Could You Be Personally Liable for an FLSA Violation?

If you have a business with employees, you likely already know how important it is to comply with the Fair Labor Standards Act (FLSA). The FLSA requires, among other things, that employees be paid at least minimum wage for time worked, and time and a half for any overtime worked (that is, time that is more than 40 hours a week).

FLSA violations can carry heavy financial penalties; an aggrieved employee can sue for twice the unpaid wages, and often, employees gather in class action suits against businesses that have a practice of not paying employees.

No Corporate Veil?

But every business owner has the idea that in a worst case scenario, it is the business that would be liable for any FLSA violation because of the corporate veil; we know that one of the big benefits of having a company is protection of your (business owners’) personal assets from lawsuits, claims and liabilities.

But when it comes to the FLSA this may not be the case.

The FLSA says that “employers” are liable to employees for FLSA violations, and in some cases, courts have defined employers to mean the actual individual corporate officers—not just the employing company.

For business owners, or even higher ranking corporate officials, this could put your personal assets at risk, and result in a personal money judgment against you, for violations of the FLSA.

When is Someone Personally Liable?

To be personally liable, a suing employee must show that an individual employer or corporate officer is involved in the daily operations of the company, or else, that the person can determine the wages or payment of the aggrieved employee.

The individual employer must do things like set policies (or be involved in how they are established) that relate to how employees are paid, or supervise the payment of employees.

This can lead to employers having personal liability, no matter who they are.

In other words, a CEO of a company that violates the FLSA may not be liable, if the CEO doesn’t handle these kinds of matters for the company or if the CEO is not involved in the routine daily operations of the business nor in how employees are paid.

But a middle manager or vice-president may have personal liability for FLSA violations, if he or she does take on these roles for the company.

Having vs. Using the Power

It doesn’t matter who you are or what your position with the company is. What matters is how involved you are in the daily operations of the company, and in the decisions that lead to the policies that violated the FLSA.

And it also doesn’t matter that an employer can make policy—for example, a CEO is capable of making payment decisions about any employee, but may not actually do so on a regular (or any) basis.

What matters is who actually does or exercises those powers, and those are often delegated to lower management, although in smaller companies, with fewer officers, that may not be the case.

Do you have an FLSA question or legal issue? Call the West Palm Beach commercial litigation attorneys at Pike & Lustig today.

Source:

/casetext.com/case/foday-v-air-check-inc-1