In the latest installment in a long running dispute regarding compensation of certain mid-level managerial employees at the Gristede’s chain of New York-area grocery stores, federal Judge Paul Crotty ruled last week that Gristede’s corporate CEO, John Catsimatidis, is an individually liable “employer” under the FLSA and New York Labor Law. Torres, et al. v. Gristede’s Operating Corp., et al., 04-CV-3316 (S.D.N.Y. Sept. 9, 2011).
The Gristede’s litigation, settled on the eve of trial in 2009 but has persisted due to the corporate defendants’ failure to adhere to the payment schedule set forth in the settlement agreement. As the suit was initially filed against numerous corporate defendants and individuals, including Mr. Catsimatidis, the CEO of the operative corporation, Plaintiffs’ counsel renewed its motion to hold Mr. Catsimatidis individually liable when the payment scheduled was not adhered to. In finding that Mr. Catsimatidis met the test for an “employer” as an individual under the FLSA’s “economic realities” test and the Second Circuit’s decision in Herman v. RSR Sec. Services Ltd., 172 F.3d 132 (2d Cir. 1999), Judge Crotty relied on undisputed evidence regarding his individual control and involvement in the management of the business, as well as on an affidavit submitted by Mr. Catsimatidis in an unrelated litigation attesting to his operational control of the company as CEO.
Consistent with the FLSA’s broad, remedial purpose, courts have fashioned tests which seek to hold individuals liable for wages as employers (even without application of the corporate veil doctrine) where they exercise sufficient control and have sufficient authority to warrant imposition of such personal liability. As the Torres decision demonstrates, management of small, medium and large businesses (along with their employment and corporate governance counsel) must be aware of this potential liability, and take steps to ensure wage and hour compliance and minimization of personal risk.