HR pros take note: You can be held personally liable for wage-and-hour violations
Under the right (or wrong) circumstances, a relatively high-level employee may be held personally liable for a company’s failure to follow the overtime and minimum wage rules set out in the Fair Labor Standards Act.
That can happen if an executive, manager or supervisor is considered the worker’s “employer” along with the company itself.
To establish such “joint employer” status and make the superior personally liable for any damages, the worker’s attorneys must demonstrate an economic reality that the person acted directly or indirectly on behalf of the company.
Fancy titles such as director, vice president or the like don’t make liability certain.
Instead, the 5th Circuit, which covers Texas employers, has created a four-factor test, based on whether the alleged joint employer:
1. Possessed the power to hire and fire employees
2. Supervised or controlled employee work schedules or conditions of employment
3. Determined the rate or method of payment and
4. Maintained employee records.
Here’s how that worked out in a recent case.
Recent case: Terry held high-level positions at Performance Pressure Pumping, first as vice president of operations and later as president of operations. Several employees of the oil field services firm in Beaumont filed a class-action lawsuit alleging FLSA violations.
The suit named both the company and Terry as being jointly liable for damages.
After Terry’s deposition, the workers asked the court to move the case forward, alleging that Terry had admitted enough facts to indicate he was a joint employer and thus potentially personally liable.
Using the four-factor economic reality test used in the 5th Circuit, the court concluded there was enough evidence to send the case to trial against both the company and Terry.
For example, Terry had testified that he had unilaterally fired one employee and had recommended hiring and firing many others. He also testified that he was responsible for changing the corporate culture he found when he took the job and then executed a plan to do so.
That was enough for the court to conclude he could hire and fire and generally had power over conditions of employment even if he didn’t set pay or maintain records. (Moore, et al., v. Performance Pressure Pumping, et al., WD TX, 2018)
Final note: This case raises the stakes for HR professionals and other managers who may not realize that they may be held personally liable for the FLSA violations their organizations make.
While it isn’t a common tactic to sue executives personally, it does happen. The lesson is that everyone who sets policy and has input on hiring and firing must make sure they thoroughly understand the FLSA and are ready to correct any errors they may discover.
They must commit to taking the time and making the effort to verify that the company’s wage-and-hour practices comply with the FLSA. Always get expert legal advice if you are unsure if a practice you are implementing is legal under the FLSA.
If your organization faces a lawsuit and you are named as an individual defendant (rather than as a company representative), consider hiring your own attorney. Remember, if both you and the company are found liable, your personal assets are at risk and could be used to satisfy all or part of any jury award.