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Quote of the Day - I want to share something with you: The three little sentences that will get you through life. Number 1: Cover for me. Number 2: Oh, good idea, Boss! Number 3: It was like that when I got here. - Dan Castellana
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Business Owners May Not Be Individually Liable To Employees For Unpaid Wages

You may be the "top guy" or the "big wig" and perhaps even "El jefe" at your company, but that doesn't make you liable to employees for unpaid wages - at least in California.  You may even exercise day-to-day control over the operations of your company, but that still doesn't make you liable (assuming, of course, that there's no fraud involved and you scrupulously maintain your corporate records and don't intermix personal and business expenses). 

Federal law is drastically different - you may be held liable as an employer under the Fair Labor Standards Act.  You won't, however, be liable to California's Division of Labor Standards Enforcement.  The key is in the definitions in the two codes.  The FLSA includes an owner who exercises operational control over the company as an "employer."  California labor law, on the other hand, has no such consistent definition. 

William Gregory founded a summer camp company some 20 years ago with about 60 campers.  After years of steady growth, the company netted some $10 million of revenue for the three summer months.  Apparently Mr. Gregory either sold his company, Science Investors, to some investors or somehow ceded financial control to them back in 1999.  Things recently went wrong when the company had a cash flow shortfall, despite the $10 million in gross revenue.  The long and short of the story finds some 555 summer instructors and 147 administrators unpaid.  The DLSE sued on behalf of 45 employees and obtained a judgment just over $110,000, and then sought to hold Mr. Gregory personally liable.  His company had earlier filed for bankruptcy.  The appellate court didn't hold Mr. Gregory personally responsible based on the provisions of the California Labor Code. 

This case has an interesting twist, and Mr. Gregory may well still be found liable to his employees.  The appellate court sent the matter back to the trial court for further proceedings to determine whether it is appropriate to pierce the corporate veil.  If the employee's attorney carefully reads the opinion, he may also amend the complaint to include a cause of action under the FLSA, making liability a foregone conclusion. 

Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Tuesday, March 14, 2006 at 18:52 Comments Closed (0) |
 
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