Can an officer or owner of a company be held liable for the company’s violations of the Fair Labor Standards Act (“FLSA”)? It appears that the answer is yes.

In Irizarry v. Catsimatidis, No. 11-4035-cv (July 9, 2013), a collective action filed on behalf of current and former grocery store employees alleging overtime violations (failure to pay overtime), the Second Circuit Court of Appeals affirmed a lower court’s decision that Mr. John Catsimatidis, the chairman, president, and CEO of a New York grocery store chain, was an “employer” under the FLSA and therefore may be subject to personal liability for failure to pay wages. Specifically, the United States Supreme Court was tasked with determining whether an individual, i.e., officer or owner of a company could be held responsible if the wage and hour law was broken and the company’s employees suffered as a result.

Economic Realities Test

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The court in this case applied the “economic realities” test which is used to determine the “economic reality” of an employment relationship.

The test includes 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
4. Maintained employment records

Interestingly, the court found that an officer could, in fact, be held responsible if s/he exercised control over corporate affairs, even though s/he did not have any part of the decision-making affecting the violations of the FLSA.

In this case, the United States Supreme Court’s decision to not review the case means that the Second Circuit’s ruling stands and that officers now face a broader range of potential liability under this decision.