Executive Summary: Under the FLSA, personal liability can attach to individual employees in supervisory, management, and executive positions. To be held liable, the individual defendant must be considered an “employer,” defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee”. 29 C.F.R. § 570.113(a). While the FLSA’s definition is relatively broad, recently, in Foday et al v. Air Check, Inc. et al, 2018 U.S. Dist. LEXIS 140552 (N.D. Ill. Aug. 20, 2018), the Northern District of Illinois clarified when individual employees can properly be named as defendants, holding that a company’s President could be held liable because he possessed certain supervisory functions and knowledge of the company’s relevant pay and scheduling practices.
Case Background: In Foday, the plaintiffs included lavatory service workers and ramp workers of Air Check, Inc. who worked at Chicago O’Hare International Airport. The lavatory service workers cleaned lavatories on planes, while the ramp workers conducted maintenance functions on the airfield, including picking up garbage, cleaning conveyors, power washing, cutting grass, and removing snow.
The challenged practices were Air Check’s use of rounding hours on an employee’s time card that allegedly only rounded down, and an automatic deduction of a 30-minute unpaid meal period, even if an employee missed the lunch break. Plaintiffs alleged that the practices violated the FLSA, the Illinois Minimum Wage Law, and the Illinois Wage Payment and Collection Act. Plaintiffs named as defendants their employer, Air Check, and three individual defendants: Mark Rathke, Roman Chmiel, and Teresa Kaminska.
The individual defendants argued at summary judgment that they could not be considered “employers” for purposes of the FLSA and Illinois statutes and should be dismissed from the lawsuit. To make this determination, the Northern District of Illinois analyzed each individual defendant’s specific functions relating to Air Check and the applicable claims.
Chmiel was the CEO and a minority owner of Air Check. As CEO, the Court determined Chmiel was primarily response for generating new business and planning growth strategies. Chmiel, however, was not involved in disciplinary action or pay decisions and did not have supervisory authority over the plaintiffs.
Kaminska was the President of Scrub, Inc., an affiliate of Air Check, and never had an ownership interest in Air Check. The only relevant evidence pertaining to Kaminska’s position was testimony that she was “one of the big bosses at the airport” and “runs and oversees operations.”
Rathke was the President of Air Check, although he had no ownership interest in the company. Rathke was the ultimate authority for policy decisions and changes and had overall responsibility for hiring and firing employees. Rathke wrote the Rules and Procedures Handbook, which contained provisions relating to regular attendance, reporting to work on time, overtime, lunch periods and breaks. Rathke was also present at O’Hare a few hours every day conducting quality assurance inspections, and further testified that he had knowledge regarding the rounding practice.
To determine whether Chmiel, Rathke, and Kaminska were “employers” under the FLSA, the Court looked at whether each individual (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records. The Court held corporate officers “with significant ownership interests, day-to-day control of operations, and involvement in the supervision and payment of employees can be personally liable for the corporation’s failure to pay owed wages.” Nevertheless, the Court noted that the mere fact that an individual possesses stock ownership or officer status is not enough and that unexercised authority is insufficient to establish FLSA liability for an individual.
Under this framework, the Court held Kaminska was not an “employer” because she had no connection to Air Check – either as an owner or an executive. The Court similarly found Chmiel was not an “employer” as there was no evidence of his having involvement in the day-to-day operations and did not have the ability to hire and fire, to supervise or control work schedules or conditions of employment, or to determine the rates or methods of payment.
By contrast, although Rathke had no ownership interest, the Court held that a reasonable juror could find Rathke was an “employer” for purposes of an FLSA violation. Rathke wrote the handbook setting the expectations for the employees, had the authority to hire and fire, was regularly present at the airport, and knew that employees were subjected to having hours rounded in some form. As a result, the Court concluded Rathke was a “corporate officer with operational control” of Air Check and was subject to potential liability pursuant to the FLSA. For similar reasons, the Court held Rathke could be held liable under the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. The case is now set to proceed to trial where a jury will determine whether Air Check and/or Rathke personally violated the wage and hour laws.
Bottom Line: Foday serves as a reminder to employers that executives, managers and supervisors can be held personally liable for violations of various wage and hour statutes, including the FLSA. It is a fact-intensive case-by-case analysis, but if the individual has control over the employee’s work, plays a significant role in personnel decisions or in creating or maintaining certain policies and practices, a Court could find that the person meets the definition of an “employer” required for individual liability under the FLSA.