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FLSA personal liability hits some, misses others

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in Human Resources,Overtime Labor Laws

The Fair Labor Standards Act (FLSA) is expansive enough to classify individual managers and corporate officers as employers. Upshot: You can be individually liable for FLSA violations. Key: the amount and degree of operational control those individuals have over employees. Two cases illustrate.

Case #1—Personal liability sticks. An employee was fired after a heated argument with his supervisor. He sued his employer for violating a slew of federal and state employment laws, including sexual har­assment and retaliation under Title VII and Florida’s civil rights laws.

The employer and the employee’s manager were also sued under the FLSA.

The employer argued that the manager wasn’t an employer under the FLSA because she was only a run-of-the-mill supervisor. A federal trial court ruled otherwise. Court: Whether a manager is an employer depends on the entire picture, not technical or isolated factors. This manager was an employer, the court concluded, since she supervised the employer’s day-to-day operations, prepared weekly time sheets, issued disciplinary warnings, controlled employees’ work hours and directly supervised employees. (Arean v. Central Florida Investments, Inc., No. 8:10-cv-2244-T-33MAP, D.C. M. Fla., 2012)

Case #2—Personal liability fails. A bartender sued his employer and one of the company’s owners individually for FLSA violations. Employee’s contentions: As a corporate officer, the owner had inherent power to control employees’ conditions of employment. Owner’s defense: He wasn’t involved in the day-to-day running of the business and didn’t supervise employees.

An appellate court ruled in the owner’s favor. Court: Authority that would lead to personal liability for FLSA violations can’t be inferred from an individual’s status as a corporate officer. Instead, the individual must have operational control over employees—the power to hire and fire, the ability to supervise, the power to set wages, etc. While each element need not be present in every case, finding employer status when none of those factors was present wasn’t appropriate, the court concluded. (Gray v. Powers, No. 10-20808, 5th Cir., 2012)

THE TAKEAWAY: Both courts articulated a ­common test used to determine whether individuals are personally liable under the FLSA. As with all issues related to the FLSA, the linchpin is control—who has it and how it’s used. To avoid personal liability, you must show that, given the extent of your authority, you didn’t contribute to the FLSA violations and tried to resolve employees’ issues, but couldn’t.

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