There has been an increase in cases under the Fair Labor Standards Act, known as the FLSA. This is of concern to employers for several reasons, not the least of which is that the FLSA applies to almost every employer.
A recent case reflects this increase and focuses on a unique aspect of the FLSA: under it, a high-ranking officer can be deemed to be an employer, and therefore, be personally liable.
This personal liability occurs when a four-factor test is met. First, did the officer have the ability to hire and fire employees? Often, the officer had the ultimate power to do this, even though the power was seldom exercised.
The second factor asks if the officer supervised and controlled employees’ work schedules or conditions of employment. Many officers exercise some measure of operational control, although usually not at this level.
Under the third factor, the officer must determine the rate and method of pay to employees. This factor is frequently met when the officer exercises considerable, or even full, control over the company’s finances.
The final factor is less often met. This factor requires the officer to maintain employment records. Only a limited number of officers fall subject to this test.
The risk that officers individually will be deemed an employer, and therefore be personally liable, increases the more control she enjoys. The key is not so much that the officer constantly exercises operational control as much that she possesses a level of control such that her decisions directly affect the nature or conditions of employee’s employment.
Personal liability for certain officers: yet another reason for employers to be diligent in their compliance with the FLSA.