The Fair Labor Standards Act (FLSA) establishes federal minimum wage and overtime payment requirements. The FLSA broadly protects “employees” and places liability on “employers.” The FLSA allows employees to seek relief not only from their violative company, but also personally from their employers. 29 USC §203. Thus, the distinction of whether someone is an “employer” is incredibly important for liability purposes.
The recent case, U.S. Department of Labor v. Serenity Home Health Care LLC, et. al., (“Serenity”) underscores this distinction. In Serenity, the Department of Labor (DOL) filed an FLSA lawsuit on behalf of 145 employees against their companies, their owner, and the companies’ general manager, Arafat Sheikhadam. The amount in controversy totaled $1,744,940.42.
On Summary Judgment, the U.S. District Court of the Eastern District of Virginia denied the DOL’s motion, deciding Sheikhadam the general manager, was not an “employer” under the FLSA. The court applied a four-factor “economic reality” test, focusing on whether the alleged employer:
(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 explained that all factors are weighed evenly, and no single factor is dispositive. The court disagreed with the DOL’s contention that Sheikhadam was an “employer” because of the extent of her involvement in overall business operations. First, the court noted that Sheikhadam’s title as “general manager” was insufficient to classify her as an employer under the FLSA. Further, the court focused on the undisputed facts that Sheikhadam had no legal, beneficial, or equitable ownership interest in the company. Also, the company’s clients, not Sheikhadam, set the employees’ schedules. Accordingly, the court held the DOL’s “claim is either unsupported by admissible evidence or flatly contradicted by evidence in the record.”
This seemingly small distinction of whether someone is an employer can have a tremendous impact on an individual’s liability under the FLSA. For Sheikhadam, this distinction meant she was not liable for almost $2 million in FLSA liability. For employers and companies in Virginia, it’s important to fully understand the scope of the FLSA and who on a company’s management may be subject to its liability. Without properly understanding the FLSA’s scope, it’s difficult for companies and employers to properly limit their liability.
If you are a company manager or senior executive, do you think you would be considered an “employer” pursuant to the FLSA? Contact us today if you wish to discuss.
If you need more guidance or information, contact the employment law attorneys at General Counsel, P.C. today at 703-556-0411, email@example.com, or use this Contact Us Form. Attorneys at General Counsel, PC are specialized in labor and employment law and have experience working with businesses, non-profits, and individuals throughout the DC Metropolitan area and across Virginia, specifically in Fairfax County, Arlington, and Loudoun County.