I read with some amusement the article entitled, “Supermarket CEO Found Personally Liable Under FLSA” on page 63 of the October 2013 HR Magazine from SHRM. Don’t get me wrong, Matthew Cannova, an attorney in Birmingham, Alabama, (a town with very good restaurants) wrote a succinct summary of Irizarry v. Catsimatidis, 722 F.3d 99 (2nd Cir. 2013). So why am I amused? Because this seems to be a new development to employers, at least in California. Yet, this is nothing new. The Fair Labor Standards Act (“FLSA”) has, for years, allowed plaintiffs to go after individuals, as well as employers, for unpaid wages.
The test is really one of control. If a manager has control over the hiring and firing of employees, supervises or sets employee schedules, determines the rate and method of paying employees, or maintains employment records, then the economic realities suggest that the manager should be held liable for unpaid wages.
I think managers in California have escaped this particular claim, perhaps because state law does not permit claims for unpaid wages against a non-employer, and state court is a much better forum for plaintiffs.
So how much control must a manager have before incurring liability under federal law? Is it enough to simply have access or control over employment records, as most HR professionals do? Probably not. But must the manager be the owner of the company to be held liable? Probably not. The answer is somewhere in the middle. The fact that there is not a bright-line rule should be very frustrating, particularly for managers.
When is this type of a claim likely? It is more likely when the employer is short on funds, perhaps close to bankruptcy, or when the manager has a deeper pocket than most.
What does a manager do to protect him/herself? Good question. Perhaps the best answer is to make sure employees are paid correctly, at least under federal law. The good thing is that federal law is much easier to handle than state law with its many quirky laws such as meal and rest period premiums, daily overtime and split shift premiums, to name a few. The main issues under federal law are minimum wage and overtime, calculated on a weekly basis only.
So with all of the other burdens heaped on your shoulders add one more. Like Mr. Catsimatidis, you may be held personally liable for unpaid wages under the FLSA.