Southern District Of New York Examines The Meaning Of “Employer” For Related Company And Individual Defendants Under The FLSA

Reiseck v. Universal Commc’ns of Miami, No. 06-CV-777(TPG) (S.D.N.Y. Aug. 23, 2012, Greisa, J.): The plaintiff, who was employed by defendant Universal Communications of Miami (Universal) as its Regional Director of Sales, brought suit under the Fair Labor Standards Act (FLSA) and state law for failure to pay overtime. In addition to Universal, the plaintiff also sued: Universal’s parent company Blue Horizon; Carl Ruderman, Universal’s Chairman and majority owner; Geoffrey Lurie, Universal’s Vice-Chairman and an officer of Blue Horizon; and David Bernstein, Universal’s CFO. Blue Horizon, Ruderman, Lurie and Bernstein each moved for summary judgment, arguing that they are not employers under the FLSA or state law and cannot be held liable for failing to pay overtime due to the plaintiff.

Although the court noted that there is a “strong presumption” against holding Blue Horizon liable for its subsidiary’s employees, the court denied Blue Horizon’s motion because there was evidence that Ruderman owned both entities, their upper management and officers were largely identical, and they occupied the same office space and shared administrative functions. Given this evidence, the court denied Blue Horizon’s motion because a reasonable jury could find that the considerable integration of the two companies casts doubt on Universal’s independence. The individual employees were next considered using the controlling “economic realities” test. Because this inquiry is fact-intensive, the court noted that defendants rarely succeed on a summary judgment motion except when “the facts of the case unambiguously indicate that a given individual does not exercise meaningful control over the plaintiff-worker.” Given the evidence that Ruderman had “ultimate managerial authority over Universal” and exercised that control over the plaintiff, albeit sporadically, his motion was denied. Bernstein and Lurie fared better and were dismissed. Bernstein did not maintain any “meaningful control” over her compensation beyond merely processing her payments, and he had no personal role in her hiring or firing; and Lurie had no direct control let alone contact with the plaintiff.

This decision underscores that, for purposes of summary judgment, it is difficult under the FLSA to dismiss related corporate entities and individual defendants unless they truly had no control over compensation or employment decisions.

Note: This article was published in the September 2012 issue of the New York eAuthority.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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