Managers Individually Liable for Unpaid Wages Despite Employer's Bankruptcy
A recent case should strike fear into the hearts of all upper-level managers and human resources professionals: in Boucher v. Shaw, the Ninth Circuit ruled that individual managers were liable for their subordinates' unpaid wages, even though the employer company filed for bankruptcy.
In Boucher, a group of former casino employees sued the CEO, CFO and the labor relations manager of their former employer, the Castaways Hotel, Casino and Bowling Center. The three managers moved to dismiss, arguing that they were not "employers" that could be liable for unpaid wages under the Fair Labor Standards Act (FLSA), and that they should receive protections from the Castaways' bankruptcy filing.
The Ninth Circuit noted that under the FLSA, the term "employer" is to be construed broadly to include individuals who have “control over the nature and structure of the employment relationship,” or “economic control” over that relationship. It concluded that the three executives, two of whom were also alleged to be co-owners of the casino, fit that definition of "employer." The court also found that because the three executives were not parties to the bankruptcy proceeding, they were not entitled to any bankruptcy protections.
As the World of Work reported earlier this month, the Washington Supreme Court reached a similar ruling based on almost identical facts in Morgan v. Kingen. These cases should serve as a reminder to managers everywhere: if your business is failing, you may want to prioritize paying your employees' wages over everything else. Failure to do so may lead to personal liability.
DOL Secures $3.4 Million Settlement for NY Car Wash Employees
A portend of things to come in federal wage enforcment? Yesterday, a group of New York car washes have agreed to pay over one thousand current and former employees a total of $3.4 million to settle a lawsuit filed by the Department of Labor (DOL) alleging violations of the Fair Labor Standards Act (FLSA). Click here to read the consent decree in Solis v. LMC et al.
As we reported back in May, the Department of Labor received a budget increase of 10 percent and is devoting most of that increase to enforcement. Employers can expect to see more activity from the DOL to enforce wage and hour laws, especially large cases against groups of employers.
In the meantime, sit back, relax and enjoy Rose Royce:
Federal Minimum Wage Increases to $7.25 Effective July 24
Employers take note: the federal minimum wage increases to $7.25 per hour effective July 24, 2009. For more information, check out the Department of Labor's Fair Labor Standards Act site.
Of course, many states also have minimum wage laws, an where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage. Click here for the Department of Labor's handy list of minimum wages by state, effective January 1, 2009. (Note: the chart does not accurately reflect that Nevada's minimum wage will increase effective July 1, 2009 increase from $5.85 per hour to $6.55 per hour, while the minimum wage for employees not receiving health benefits will increase from $6.85 per hour to $7.55 per hour).
Need the Department of Labor's minimum wage posters? Here they are:
New Federal Legislation Would Penalize Employers' Use of "Independent Contractors"
The U.S. Congress is currently considering legislation that would impose significant penalties on employers who improperly classify employees as "independent contractors" to avoid paying for benefits.
The Employee Misclassification Prevention Act (S. 3648) was introduced in the Senate on September 29, and is sponsored by Senators Edward M. Kennedy (D-Mass.), Barack Obama (D-Ill.) and John Kerry (D-Mass.). Features of the bill include:
- Amending the Fair Labor Standards Act (FLSA) to prohibit the misclassification of an employee as an independent contractor, providing for liquidated damages and civil penalties of up to $10,000.
- Requiring employers to keep records on and notify workers of their employment or independent contractor classification and their right to challenge that classification.
- Requiring state unemployment insurance agencies to audit employers who misclassify employees.
- Allowing the Department of Labor and the Internal Revenue Service to share information on cases where employers misclassify workers.
- Requiring the Department of Labor to perform targeted audits focusing on employers in industries that frequently misclassify employees.
- Directing the Department of Labor to establish a Web site that summarizes the rights of employees under the FLSA and other federal laws.
A companion bill, H.R. 6111, was introduced in the House in May. Don't expect this bill to become law as long as President Bush is in the White House, but with a likely democratic majority in Congress and a new President, passage of the bill appears very likely. Employers should be aware of the existing risks of incorrectly classifying employees as "independent contractors," including claims for unpaid overtime, minimum wage claims, benefits claims, workers' compensation liability, and tax penalties.
