Business owners, supervisors and managers performing services for corporate entities often believe that liability for wage and hour violations can be imposed solely on the incorporated entity. To the contrary, as demonstrated by a recent New York Federal Court decision, various theories support individual liability under both federal and, in this case, New York State law.
In Flannigan v. Vulcan Power Group, L.L.C., 2010 U.S. Dist. LEXIS 41751 at * 10-13 (S.D.N.Y. Apr. 27, 2010), Judge Barbara Jones considered a motion to dismiss wage and hour claims brought against an officer/manager.In denying the motion, the court explained that corporate officers and principal shareholders, as well as supervisors and managers involved in wage and hour policymaking/decision-making, can be personally liable for unpaid wages under federal and state law. Id. The Court cited Plaintiff’s allegations and documentary evidence to the effect that the individual defendant had met with her regarding the terms of her employment, and subsequently communicated with her about the status of her commission compensation, as sufficient to allege individual liability under the FLSA and New York law. Id. The court did however find that individual liability could not be imposed on the corporate shareholders under Section 630 of the New York Business Corporation Law because the defendant corporation was not incorporated in New York. Id. Under BCL § 630, the ten largest shareholders of a closely held New York corporation are liable for unpaid wages and benefits.
Business owners (as well as supervisors and managers involved in wage and hour policymaking/decision-making) must recognize the various theories under which they can be subject to personal liability and of course take actions to minimize such potential liabilities.