Reviewing a district court decision issued two years ago, the United States Court of Appeals for the Second Circuit has affirmed a ruling finding John Catsimatidis, the CEO and owner of New York-area grocery chain Gristede’s (and a New York Mayoral Candidate), individually liable for wages under the FLSA based on the “economic realities” of his relationship to the business and the workers in question. Irizarry v. Catsimatidis, 2013 U.S. App. LEXIS 13796 (2d Cir. 2013).
The Court collected appellate authority on the issue from within the Second Circuit and outside, and ultimately focused its inquiry on the alleged individual “employer’s” operational control over the entity, as well as such individual’s “potential power” to control the terms of employment. The Court stated that a court assessing the individual liability question must be “mindful, when considering an individual defendant, to ascertain that the individual was engaged in the culpable company’s affairs to a degree that it is logical to find him liable to plaintiff employees.”
Here, the Court concluded that this standard was met because “[Mr.] Catsimatidis’s actions and responsibilities — particularly as demonstrated by his active exercise of overall control over the company, his ultimate responsibility for the plaintiffs’ wages, his supervision of managerial employees, and his actions in individual stores — demonstrate that he was an ‘employer’ for purposes of the FLSA.” The Court may have been making a veiled reference to an affidavit Mr. Catsimatidis had submitted in an unrelated federal litigation regarding his role in company affairs.
However, addressing parallel claims under state law, the Court declined to extend its FLSA analysis to the determination of “employer” status under the New York Labor Law, citing the absence of guidance from the New York Court of Appeals on the issue.
The potential for individual liability under federal and state wage laws is a business reality, and the flexible legal test discussed in Irizarry cautions against over-reliance on the “corporate form” to preclude such liability. All employers and executives should review and address this exposure, with overall wage and hour compliance programs and constant monitoring of such programs still serving as the best risk management tool.