When some restaurant employees argued they weren’t properly paid, they sued not only the restaurant but also a manager individually. The manager argued she wasn’t an “employer” under the federal Fair Labor Standards Act (FLSA) and the Illinois Wage Payment and Collection Act (IWPCA). A recent federal court decision in Chicago reminds us that individuals can be branded as employers and burned with personal liability.

First course

Gina Jang, Hoseong Chang, and Kyoung Choi are former employees of the Woo Lae Oak restaurant who claimed they were denied minimum wage and overtime compensation in violation of the FLSA and the IWPCA. They sued not only the restaurant but also some of their fellow employees for the alleged failures.

Kaylyn Kim was one of the individuals sued. She began working for the restaurant in 2010 as an “office manager.” According to her, she was responsible only for organizing the office operations and procedures, preparing the monthly inventory budget, reviewing and approving the restaurant supply requisitions, implementing a filing system, and maintaining office equipment.

She claimed she did not have the authority to hire or fire any employees, including Jang, Chang, or Choi, did not supervise them, did not prepare their work schedules, did not determine the rate or method of their pay, and did not prepare their payroll checks.

Hostess with the mostest

In turn, Jang, Chang, and Choi argued that Kim was being modest in her description and acted with more authority than her title let on. According to them, Kim told customers she was in charge of “everything.” They claimed she conducted interviews of potential employees, held herself out as a “general manager,” and was responsible for overseeing the restaurant’s financial transactions and accounting. They even claimed she told Jang she would pay lost wages to her when business got better and offered to pay her a manager’s wages if she didn’t quit.

Although Kim was given a chance to dispute the allegations, she did not do so, which forced the court to accept them as true. Based on those actions, Jang, Chang, and Choi argued that Kim qualified as an “employer” and should be held personally liable for the restaurant’s alleged failure to pay the minimum wage and overtime compensation.

Recipe for personal liability

Many employees like Kim may be surprised to learn what students of the FLSA and the IWPCA hopefully remember. Individuals can be personally liable for wage violation claims if the court finds that they qualify as an “employer” under the statutes.

Under the FLSA and the IWPCA, an “employer” is broadly defined to include “any person” who acts “directly or indirectly in the interest of an employer in relation to an employee.” What that means inside the office is that if an individual exercises control over the part of employment alleged to have been violated, then she can be liable as an employer.

Hoping to avoid personal liability, Kim argued that she didn’t exercise the level of control over Jang, Chang, and Choi in her role as “office manager” that was needed to qualify her as an employer.

Ordering off the menu

The court rejected that argument, stating that it had to look at the employment relationship as a whole and couldn’t focus on “technical labels” such as job descriptions and titles. Courts call this the “economic realities” test. According to the court, the fact that Kim claimed she didn’t have authority as office manager to hire or fire employees, supervise them, determine their method or rate of pay, or issue payroll checks didn’t matter. Rather, what mattered was what Jang, Chang, and Choi claimed she actually did.

The court found that Jang, Chang, and Choi had alleged enough facts to take the issue of whether Kim qualified as an employer to a jury. In particular, the court agreed that they had alleged she supervised them and was responsible, at least in part, for the fact that they were denied the minimum wage and overtime compensation.

The court also agreed that if Jang, Chang, and Choi could prove those allegations, Kim might be considered an employer under the FLSA and the IWPCA and subject to personal liability. Gina Jang et al v. Woo Lae Oak, Inc., No. 12-cv-782 (N.D. Ill., Dec. 12, 2013).

Don’t let your sous chef become a sued chef

This case reminds us to educate employees about their responsibilities and potential exposure under the FLSA and the IWPCA so they don’t find themselves in hot water. Many employees assume (incorrectly) that they can’t be hauled into court for a company’s failure to pay appropriate wages. That’s simply not the case. Any employee whose actions are alleged to have caused—or even contributed to—a company’s failure to pay wages may be considered an employer under the statutes, regardless of their job description or job title.

This article was written by the attorneys at Ford Harrison LLP.