CEO, CFO And Manager Held Individually Liable For Employee Unpaid Wages Upon Corporation's Bankruptcy
If your company files bankruptcy or dissolves and in the process the company fails to pay its employees their wages, vacation and sick time, the Ninth Circuit says you - as the Chief Executive Officer, the Chief Financial Officer and the labor manager - can be held individually liable to pay those back wages. Plus penalties.
Read that sentence again and don't skip over the word "individually." Yep, you got that right. Ouch.
In Boucher v. Shaw, the Ninth Circuit upheld individual liability for supervisors under the federal Fair Labor Standards Act despite two striking facts: (1) they were not individually liable under Nevada wage and hour laws; and, (2) the corporate employer (the Castaways Hotel and Casino) was in bankruptcy court in liquidation proceedings.
In these conomic times, this case is an important reminder that executives are taking the risk of individual liability under the FLSA by failing to ensure that employees are paid upon dissolution or bankruptcy of a corporate employer. This ruling applies in California since it's out of our Ninth Circuit and the law enforced by the court is a federal, not state, law.