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Eleventh Circuit Holds Manager Individually Liable Under FLSA

June 27, 2024 Posted in Legal Updates Share

On June 20, 2024, the Eleventh Circuit clarified that a wage-earning hotel manager could be individually liable under the Fair Labor Standards Act (“FLSA” or “The Act”). See Spears v. Bay Inn & Suites Foley, LLC, No. 22-13376, 2024 WL 3063472 (11th Cir. June 20, 2024).

William Spears worked as a front desk clerk for various hotels in Alabama operated by Rick Patel Sr. and his son, Rick “Sunny” Patel Jr. Spears primarily worked night shifts averaging 62 hours a week. Spears’s tasks included checking guests into and out of the hotel, answering the phone, making reservations, and sometimes performing housekeeping and maintnence tasks. Spears was paid $700 to $750 a month.

Sunny handled the day-to-day operations at the Alabama hotels. Spears interacted mostly with Sunny, not Rick (who lived in Florida). Spears testified that Sunny was his immediate supervisor who assigned him tasks and scheduled his shifts. Sunny also signed Spears’s paychecks, when Rick was not available.

Spears ultimately sued Rick Patel Sr. and Sunny Patel Jr. under the FLSA alleging he was not paid the legally required minimum wage or overtime. The magistrate judge found in Spears’s favor, and ruled that Rick and Sunny were employers under the Act individually liable for those violations. The Patels appealed the decision and argued that Sunny was not an employer under the Act because he did not have any control or decision-making authority over Spears’s compensation and did not exercise control over the finances of the hotels. The Eleventh Circuit disagreed.

The FLSA creates a private right of action against any employer who violates its minimum wage or overtime provisions. U.S.C.A. § 216(b). The Act broadly defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” Id. § 203(d).

In this case, the Eleventh Circuit declined to agree with Sunny that he should not be an “employer” under the Act. The Court explained that an “employer” is not limited to upper management and executives, and instead clarified that this definition includes anyone who exercises significant control over the terms and conditions of an employee’s work. Such control must be (1) substantial and (2) related to the company’s obligations under the Act.

Here, Sunny was “undeniably” involved in the day-to-day operations of the company. Sunny is the son of the owner of the company. Sunny lived onsite. Sunny supervised Spears’s daily job activities. Sunny assigned Spears tasks and set his schedule. Sunny commonly signed Spears’s paychecks.

Therefore, the Court held that Sunny exercised significant control over the terms and conditions of Spears’s employment and was thus individually liable under the Act.   

Key Points of the Holding

1. Ownership of the business is not dispositive for individual liability under the Act.

 

2. If a manager exercises significant control over the terms and conditions of an employee’s employment, the manager may be considered an “employer” as defined by the FLSA.

 

3. Consider the following examples to determine whether a manager exercises significant control over the terms and conditions of an employee’s employment:

1. Power to hire and fire employees;
2. Power to supervise and control employee work schedules or conditions of employment (i.e., overseeing the day-to-day operations of the business or having some direct responsibility for the supervision of an employee);
3. Power to determine the rate and method of payment
4. Power to control the company’s purse strings; and/or
5. Power to maintain employment records.
6. Power to maintain employment records.

 

4. Because the definition of employer is so broad, and because courts analyze this question on a case-by-case basis, it is critical for employers to reassess their practices and ensure compliance with the FLSA.

Action Steps for Employers

Inform. Inform your managers, supervisors, and owners of this standard. Conduct regular training sessions on FLSA requirements for all managerial and supervisory staff.

Ensure. Ensure individuals with significant control over the terms and conditions of employee’s employment understand the implications of their actions under the FLSA.  

Comply. Consider seeking legal advice to ensure compliance with the FLSA and other relevant labor laws. Consider having a legal professional review company policies and practices periodically.

Address. Address issues as they arise. Confirm you have a system in place to handle employees’ reports of wage and hour concerns without fear of retaliation. Thoroughly investigate complaints properly and address issues with your employees.

By taking these proactive steps, employers can minimize the risk of individual liability under the FLSA and foster a compliant and fair workplace.

This article is intended to provide general information about the FLSA and is not intended as legal advice. If you have specific questions or wish to schedule a training, Johnson Jackson attorneys are available to provide further information at 813-580-8400.