Unpaid Overtime and Unlawful Termination: Corporate Executive with Operational Control Can be Individually Liable under the Fair Labor Standards Act and Pennsylvania Law

Almost all employers are incorporated with a principal reason being that the owner(s) of the corporation want to insulate themselves from the business and avoid personal liability for actions taken by the employer’s business. However, certain employment laws do not recognize the liability protection most often afforded by corporate formation. As the court recognized in Schneider v. IT Factor Productions, 2013 U.S. Dist. LEXIS 173583(E. D. Pa. December 9, 2013)(Buckwalter, S. J. ), the Fair Labor Standards Act (FLSA), the Pennsylvania Minimum Wage Act (PMWA) and the Pennsylvania Wage Payment and Collection Law (WPCL) all provide for individual liability of corporate officers with operational control.

In Schneider, the Plaintiff filed claims against both the corporate employer and an individual corporate officer with operational control, seeking unpaid overtime and unpaid wages, also asserting a claim for the unlawful termination of employment when the employee complained about wages.The individual defendant moved to dismiss the Complaint against her individually. The corporate officer claimed that at all relevant times, she was a Member/Manager of the limited liability company which employed the Plaintiff and that under both New Jersey and Pennsylvania law, members or managers of limited liability companies do not have any personal liability for the debt, obligation, or liability of those companies. Thus, the corporate officer argued that the claims against her individually under the FLSA, PMWA and WPCL, are precluded by applicable law.

In Schneider, the Court denied the Motion to Dismiss noting that individuals acting in a supervisory capacity may be liable in their individual capacities as an employer under the FLSA if they are a corporate officer with operational control. In order to meet this requirement an employee must demonstrate facts showing that the corporate officer had control, such as authority to hire and fire the relevant employees; authority to promulgate work rules and assignments and to set the employees’ conditions of employment such as compensation, benefits, and work schedules, including the rate and method of payment; involvement in day-to-day employee supervision, including employee discipline; and actual control of employee records, such as payroll, insurance, or taxes. In Schneider, the court also noted that like the FLSA, the PMWA has a similarly expansive definition of the word “employer” which includes any individual, partnership, association, corporation, business trust, or any person or group of persons acting, directly or indirectly in the interest of an employer in relation to any employee. Accordingly, the analysis for whether an individual constitutes an “employer” is the same under the PMWA as under the FLSA. Thus, the Court held that limited liability status does not insulate a corporate officer from liability under the FLSA or PMWA if the corporate officer exercised operational control of the company and was individually responsible for FLSA and PMWA violations.

In addition, the court noted that under the WPCL, the term “employer” is defined as “every person, firm, partnership, association, corporation, receiver or other officer of a court of this Commonwealth and any agent or officer of any of the above-mentioned classes employing any person in this Commonwealth. As such, this language imposes personal liability on high-ranking corporate officers for employees’ unpaid wages. Consequently, an agent or officer can be personally liable for unpaid wages if there is evidence of an active role in decision making.

For more information on unpaid overtime, the FLSA, unpaid wages and Abramson Employment Law see http://www.job-discrimination.com/lawyer-attorney-1126494.html

(Abramson Employment Law represents the Plantiff in Schneider v. IT Factor Productions)


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Filed under Pennsylvania Wage Payment and Collection Law, Retaliation, Unpaid Overtime FLSA

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