11th Circuit: Personal Liability Under the FLSA Expanded
Author: Michael Cardman, XpertHR Legal Editor
Personal liability for violations of the Fair Labor Standards Act (FLSA) is no longer reserved only for corporate officers, such as CEOs, CFOs or COOs. Rather, in Lamonica v. Safe Hurricane Shutters, +2013 U.S. App. LEXIS 4599 (11th Cir. 2013), a federal appeals court ruled that any individual with control over an employer's financial affairs who could potentially cause an employer to violate FLSA regulations, even if he or she spends as little as one week a month at work.
In Lamonicia, two members of the defendant's board of directors argued they were entitled to a new trial in part because personal liability under the FLSA is limited only to corporate officers. They based this argument on an interpretation of two prior cases, Donovan v. Agnew, +712 F.2d 1509, 1510 (1st Cir. 1983) and Patel v. Wargo, +803 F.2d 632 (11th Cir. 1986), which held that "a corporate officer with operational control of a corporation's covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages" (emphasis added). The 11th Circuit rejected this interpretation stating:
[W]hile it recognized personal liability for officers, Wargo did not purport to limit personal liability to officers, and the Act's broad definition of "employer" does not admit of such a limitation. As we have previously stated, whether an individual fits that definition "does not depend on technical or isolated factors but rather on the circumstances of the whole activity." In the typical case, a corporation's officers will exercise more operational control than its directors and therefore be more susceptible to personal liability. However, usual corporate roles are not always observed, and some directors may assume more operational control than some officers. Therefore, a supervisor's title does not in itself establish or preclude his or her liability under the FLSA.
The court observed that the board members each owned about a quarter stake in the defendant's business which suggested they had control over its financial affairs. The court further determined that - although not always on site - the board members exercised "substantial supervisory powers" and that "the fact that control was exercised only occasionally 'does not diminish the significance of its existence.'" Based on these findings, the 11th Circuit upheld the jury verdict holding them personally liable under the FLSA.
This ruling applies only to employers operating in Alabama, Florida and Georgia. Nevertheless, individuals outside the 11th Circuit who exercise control over an employer's compensation practices should take heed as they too may be held personally liable for FLSA violations. In fact, there appear to be no rulings that conflict with Lamonica and other courts may well find its reasoning persuasive.