Corporations exist in large part to protect the individual owners of those corporations from being sued. Across the country courts have set high standards for when you may sue the owners or board members of a corporation in addition to suing the corporation itself. The employment context is unique where under the Fair Labor Standards Act (“FLSA) you are entitled to sue the company and your individual employer for a failure to pay the minimum wage or overtime wages, so long as the criteria of the “economic realities” test are met. Under the “economic realities” test, an individual “employer” can be sued (in addition to the corporation) where it can be established that the individual is someone who (1) has the authority to hire and fire employees; (2) supervises and controls work schedules or employment conditions; (3) determines the rate and method of payment; and (4) maintains employment records. In Caseres v. S & R Mgmt. Co., LLC , a recent Maryland federal court case, the court found that a 25% owner of the company could not be held personally liable because he did not hire or fire the claimants, supervise or control the claimant’s work schedule or employment conditions, or maintain his employment records.Significantly, the court did state that if discovery revealed additional facts suggesting that owner did meet the factors in the “economic realities”test that the claimants could file a motion seeking to reinstate him as a defendant. In another recent Maryland federal court case, Iraheta v. Lam Yuen, the court found that there was no basis to dismiss the individual defendants where the claimant had alleged that the individual defendants were members, directors, officers and owners of the owing corporation and where the claimant had alleged that all defendants collectively took the claimed unlawful actions in not paying her all the owed unpaid wages. What this means: Even if the company that you worked for is insolvent you may be still able to recover your owed wages by suing an individual who is considered an “employer” under the law.
