If You Have the Authority to Hire and Fire, the DOL Might Play the Grinch This Christmas and Sue You Personally for FLSA Violations

If my season-appropriate title did not make you at least a little uneasy, then you aren’t paying attention. I’ll say it again: If you have the authority to hire and fire employees, you may have personal liability under the Fair Labor Standards Act. That means that you may be sued personally in addition to your employer and that a plaintiff may seize your personal stuff (bank accounts, stocks, vehicles, gold bullion that all HR professionals are known to hoard…..).

Obviously, not all HR professionals may be sued individually, and the analysis as to whether or not they can is pretty fact specific. A recent (Nov. 11, 2018) case out of the U.S. District of Arizona offers a good outline of the analysis.

The U.S. Department of Labor sued Austin Electric Services and Mr. Toby Thomas. Mr. Thomas was the President of Austin Electric and an active manager of the company. He owned approximately 30% of its stock and as President, Mr. Thomas had the authority to hire and fire employees, although he had not done so in over eight years. Mr. Thomas also established the company benefit plan and determined if workers were initially classified as employees or independent contractors. Mr. Thomas also had the authority to set employee pay, although he had not recently done so. Most employee compensation was determined by an “informal committee.” Mr. Thomas was always a part of this informal committee and the other members indicated that his voice carried the most weight.

The FLSA provides that “’Employer’” includes any person acting directly or indirectly in the interest of an employer in relation to an employee. . .” This definition is given “an expansive interpretation in order to effectuate the FLSA’s broad remedial purposes.”

Whether or not an individual qualifies as an employer hinges generally on whether or not the individual “exercises control over the nature and structure of the employment relationship, or economic control over the relationship.” In doing so, Courts typically consider whether the alleged employer: (1) has the power to hire and fire employees; (2) determines the rate and method of payment; (3) supervises and controls employee work schedules or conditions of employment; and (4) maintains employment records.

Considering these factors, the District Court held that Mr. Thomas personally qualified as an “employer” for purposes of the FLSA. Significantly, the Court indicated that it was Mr. Thomas’s power to hire and fire that mattered, not whether or not he recently exercised that power. (This should encourage HR professionals to write their own job descriptions, making it clear that they do not have the power to independently hire and fire. Believe me, when it hits the fan, and people realize that they can be sued individually, they tend to “remember” that you had a lot more authority than you may have actually had. You will want something in writing to back up your assertion that you did not have sufficient authority to be an “employer.”)

The FLSA is one of the few federal employment-related statutes under which an HR professional can be sued personally. The OSHA Act also provides for individual liability to retaliation.

My suggestion, if your position lacks the final authority that could create personal liability under the FLSA, make that clear in own written job description. i.e. “Although this position may make recommendations, it does not have the authority to hire employees, fire employees, determine exempt v. non-exempt status, determine benefit eligibility…” You get the idea. On the other hand, if your position clearly does possess these powers, be sure to hide your hoard of gold in a very deep hole…

Shameless plug: If you need assistance in determining whether or not you may face individual liability under the FLSA or in crafting a written job description that will help you minimize this risk, don’t hesitate to contact me directly.

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