By Sarah Burch and Teresa Shulda

Recently, the Kansas Court of Appeals held that in certain circumstances, public officials can be held individually liable for violations of the Fair Labor Standards Act (FLSA). The U.S. 2nd Circuit Court of Appeals (whose rulings apply to all New York, Connecticut, and Vermont employers) made a similar ruling in the private employer context and held a CEO of a corporation personally liable for FLSA violations.

The recent decisions serve as good reminders to both public and corporate officials of the importance of complying with the FLSA’s minimum wage and overtime requirements.

The Kansas decision: working hard or hardly working?

In 2001, Keith Lumry started as a special agent for the Kansas Bureau of Investigation (KBI), working on narcotics investigations. He stayed in that position until 2008, when he joined a newly formed drug task force.

Shortly before starting with the task force, Lumry told his new supervisor, Clint Hawkins, that he was willing to work five hours of unpaid overtime each week but he was no longer willing to work 10-plus hours of unpaid overtime each week. According to Lumry, before he joined the task force, he was encouraged to work overtime without reporting it and routinely did so. He did not complain about the prior unpaid overtime to Hawkins. Rather, he simply stated he wouldn’t work overtime without pay any longer.

About a month after Lumry started his new position, Hawkins noticed discrepancies in his time sheets. Lumry recorded time for things that he apparently did not work on, and he recorded more time than other agents who performed the same tasks. After looking into the discrepancies, Hawkins told the director of the KBI, Robert Blecha, who ordered an administrative inquiry of Lumry’s time. Ultimately, Blecha decided to terminate Lumry for falsifying his time sheets.

Lumry claimed he was fired in retaliation for asserting his rights under the FLSA based on his statement to Hawkins about being unwilling to continue to work overtime for free. Lumry initially filed a lawsuit against the KBI in federal court, but his claims were thrown out under the doctrine of sovereign immunity, which precludes legal action against a government without its consent. That did not end the matter for Lumry, however.

He then filed suit in state court, asserting claims against Hawkins, Kelly Ralston (a second-level supervisor), and Blecha and seeking to hold them personally liable for retaliating against him in violation of the FLSA.

What the Kansas court said

The court concluded that public officials can be held personally liable under the FLSA. Before this case, Kansas courts hadn’t addressed whether employees could be held personally liable for violations of the FLSA. The court of appeals followed the approach of the majority of courts outside the state, finding that if a public official meets the definition of “employer,” he may be held individually liable if he acted in the interest of the agency.

To determine whether Hawkins, Ralston, and Blecha were “employers,” the court adopted an “economic realities” test, asking whether the individuals sued had the power to hire and fire workers, (2) supervised and controlled employees’ work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.

The court determined that Hawkins and Ralston did not qualify as employers, noting that an individual must have “more than just managerial responsibilities” to be considered an employer. The court came to a different conclusion on Blecha, holding that he met the definition of employer under the FLSA. The distinguishing factor seemed to be that Hawkins and Ralston did not have the power to fire Lumry, but Blecha, as the director of the KBI, did. The court likened Blecha to the KBI’s CEO.

The case ultimately worked out for Blecha. Although the court found that Blecha could be held personally liable for violations of the FLSA, Lumry did not prove that he had a valid retaliation claim under the Act. The court held that Lumry’s statement that he was unwilling to work unpaid overtime in the future was not clear and detailed enough to invoke the protections of the FLSA. Lumryv.State,2013 WL 4278326 (Kan. Ct. App., Aug. 16, 2013).

2nd Circuit: The buck stops at the CEO’s office

The outcome was not as rosy for John Catsimatidis, the chairman and CEO of Gristede’s Foods, Inc., a supermarket conglomerate in the New York City area. The company employed approximately 1,700 employees. In 2004, a group of Gristede’s employees filed a class/collective action lawsuit alleging that the company failed to pay overtime under the FLSA. The employees prevailed, and the parties entered into a settlement agreement.

When Gristede’s defaulted on its payment obligations under the settlement agreement, the employees asked the U.S. District Court for the Southern District of New York to hold Catsimatidis personally liable for the payments. The district court granted the employees’ request, and Catsimatidis appealed to the 2nd Circuit.

The 2nd Circuit upheld the lower court’s decision, ruling that Catsimatidis was an employer under the FLSA and could be held personally liable for violations of the Act. The 2nd Circuit applied a test that was similar to the economic realities test the Kansas Court of Appeals used to make its determination.

Notably, Catsimatidis was not saved by the fact that he managed employees at a very high level. For example, he wasn’t typically involved in the day-to-day operations of individual supermarkets. He didn’t hire or fire most employees or set specific wages or schedules, and he had only limited interaction with the managers who handled those types of decisions. It also didn’t matter that Catsimatidis wasn’t accused of making decisions that violated the FLSA.

Rather, in concluding that Catsimatidis was an employer, the court relied on the fact that he was active in running the company, including having contact with individual stores, employees, vendors, and customers. Also, he was ultimately responsible for employees’ wages and signed paychecks, and he supervised certain managerial personnel, such as the chief financial officer and the chief operating officer. Irizarryv.Catsimatidis,722 F.3d 99, 107 (2d Cir., 2013).

What to remember

Nearly all employers are subject to the requirements of the FLSA, and the potential penalties for violations can be costly. With court decisions like these, corporate officers and public officials should be more motivated than ever to ensure that their companies and agencies are in compliance with the FLSA’s requirements.

Now is a good time to review and update your policies to ensure that employees understand their obligation to accurately report all time worked. Also, train supervisors so they know the FLSA’s minimum wage and overtime requirements and how to properly handle employee complaints when they arise.

Sarah Burch and Teresa Shulda are employment lawyers with Foulston Siefkin LLP. Sarah can be reached at 316-291- 9752 or sburch@foulston.com. Teresa can be reached at 316-291-9791 or tshulda@foulston.com.