In a recent decision by Judge Crotty in the Southern District of New York, John Catsimatidis was held to be jointly and severally liable for wage and hour violations committed by his company, Gristedes. Gristedes, one of the largest supermarkets in New York City was accused of failing to pay overtime to thousands of workers. The case was certified as a class action, and the workers were to receive well over $2 million. However, the Company argued that due to the economy, they were unable to pay the settlement. Therefore, Plaintiffs had no choice but to seek relief from the company’s owner.
The Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL) both provide for personal liability in unpaid wage cases. The reason is simple, so that a company cannot disregard their obligations to pay proper wages because the company has no money. The laws provide that an owner can also be held personally responsible, to increase the likely hood that people will ultimately be paid their overtime and minimum wage. The Court in this case found Mr. Catsimatidis liable because he: is the sole owner, President and CEO; has the authority to open and close stores; can set prices; select decor; is responsible for advertising; obtains credit for the company and can declare bankruptcy on their behalf.
This case is especially significant because the Court rejected the economic reality test where the company had argued no individual liability because Mr. Catsimatidis did not hire and fire employees, supervise schedules, determine rate and method of pay and maintain employment records. The Court reasoned that it does not matter that the owner delegates those tasks to others, as the key fact is he has the power to delegate those tasks. Since the owner had total control and nothing was beyond his reach, he was held liable for unpaid wages.