Remember That Managers Can Be Individually Liable Under the FLSA!

A case from the U.S. Court of Appeals for the Eleventh Circuit provides a good reminder that individual owners and managers, even those at a middle level, can be held liable for violations of the Fair Labor Standards Act.

What the FLSA Says. The FLSA holds “employers” liable for minimum wage and overtime violations, and it defines that term very broadly to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” In making that determination, courts will look at the total circumstances of the relationship.

Background of the Case. In Spears v. Patel, the employee worked as a front desk clerk at hotels that were operated by a father and son. The father was based in another state, so the son was responsible for day-to-day operations for the hotels where the employee worked. The son scheduled and assigned work to the employee and, in consultation with his father, directed the employee to adjust room rates.

The employee eventually sued the hotels and the two individuals for wages and overtime pay. A federal magistrate judge ruled that both individuals were employers under the FLSA and individually liable for unpaid wages and overtime. The son appealed, arguing that he could not be an “employer” as he was a wage-earning employee and not an owner of the company that owned the hotels in question.

The Court’s Decision. The Eleventh Circuit rejected the son’s argument. It acknowledged that owners and corporate officers are “more susceptible to personal liability because they are more likely to exercise operation control.” However, the definition is not limited to those groups, and under existing Eleventh Circuit caselaw, a supervisor who either is “involved in the day-to-day operation or [has] some direct responsibility for the supervision of the employee” may be an “employer” under the FLSA. Moreover, “[i]nvolvement in the day-to-day operations of a company can include regular visits to the company’s facilities, the power to determine employee salaries, involvement in the business operations of the company, or control over the company’s purse strings.”

This definition, however, does not include low level supervisors or team leads, as, “[a] supervisor’s control must be substantial and related to the company’s obligations under the [FLSA].” But, according to the Eleventh Circuit, even mid-level managers may have the necessary authority to trigger individual liability.

And that is the case here. The Eleventh Circuit determined that the son was “undeniably involved in the day to day operations of the company.” He supervised the employee, gave him tasks, and set his schedule. Although the son tried to argue a lack of financial control, in that his father set salaries and directed him to adjust room rates (which he passed along to the employee), the Eleventh Circuit noted that the son had control over the company’s finances in ways that other employees did not. He was able to sign paychecks, and no other employees were involved in discussions about room rates. Moreover, he assumed responsibility for company business when his father was unavailable. According to the Eleventh Circuit, his involvement in both day-to-day operations and company operations – which were substantial and related to the Company’s obligations under the FLSA – were separate reasons for finding him to be an FLSA “employer” and therefore individually liable.

Lessons for Employers. This case highlights the potential consequences for even middle managers arising from violations of the FLSA. Such violations are, unfortunately, all too common, and it behooves employers to pay particular attention to ensuring compliance – and to empower managers to speak up if they believe employees have not been paid appropriately.