News & Insight

Employment Law: Personal Liability for Wages? It May Depend on the Boss

Though the business entity is normally liable for unpaid wages, employees also may attempt to claim them from individual owners of the employer entity.

 In Maryland, an individual construction project manager who is a company owner may be considered an “employer” under the Fair Labor Standards Acts (“FLSA”) and could be liable for unpaid wages to the employees of his company.

 To be considered an “employer” for purposes of individual liability for wages, the project manager must meet certain criteria, known as the “economic reality test.” The test examines the alleged individual employer’s responsibilities, including whether that individual: (1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment, and (4) maintained employment records.

 These four factors, however, serve more as guidance in making the determination of whether an individual is an actual employer. The courts will look at the totality of the circumstances, and not simply one factor, in making that decision. For example, the potentially liable individual must an actual owner of the employer entity, not just closely related, even if closely involved in the business.

 In a recent appellate decision by the Maryland Court of Special Appeals, the court was asked to decide whether an individual project manager, who was also the father of the owner of the general contractor company, could be considered an “employer” for purposed of FLSA liability for wages. While the project manager did have control over the employees’ schedules and had the power to hire and fire them, the court determined that the owner’s father/project manager was not an “employer” within the meaning of the FLSA because he had no equity in the company, and hence no equity in the results of the employees’ labor that he supervised. As such, the father was not personally liable for the wages of the employees.

 The court’s finding, however, did not change the ultimate outcome for the son/owner of the general contractor company. He remained personally liable for the unpaid wages.  

For additional information please contact Michael Siri at 410-583-2400 or