarding wage and hour lawsuits, then chances are you’ve come across the term “liquidated damages.”

Every restaurateur should understand what these damages mean and how they are calculated. In this context, ignorance, unfortunately, does not lead to bliss.

Liquidated damages is an amount of money damages established as a statutory and/or contractual remedy (i.e., the money you’re required to pay the other side if you lose your case). In the context of employment law, such damages represent a fixed amount defined by statute and usually equal to a plaintiff’s back pay award.

Many attorneys refer to liquidated damages as double damages, since they operate to punish employers for failing to meet minimum pay standards.

For example, if a court finds that you owe your past or current employee an overtime rate of $24 an hour, for the past two years, then you are liable for the total amount owed in back pay for that period, plus liquidated damages in the same amount. Hence, the term “double damages.”

Yes, that is a hefty slap on the wrist. The law enforces such damages as both a deterrent and punishment while savvy plaintiff lawyers use it as a weapon to force restaurateurs into settlements.

So, now that you know Liquidated Damages does not refer to an action movie from the 1990s starring Harrison Ford, please keep an eye on your payroll, because if you don’t, your employee’s lawyer will.