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Is My Manager Personally Liable For Overtime Violations?

by | Jul 5, 2022 | Employment Law, Federal Law Update, Wage: Minimum Wage, Wage: Overtime, Wage: Tipped Employees |

The Fair Labor Standards Act (“FLSA”) is a federal law that requires all covered, nonexempt employees be paid at least the federal minimum wage per hour, plus time and one-half for all hour worked beyond 40 per workweek. (Best Law Read: Is An Assistant Manager Exempt From Overtime Pay Requirements?; My Boss Refuses To Pay Me Overtime! I Need The Top Wage And Hour Attorney!). Occasionally, our wage theft attorneys come across a self-proclaimed brilliant who believes that he or she has figured out how to game the system by threatening to drain all of the assets out the company or close the company to avoid liability (likely to open under another entity). Of course, these are the same brainiac employers who thought they could avoid paying minimum wage by falsifying hours, misclassifying workers as exempt, or trying to claim their workers are 1099 independent contractors. The clear path around this argument is to sue individual owners and managers directly. Putting them in line to pay damages usually keeps them from wanting to hide the primary defendant’s assets.

Recently, in Zelaya v. Rockville Seafood And Grill, Inc., 2022 WL 1781248, at *4 (D. Md. May 31, 2022), the United States District Court for the District of Maryland addressed this issue when a defendant, Amirhossein Faraji, sought to dismiss the case against him personally. According to the opinion, Marden Zelaya was employed as a cook at Rockville Seafood & Grill (“Restaurant”) from about 2011 until September 3, 2021. Defendant Reza Ghassemi-Faraji owned and operated the Restaurant while Defendant A. Faraji served as its manager. Defendants paid the employee a bi-monthly salary, once the COVID-19 pandemic hit, Defendants made the employee sign documents stating the hours he worked in order to receive his paycheck. By only paying the employee for the hours worked, there should be no question that he became a non-exempt employee entitled to overtime and minimum wage under the FLSA. But, according to the lawsuit, the Defendants failed to pay the required minimum wage and/or overtime pay for his work. The decision does not address the underlying claim – only whether A. Faraji could ever be liable for any violations.

Specifically, A. Faraji argued that the employee did not sufficiently alleged facts to show that he is an employer under the FLSA and that because he is not an owner of the Restaurant, the claims must automatically be dismissed.

The District Court rejected this argument and set forth the applicable law as follows:

The FLSA defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee….” 29 U.S.C. § 203(d) (2018). An individual who has “managerial responsibilities and substantial control of the terms and conditions of the work…of employees” is deemed to be an employer. Id.

To determine whether an individual is an “employer” under the FLSA, the Court examines “the economic realities of the relationship between the employee and the putative employer.” Iraheta v. Lam Yuen, LLC, Civ. No. DKC 12-1426, 2012 WL 5995689, at *3 (D. Md. Nov. 29, 2012) (citing Caseres v. S & R Mgt. Co., LLC, Civ. No. AW-12-01358, 2012 WL 5250561, at *3 (D. Md. Oct. 24, 2012). …

Under the “economic realities test,” a court looks to a number of factors, including whether the putative employer is someone who: (1) has the “authority to hire and fire employees;” (2) “supervise[s] and controls work schedules or employment conditions;” (3) “determine[s] the rate and method of payment;” and (4) “maintain[s] employment records.” Kerr v. Marshall Univ. Bd. of Governors, 824 F.3d 62, 83 (4th Cir. 2016) (quoting Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999). No single factor is dispositive; rather, a court must analyze the facts using a totality of the circumstances approach. Gaske v. Crabcake Factory Seafood House, LLC, Civ. No. JMC-18-2630, 2021 WL 5326465, at *3 (D. Md. Nov. 15, 2021); see also Hurd v. NDL, Inc., Civ. No. CCB-11-1944, 2012 WL 642425, at *5 (D. Md. Feb. 27, 2012) (citing Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947)).

When analyzing the four factors, the Court focuses on “whether a particular individual had sufficient operational control within a business enterprise to be considered an employer.” Guillen v. Armour Home Improvement, Inc., Civ. No. DLB-19-2317, 2022 WL 524986, at *5 (D. Md. Feb. 22, 2022) (quoting Garcia v. Frog Island Seafood, Inc., 644 F. Supp. 2d 696, 721 (E.D.N.C. 2009)) (internal quotation marks omitted).

An individual’s lack of ownership interest, while relevant, does not resolve the question of whether that individual is an “employer” under the relevant statutes.

Id.  at *4–5.

In Zelaya, the lawsuit asserting that A. Faraji “had the power to hire, fire, suspend, and otherwise discipline Plaintiff.” To illustrate this authority, the lawsuit further asserted A. Faraji was “present during Plaintiff’s interview and participated in Plaintiff’s hiring process.” The lawsuit further provided that A. Faraji “had the power to supervise the work duties of Plaintiff,” and regularly did when he “customarily directed the Plaintiff to perform certain work duties regarding the foods he needed Plaintiff to cook and prepare for the day.” According to the lawsuit, A. Faraji further exercised his authority to set and alter the employee’s work schedule, including around March 2020, when he cut the employee’s hours. Even further A. Faraji, as a manager, “controlled the day-to-day operations” of the Restaurant. In response to A. Faraji’s argument that he not alleged to have maintained employment records, the District Court held: “With regard to the maintenance of employment records, Plaintiff does not allege that Defendant A. Faraji maintained such records. However, a plaintiff need not meet every factor of the economic realities test to state a plausible claim for relief.”

Based on the above, the District Court denied A. Faraji’s Motion to Dismiss the claims against him personally. This means that he will be personally liable for all damages even if the business shuts down or transfers its assets.

How’s that sound brainiacs?

What should I do if I’m not being paid time and a half for overtime work by the company that I work for?

Best Ohio Wage Theft Attorney Answer: Every wage and hour claim is different. The FLSA is complex, and lawyers need experience in these types of claims to properly handle them. However, the vast majority of attorneys have never handled an FLSA case, much less have the intimate knowledge the complexities of the exemptions to best help you. If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The experienced wage and hour lawyers at Spitz will provide you with the top options for your overtime pay dispute situation. (Read: What is the Spitz No Fee Guarantee?) If you even think that you may be entitled to overtime pay that you are not being paid, call our Cleveland, Columbus, Cincinnati, Toledo, Boardman, Detroit, and Raleigh attorneys right now. Do not wait. The longer that you wait, the less that your claim may be worth.

Disclaimer:

The wage theft materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Should I be getting paid overtime?”, “Does my job have to pay me time and half for working extra hours on the weekend?”, “My paycheck is is missing money that I am owed” or “What do I do if I’m not being paid minimum wage?”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.