Bankrupt Employer’s Managers Liable for FLSA Claims

July 12, 2009 by Beeson Tayer & Bodine

The Ninth Circuit Court of Appeals has ruled that employees shorted by bankrupt employers may pursue their Fair Labor Standards Act (FLSA) claims against the employer’s managers. Boucher v. Shaw, __ F.3d __ (7/27/09).

In this case, employees brought an action to recover unpaid wages and accrued vacation and holiday pay in the form of a minimum-wage claim under the FLSA. Their employer, however, was bankrupt.

The court noted that an individual who exercises “control over the nature and structure of the employment relationship,” or “economic control” over the relationship, is considered an employer subject to FLSA and is individually liable. But the managers in this case argued that the Chapter 7 bankruptcy of the employer relieved them of all such liability. The Ninth Circuit rejected the argument, concluding the bankruptcy provides relief only for the employing entity, and has no effect on the claims against the individual managers.

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