Second Circuit Affirms SDNY’s Broad Use of “Employer” under FLSA

On July 9, 2013, the US Court of Appeals for the Second Circuit affirmed an SDNY decision approving individual “employer” liability on supermarket owner of Gristedes Supermarkets, John Catsimatidis for wages under the Fair Labor Standards Act (“FLSA”) class action lawsuit. Irizarry v. Catsimatidis, 2013 WL 3388443 (2d Cir. 2013); Torres et al. v. Gristedes Operating Corp. et al, 628 F.Supp.2d 447 (SDNY 2008).

The class action litigation, first brought in SDNY in 2004 began when employees of Gristedes Supermarkets sued various corporate and individual defendants, arguing that they were misclassified as exempt employees under the FLSA and New York Labor Law (“NYLL”) and therefore entitled to overtime. The parties agreed to settle the matter for $3.5 million, with $425,000 paid up front, and 27 monthly installments thereafter. After the Supermarket defaulted on the payments, the employees sought to sue Mr. Catsimatidis, CEO and Owner of the Supermarket, individually.

Mr. Catsimatidis argued that he was not in charge of activities in a day-to-day capacity but was merely a high-level executive who made only general corporate or symbolic decisions. While the Court agreed that generally an owner or officer of a company makes corporate decisions unrelated to employee function, the Court found that under these set of facts, Mr. Catsimatidis was liable under the FLSA which includes a “operational control” and “totality of the circumstances” test to determine whether an individual owner or officer is an “employer.” In using the tests to weigh whether the individual owner or officer is an “employer,” the Court held that because Mr. Catsimatidis made general management decisions, visited the stores frequently, interacted with managers, made changes to local promotions and marketing strategies, and held ultimate responsibility for decisions with respect to the plaintiffs’ wages, he qualified as an “employer” within the meaning of the FLSA and was therefore personally responsible for the outstanding settlement payments. Under FLSA standards, Mr. Catsimatidis’ arguments that he made decisions directly related to their employment “only occasionally” did not stand. The Court did not find, however, that Mr. Catsimatidis could be individually liable under the New York Labor Law, which does not provide as expansive tests as the FLSA provisions.

While this holding and the Court of Appeal’s affirmance could potentially provide greater remedy for employees who seek to have corporate officials held individually liable to a Company’s judgment, we should be diligent to note that a corporate official must truly exercise enough operational control over his employees that his decisions affect the “the nature of conditions of the employees’ employment,” for this broadened use of “employer” to truly apply. For more detailed information regarding federal and state laws governing wage and hour laws visit, New York Wage and Hour Law.. Attorneys with a focus in Employment and Labor Law, including Wage and Hour laws, can protect your interests and your right. If you would like to get a consultation with one of our New York employment law attorneys, do not hesitate to contact us at Borrelli and Associates immediately. We are eager to review your case and give you advice.