Clyde Snow

Are You Personally Liable for Employee Wage Claims?

by | Aug 19, 2020

Many business owners and executives are surprised to learn that even if their business is a corporation or a limited liability company (LLC), they may be personally liable for wage claims filed by their employees.

Federal Law

Under the federal Fair Labor Standards Act (FLSA) as interpreted by federal courts, you may be personally liable for wage claims if you are an owner, officer, executive, or high-level manager and any of the following is true:

  • You have overall control over the operations of the company;
  • Your reporting chain includes employee managers or supervisors;
  • You have oversight of payroll;
  • You have authority to hire and fire employees; or
  • You have control over employee work schedules and pay rates.

This is not a complete list of factors that may lead to liability, and none of these factors necessary means that a court would find you liable under the FLSA. But if any of these factors are present, you should take a personal interest in ensuring that employees at your organization are properly paid.

Potential liability under the FLSA includes unpaid wages, liquidated damages equal to the amount of unpaid wages, attorney fees, and costs.

Utah Law

Under Utah law, personal liability is slightly narrower than under the FLSA. The Utah Payment of Wages Act (UPWA) defines “employer” to incorporate the FLSA definition, but it carves out individuals who do not hold specific high-level positions. (Utah Code § 34-28-2(c).) Thus, you cannot be personally liable under the UPWA unless you are

  • an officer;
  • a manager of a manager-managed limited liability company;
  • a member of a member-managed limited liability company;
  • a general partner of a limited partnership; or
  • a partner of a partnership.

Potential liability under the UPWA includes unpaid wages, penalties, attorney fees, and costs. For a terminated employee, it may also include unused vacation, sick leave, PTO, floating holidays, bonuses, and severance if a contract or policy provides that these amount will be paid out upon termination. (Utah Admin. Code R610-3-4.)

Personal liability under the FLSA and the UPWA may be covered by Director & Officer liability insurance policies. Check with your company’s risk management department to find out if you are covered.

Thanks to Chris Snow for contributing research for this post!

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