To ensure workers prompt and full payment of wages, the Fair Labor Standards Act (FLSA) allows for individual liability if the individual is deemed an “employer”. New York courts looks to four factors in determining if an individual is an “employer”: whether the person (1) has the power to hire and fire; (2) supervises or controls work schedules or conditions of employment; (3) determines rates and methods of pay; and (4) maintains employment records. So, at what level in the corporate hierarchy does an individual become an “employer”?
It is generally understood that a company owner, president, or stockholder must have at least some degree of involvement in the way the company interacts with employees to be an “employer.” However, the Second Circuit recently held that the owner and chief executive officer of a company was an “employer” despite him not having or exercising direct control over the employees who sued.
In Irizarry v. Catsimatidis, Gristedes, the New York City supermarket chain, settled a class action claim brought against it by store managers who alleged they were owed overtime. Gristedes defaulted on the settlement agreement, and the store managers moved to have Catsimatidis, the owner and chief executive of Gristedes, held personally liable as an “employer.”
Catsimatidis argued he was a high-level figurehead who only made general corporate decisions that “affected the lives of the plaintiffs through an attenuated chain of but-for causation[,]” and that therefore, he was not an “employer.” There was no evidence he ever directly managed or otherwise interacted with the store managers who sued.
The Second Circuit rejected this defense. The Court held that to be a FLSA “employer,” an individual must have control over a company’s actual “operations” in a way that relates to a plaintiff’s employment. The individual needs some degree of involvement in employment-related issues like workplace conditions and operations, personnel, or compensation. “Although this does not mean that the individual “employer” must be responsible for managing plaintiff employees–or, indeed, that he or she must have directly come into contact with the plaintiffs, their workplaces, or their schedules–the relationship between the individual’s operational function and the plaintiffs’ employment must be closer in degree than simple but–for causation.”
Since Catsimatidis had overall operational and financial control over Gristedes, including personnel and payroll matters, and he, at times, influenced individual stores, he was deemed a FLSA “employer”. It was not relevant that he did not exercise direct control over the workers who sued. But, the Court commented, “[w]e recognize that the facts here make for a close case . . . .”