Dentons Digest
On June 20, 2024, in Spears v. Patel, No. 22-13376 (11th Cir.), a three-judge panel affirmed the District Court for the Southern District of Alabama’s ruling that Rick “Sunny” Patel Jr. was an “employer” under the Fair Labor Standards Act (“FLSA”) and was therefore individually liable for failing to comply with the FLSA’s minimum wage and overtime requirements. The Eleventh Circuit held that the FLSA contains a “broad definition” of who is an employer, including those who are “involved in the day-to-day operations or have some direct responsibility for the supervision of the employee,” particularly in regard to compensation and financial decisions. Employers, particularly those who delegate significant control to managers, should be aware of how much control and authority they are delegating to their employees.
Case Background
Plaintiff, William Spears, sued Rick “Sunny” Patel Jr. and his father, Rick Patel Sr., for violations of the FLSA, alleging that they paid him below minimum wage and failed to pay him overtime when he worked over 40 hours a week. Spears worked as a front desk clerk at various hotels in Alabama that were owned and operated by Rick and Sunny. Id. at 3. During his employment, Spears typically worked 62 hours a week, checking guests in/out of the hotel, making reservations, and performing additional housekeeping/maintenance duties. Id. For his services, Spears received between $700 and $750 a month and onsite lodging that the parties stipulated was worth $630 a week. Id. Sunny oversaw the majority of the day-to-day operations at the Alabama hotels while Rick was based in Florida. Id. While Sunny was a wage-earning employee of the hotels, he had significant control over the operations of the hotel, including the employees and the financial decisions. Id. at 3, 7.
The Southern District of Alabama District Court held that Spears was not paid the legally required minimum wage or overtime for the services he provided. Id. at 4. The district court found that both Sunny and Rick were employers under the FLSA and were therefore individually liable for the FLSA violations. Id. Sunny appealed the district court’s holding that he was an employer under the FLSA.
Eleventh Circuit Holding
The Eleventh Circuit agreed with the district court and held that Sunny was considered an employer under the FLSA. Id. at 7. The Eleventh Circuit explained that the “definition of ‘employer’ is broad” under the FLSA, that “individual liability is not limited to upper management and executives,” and that “anyone who has ‘some direct responsibility for the supervision of the employee’ can be an employer,” including managers. Id. at 7-8.
The panel rejected Sunny’s argument that he could not be an employer because he was not an owner and was a wage-earning employee himself. Id. at 6. To be an employer under the FLSA, and therefore be individually liable, an individual must be either “involved in the day-to-day operations or have some direct responsibility for the supervision of the employee.” Id. The Eleventh Circuit explained that Sunny was substantially involved in the day-to-day operations: he lived at one of the properties and supervised Plaintiff’s daily activities; he oversaw the hotel’s day-to-day functions; he gave Plaintiff tasks and set Plaintiff’s work schedule; and he made financial decisions (including signing paychecks and setting rental rates). Id. at 7. Further, the panel differentiated Sunny from an “average middle manager” because he was the son of the owner of the company, regularly consulted the owner/his father on company financial matters, and attended to company business while the owner/his father was unavailable. Id. at 8.
Key Takeaways for Employers
Spears v. Patel demonstrates just how broadly courts are willing to define who is an “employer” under the FLSA. Employers should be aware that heavily delegating the day-to-day operations of a business to managers, and specifically involving managers in the company’s financial and compensation decisions, may open the door for individual liability under the FLSA.
