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Warn bosses: Bankruptcy won’t stop wage claims

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in FMLA Guidelines,Human Resources

The Fair Labor Standards Act (FLSA) says some managers may be held personally liable for unpaid wages, independent of the company’s obligation to pay.

Not even a company bankruptcy halts individual liability.

According to cases interpreting the FLSA, those who have control over the nature, structure and economics of the employment relationship can be personally liable.

Courts consider such factors as ownership interest, day-to-day control, the power to hire and fire and the authority to keep employment records.

Recent case: Thelma Boucher and other former Castaways Casino employees sued several company managers after they weren’t paid while the company filed for bankruptcy.

They argued that individual managers could be held personally liable under the FLSA for unpaid wages because the managers were also the “employer.” The individual managers each owned a share of the company and were responsible for day-to-day operations.

The managers claimed they weren’t liable because any pay claims had to go through the bankruptcy court as creditor claims.

The 9th Circuit Court of Appeals disagreed. It said the managers could be held personally liable apart from the company. In effect, the company could discharge its wage “debt” but the individual managers could still find themselves liable for the unpaid wages. (Boucher, et al., v. Shaw, et al., No. 05-15454, 9th Cir., 2009)

Final note: Managers can also be personally liable under the FMLA and other federal laws enforced by the U.S. Department of Labor for willful violations of the law. It’s yet another reason to educate yourself on the law.

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