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Grocery Store CEO Is Employer under FLSA, Can Be Held Personally Liable for Damages: Second Circuit
Practical Law Legal Update 4-534-1105 (Approx. 4 pages)
Grocery Store CEO Is Employer under FLSA, Can Be Held Personally Liable for Damages: Second Circuit
by Practical Law Labor & Employment
| Published on 11 Jul 2013 • USA (National/Federal) |
In Irizarry v. Catsimatidis, the US Court of Appeals for the Second Circuit affirmed a district court's ruling that the chairman of a New York City grocery store was an employer for purposes of assessing liability in a wage and hour action under the Fair Labor Standards Act (FLSA).
On July 9, 2013, in Irizarry v. Catsimatidis, a wage and hour class action, the US Court of Appeals for the Second Circuit issued an opinion affirming in part a district court ruling which found a New York City grocery store CEO qualified as an employer under the FLSA. The Second Circuit found that the defendant qualified as an employer after applying an "economic reality" test. The Second Circuit also vacated the district court's award of summary judgment to the plaintiffs on the related state labor claim, finding the definition of employer under the New York Labor Law (NYLL) required further discussion prior to a grant of summary judgment.
Background
John Catsimatidis is the CEO and Chairman of Gristede's Foods, Inc., a grocery store chain operating throughout New York City. In 2004, several employees commenced a wage and hour class action lawsuit against Gristede's, including several managers and Catsimatidis. After several years of litigation and failed settlement negotiations, the plaintiffs moved for partial summary judgment on Catsimatidis's personal liability as an employer under the FLSA and the NYLL.
The district court granted summary judgment and found the CEO was an employer, finding instructive the fact that Catsimatidis:
- Hired managerial employees.
- Signed all paychecks to the class members.
- Had the power to close or sell Gristede's stores.
- Routinely reviewed financial reports.
- Worked in Gristede's corporate office.
- Generally presided over the company's day to day operations.
Catsimatidis appealed to the Second Circuit.
Outcome
The US Court of Appeals for the Second Circuit affirmed in part the district court's opinion, finding that Catsimatidis was an employer under the FLSA. The Second Circuit affirmed after applying what it described as an "economic reality" test, a four-prong guide first used in the Second Circuit decision, Carter v. Dutchess Community College. The test determines the economic reality of an employment relationship by evaluating the totality of circumstances on weighing whether an employer:
- Had the power to hire and fire employees.
- Supervised and controlled employee work schedules or conditions of employment.
- Determined the rate and method of payment.
- Maintained employment records.
Applying the test to this case, the Second Circuit found Catsimatidis:
- Possessed great power to hire and fire, regardless of whether it was often applied.
- Exercised some operational control of the stores, but was rarely concerned with employee schedules or conditions.
- Exercised a large amount of financial control, often examining profit statements and setting up meetings with payroll companies.
- Did not maintain employment records, and only worked in the same office where the records were kept.
The Second Circuit admitted that only the first and third prongs supported a finding that Catsimatidis was an employer while the second and fourth ones did not. However, the court concluded that under the totality of the circumstances, specifically considering that Catsimatidis had functional control over the whole enterprise, the CEO was indeed an employer under the FLSA.
The Second Circuit vacated in part the district court's ruling that Catsimatidis was an employer under the NYLL, finding an insufficient basis for that determination. The Second Circuit remanded the case to the lower court to determine the damages under the FLSA and to address the related NYLL issue.
Practical Implications
Despite the finding of personal liability, the Second Circuit acknowledged it was a close case based on the specific facts. The court's holding suggests that under the totality of the circumstances test, personal liability may not be found under the FLSA where corporate actors have little influence over or direct involvement with employment matters.