No C-Suite office? You may still be liable for FLSA violations

You might want to ditch ideas about the corner office. A federal appeals court recently ruled that personal liability for violations of the Fair Labor Standards Act (FLSA) extends beyond corporate officers to individuals who exercise control over significant aspects of a company’s day-to-day functions. (Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299, 11th Cir., 2013)

Piercing the corporate veil. Employees sued their employer and two corporate directors individually for unpaid overtime. Each director owned about 22% of the company’s stock. One director was on the premises about two weeks every month, the other for a few days a month. But both visited job sites and employees received work orders from them.

Directors’ defense: They were minority shareholders and individual liability for FLSA violations is limited to corporate officers with direct day-to-day control over employees.

A jury found them liable for the unpaid overtime and an equal amount in liquidated damages. The directors appealed.

How much control is enough? The issue the appellate court addressed was whether corporate supervisors, other than officers, may be personally liable under the FLSA. The answer, the court said, was yes.

FLSA Compliance D

Appeals court: Typically, corporate officers exercise more operational control than directors. But usual corporate roles aren’t always observed, and some directors assume more operational control than officers. Therefore, the court concluded, a title neither establishes nor rules out liability under the FLSA.

As for the degree of control, the court clarified that day-to-day control isn’t the key consideration. Instead, the court said, the primary concern is the supervisor’s role in causing the FLSA violation.

Court: It’s possible for a supervisor to exercise enough control to play a substantial role in causing the FLSA violation while only working part time. In short, the court concluded that the fact that control is exercised only occasionally doesn’t diminish its significance.

• BOTTOM LINE: This court’s broad interpretation fits with the FLSA as remedial legislation—it’s meant to cover as many employees as possible and to hold as many parties liable as possible.

Red flag: If you have some control over the company, you may be liable for FLSA violations. 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.