The First Circuit has ruled that corporate officers may be held personally liable for a corporation’s failure to pay to pay its employees proper wages under the Fair Labor Standards Act (“FLSA”). While the district courts in the First Circuit have been willing to impose personal liability on corporate officers for years, the First Circuit Court of Appeals has finally weighed in on this issue.
In Chao v. Hotel Oasis, Inc., the First Circuit Court of Appeals held the president of a corporation personally liable for the corporation’s FLSA violations. Prior to imposing personal liability, however, the Court determined that it is necessary to undergo a personally liability analysis to consider whether the corporate officer was “principally in charge of directing employment practices, such as hiring and firing employees…thus instrumental in “causing” the corporation to violate the FLSA.”
This has long been the rule in Massachusetts, where the Wage Act names the President and Treasurer as having personal liability for non-payment of wages. Now it appears there’s similar liability under Federal law, too.
The ruling is important for employees of companies where executives attempt to use bankruptcy threats to deprive employees of wages. Now, they are personally liable, too.