In 2005, the California Supreme Court ruled that, under state law, individual managers and corporate officers couldn’t be held personally liable for unpaid wage claims. In other words, only the company could be forced to pay back wages. This was an important victory for California employers (Find out more on the 2005 case).
But the Ninth Circuit Court of Appeals—which covers California—has just ruled that managers and officers don’t enjoy the same protection under the federal Fair Labor Standards Act (FLSA).
Join us this fall in San Francisco for the California Employment Law Update conference, a 3-day event that will teach you everything you need to know about new laws and regulations, and your compliance obligations, for the year ahead—it’s one-stop shopping at its best.
In 2003, The Castaways casino in Las Vegas, Nevada filed for bankruptcy, and then ceased operations in early 2004. A handful of employees sued, claiming that they hadn’t been paid their final wages or accrued vacation earnings. Since the corporation was in bankruptcy, the employees named three top level managers—the company CEO, the CFO, and the Labor Relations Manager—as defendants in the lawsuit. Both the trial court and the Nevada Supreme Court ruled that, under Nevada state law, individual managers and officers could not be held liable for unpaid wages and dismissed the case.
One employee then pursued his unpaid wage claims under the federal FLSA. Reversing the federal district court, the Ninth Circuit ruled in Boucher v. Shaw that under the FLSA’s definition of “employer,” if individual managers and officers control and direct the work of employees, and take actions that deprive those employees of earned wages, the individuals can be made to pay the employees out of their own pockets.
We’ll have more on this important case, and what it means for California employers, in an upcoming issue of California Employer Advisor.