Recently, the United States Supreme Court recently declined to review a
decision by the Second Circuit Court of Appeals in which the court held
that a corporate officer was
personally liable for violations of the Fair Labor Standards Act ("FLSA"). The
question before the United States Supreme Court was whether a corporate
officer could be held liable for a corporation's violation of the
FLSA merely because that corporate officer maintained general control
over corporate affairs (regardless of whether the corporate officer had
responsibility over the conduct that had resulted in the violation).
The issue arose since there are differing interpretations as to the meaning
of "employer" under the FLSA because viewing the individual
as the "employer" imposes liability on the individual. Individual
liability under the FLSA turns on whether an employment relationship exists
between the employee and the purported employer.
This raises a very important question: what is the law in Florida? The
Eleventh Circuit of Appeals (which includes Florida) has held that status
as a corporate officer alone will not trigger individual personal liability.
Rather, to be personally liable, a corporate officer must either be involved
in the day-to-day operation or have some direct responsibility for the
supervision of the employee. Corporate officers who play no active role
in on-going business operations will not be held individually liable under the FLSA.
The Second Circuit Court of Appeals applied a four-factor test to determine
the "economic reality" of an employment relationship, and thus,
whether a corporate officer can be held personally liable. The test asks:
"whether the alleged employer (1) had the power to hire and fire the
employees, (2) supervised and controlled employee work schedules or conditions
of employment, (3) determined the rate and method of payment, and (4)
maintained employment records."
The Eleventh Circuit Court of Appeals has not adopted the Second Circuit
Court of Appeals test when determining whether a corporate officer is
personally liable for violations of the FLSA. Because the United States
Supreme Court declined to review the Second Circuit Court of Appeals decision,
the ruling stands as the law in that circuit and employers in the Eleventh
Circuit Court of Appeals (which includes Florida employers) are left with
little clarity concerning what levels of operational control will trigger
individual liability on the part of corporate officers. Until the United
States Supreme Court reviews the issue, corporate officers must be aware
of the potential for personal liability for FLSA violations.
Alex P. Rosenthal
Rosenthal Law Group
2115 North Commerce Parkway
Weston, FL 33326