Yesterday, the nation’s highest court decided to close the checkout lane on John Catsimatidis when it denied the grocery chain CEO’s petition for certiorari in a case we have been following since last year. The petition challenged the Second Circuit’s conclusion that Catsimatidis should be held personally, jointly, and severally liable for wages owed to employees based on his general control over the company.
Applying a standard known as the “economic realities” test, the Second Circuit looked at Catsimatidis’ power to hire and fire, his supervisory roles with regard to work schedules and conditions of employment, his role in setting the rate and method of employees’ payment, and his duties with respect to maintaining employment records. Although it noted it was a close case, the Second Circuit held that given the totality of the circumstances, the CEO could be held personally liable for the unpaid amounts under an FLSA settlement agreement. In other words, he was left holding the bag.
The Second Circuit’s decision differed from at least four of its sister circuits. Indeed, the First, Seventh, Eighth, and Eleventh Circuits all hold that personal liability is limited to acts of personal responsibility. Given the split and impact of the Second Circuit’s far-reaching decision, Catsimatidis turned to the Supreme Court for assistance. But today’s denial means that, at least for now, there are many options to choose from on the individual liability of corporate officers question.
Although the question of individual liability remains unsettled—and until more clarity is provided—employers should consider raising awareness of the potential for personal liability by reviewing corporate structures and operational control to determine which individuals may ultimately be at risk of individual liability based on the “economic realities” of their position. This case also presents an additional reason for companies to be proactive in assessing wage and hour compliance.