Can Officers, Directors or Managers Be Held Personally Liable for FLSA Claims?
To the surprise of many company officers, directors, and managers, the answer is yes. An employee can personally sue an officer, director, and manager for claims under the Fair Labor Standard Act (FLSA). Claims under the FLSA are primarily for unpaid wages, overtime, and improper exemption status of an employee. Also unknown to most officers, directors, and managers is the fact that a discharge of an employee can also spell trouble for a company. Such trouble may arise if the proper steps are not taken in discharging an employee or if the discharge is retaliatory in nature, such as in instances where an employee is discharged after complaining about his or her wages or whistleblowing as to some wrongful act committed by the employer under the FLSA.
Though FLSA lawsuits can arise even when there has been no foul play on behalf of a company and even when employers and management keep proper timekeeping and employee records, a large part of FLSA claims seem to arise when employers do not keep proper timekeeping or employee records, as required by the FLSA and when employees are improperly paid a salary and not given overtime as required by law.
Many companies and management believe that an agreement between an employee and employer as to compensation such as a salary regardless of the hours worked by the employee is sufficient to create a safe harbor in the event of a lawsuit by the employee. However, that is simply not true. Even assuming that an employee agreed to their salary and never complained about overtime when he or she worked more than 40 hours in any given workweek, that agreement or understanding between the employee and employer is not a defense to an FLSA claim for improper wage compensation. It is the employer’s burden to show that an employee is in fact an exempt employee, otherwise, regardless of the employer’s intention and good faith, the employer will be liable to the employee for damages and attorney fees, which are often very hefty in FLSA cases.
Exempt Employee Status
Employers and management must be extremely vigilant about categorizing an employee as an exempt employee. In most cases, employees will not be considered exempt status and must be paid overtime for actual work that exceeds 40 hours during any given workweek. Therefore, if an employer is in doubt as to whether an employee is exempt or not, it is best to err on the side of caution and pay the employee by the hour, including any overtime pay, if applicable.
Timekeeping and Remote Workers
Another area in which many companies and employers fail to realize is a speed trap (a driving terminology that I am sure we can all relate to), is timekeeping requirements related to remote workers, lunch breaks, and improper paid time off deductions. Now more than ever, when remote work is so pervasive in the workforce, companies need to be clear about the policies related to timekeeping, compensation, time off, and have strict record-keeping procedures in place to ensure compliance with those policies.
Federal and State Law Claims | Employer/Employee Agreements
These are just some of the issues which can arise under an FLSA claim and can, unfortunately, lead to personal liability for officers, directors, and managers, as well as the company’s owners. Ultimately, employers are the ones responsible for maintaining proper timekeeping records and paying their employees in accordance with federal and state laws. As such, the burden to prove compliance with federal and state law claims related to wages and compensation is on the employers. Joint employers are also subject to the same burden and responsibility.
Luckily for officers, directors, and managers, not all employment claims lead to personal liability. However, it should be noted that there are additional claims such as those covered by the Family Medical Leave Act (FMLA) along with other federal and state law claims, which can subject an owner, officer, director, or manager to personal liability. Such claims are beyond the scope of this article, which is limited to claims under the FLSA, but if you would like more information regarding such claims or to discuss any other concerns that you may have please do not hesitate to contact us.
Employment Employer Representation | The Campbell Law Group, P.A.
Our firm currently offers both in-person and virtual consults. If you have any questions or concerns about claims related to the Fair Labor Standard Act, or any corporate, commercial, employment, family, or construction law matter, please feel free to contact us at 305-460-0145 or to schedule a consult here.
For more information as to how to mitigate your risk of being sued by an employee for claims arising out of the FLSA or about the importance of employment agreements, employee handbooks, and policies, please see Employment Law-Transactional, 6 Tips to Help Your Company Avoid Fair Labor Standards Act (FLSA) Violations; 8 Tips to Help You Mitigate Your Risk of Employee Lawsuits, Do You Need An Employee Handbook?; Why Your Business Needs a Handbook for Employees; 10 Key Elements of a Solid Employee Contract.
Company Policies, Director, Employee Handbook, Employment Employer Representation, Employment Law, FLSA, Improper Exemption, Joint Employer, Manager, Officer, Overtime Claims, Personal Liability, Unpaid Wages