While the Fair Labor Standards Act (FLSA) governs employers’ responsibilities to workers regarding pay and other matters, it also has broad language that includes supervisory employees when investigating violations. Complaints do not affect only the company as an entity. They may also expose individuals with the power to affect employee compensation to legal jeopardy.
The Fair Labor Standards Act Offers Significant Protection for Workers
The Fair Labor Standards Act (FLSA) provides regulations regarding the federal minimum wage, overtime pay, and tips. It also guides employers on managing hours worked, maintaining accurate records for pay, and handling child workers. Further, it establishes the process and penalties for those who violate these standards, including managers, supervisors, C-suite professionals, and HR personnel.
Workers have the FLSA’s backing to pursue legal action against the company as an entity, but also against those who played a part in alleged wage and hour violations. Its definition of “employer” includes “any person acting directly or indirectly in the interest of an employer in relation to an employee.”
With this description, any supervisor or manager with the authority to assign schedules or hours, classify workers, and set pay levels could be personally liable. This is true despite any employer efforts to mitigate or indemnify supervising workers from that risk.
Texas Laws Further Uphold the FLSA Governance on Wage and Hour Concerns
The Texas Guidebook for Employers provides valuable interpretations of FLSA requirements in Texas, but our state has several statutes that support or enhance actions under the FLSA. These include:
- Texas Payday Law: Employers must pay workers in full, on time, and on their scheduled paydays. Failure to do so opens the company to wage claims filed through the Texas Workforce Commission.
- Texas Child Labor Law: Like the FLSA, this law governs the employment of children ages 14 and older to protect their health and well-being. There are exceptions for those working in the performing arts under separate legislation.
- Equal Work, Equal Pay: This law mandates equal pay for all genders when they perform the same job duties.
As an employer, supervisor, or manager, you should be fully versed in how these laws work in tandem with the FLSA, as well as how they may have more restrictions. For example, violations can arise even after an employee’s termination, since the Texas Payday Law requires full payment for final wages within 6 days of firing.
Determining Which Supervisory Workers Could Face Personal Liability for Texas Wage and Hour Violations
While the FLSA opens supervisors and managers to personal liability risk through its broad definition of employer, this does not mean every person in a supervisory capacity carries the same power in wage and hour decisions. The state of Texas uses an economic reality test to determine whether a supervisor is liable, based on many factors, including:
- Does the person have the power to hire or fire workers?
- Do they control and supervise schedules and conditions of employment?
- Do they determine the method or amount of pay?
- Do they have operational authority over vital business concerns?
- Do they maintain employment records?
- Do they maintain and update payroll records?
A person’s title does not necessarily expose them to personal liability, but rather the extent of their responsibilities related to wage and hour matters within the company. This can become complicated when dealing with the line between independent contractors and hourly employees, as discussed in the Texas Guidebook for Employers.
Damages to the Employer and Supervisors Due to Wage and Hour Violation Claims
Recent trends in FLSA investigations and enforcement indicate that the Department of Labor (DOL) is increasingly targeting HR and operations managers, seeking liquidated damages. When a plaintiff sues a corporation, many individuals may find themselves subject to massive liability demands in class action lawsuits without the capacity to meet them.
Plaintiffs often do not have to prove a supervisor or manager’s intent to violate the FLSA to establish the violation. This can sweep up frontline workers who oversee daily assignments without the benefit of a deep understanding of FLSA regulations. Liability under FLSA claims is joint and several, potentially placing a substantial burden on a single supervisory employee under Texas’s proportionate responsibility statute.
Potential damages could include:
- Unpaid minimum wage amounts
- Unpaid overtime
- Liquidated damages, including back pay
- The plaintiff’s attorney fees and costs
Companies that file for bankruptcy in the wake of FLSA charges could secure discharges for wage and hour claims, but this is not a guarantee. In the event of willful or repeated violations, they may have to pay civil restitution to the plaintiff, and the bankruptcy court will likely consider it non-dischargeable. Further, Directors & Officers Insurance (D&O) may not offer protection against intentional violations.
Reducing Personal Liability Risks for Your Company and Supervisory Employees
There are two powerful tools that can reduce liability from wage and hour claims to both your company and your employees who have responsibilities over these matters. The first is analyzing your existing risks in areas such as employee classification, overtime authorization, off-the-clock work, time-entry adjustments, and the like. A thorough review of each worker’s understanding and actual performance can reveal areas for correction.
The second tool is education, whether after the fact, when you identify a risk, or preventive, when you hire and promote workers. Ensure your supervisors and managers adhere to the following recommendations:
- Understand classification rules for employees versus contractors
- Maintain timekeeping procedures
- Manage overtime hours and pay correctly
- Refuse to demand or authorize off-the-clock work
- Keep accurate records for hours, pay rate, overtime, and tips
- Notify upper management and HR of wage concerns
- Refrain from retaliatory actions against workers who bring wage and hour claims
Through risk management and training, you can minimize potential liability, keep employees performing at their best, and build a solid foundation for continued growth.
Turn to MehaffyWeber’s Texas Labor and Employment Team for Guidance
Employers must recognize how the FLSA demands accountability and from whom, along with examining how Texas courts view these kinds of cases. With assistance from legal counsel focused on labor and employment matters, you and your company can reduce potential risks for the business as a whole and individual representatives. To learn more, contact MehaffyWeber for a consultation today.