Boucher v. Shaw
Filed July 27, 2009
Cite as 05-15454

Managers are not Employers under FLSA

Plaintiffs Ardith Ballard, Thelma Boucher and Joseph Kennedy III were employees of Castaways Hotel, Casino and Bowling Center (Castaways). They were all discharged after Castaway filed for Chapter 11 bankruptcy protection and during its operation as debtor-in-possession.

The Castaways converted its Chapter 11 petition to Chapter 7 liquidation after the plaintiffs were terminated. Subsequently, it ceased operations.

The plaintiffs filed a suit in Nevada state court for the recovery of unpaid wages. Allegations include Ballard not receiving her last pay period, Boucher not receiving her pay on time while all of them were not paid their accrued vacation and holiday pay. They asserted their claims under Chapter 608 of the Nevada Revised Statutes and the FLSA, 29 U.S.C. § 206(a).

Meanwhile, the plaintiffs’ union, Culinary Workers Union, Local 226 (union) sought to recover wages that were withheld from the plaintiffs as dues from the pay checks of Boucher and other employees.

On the other hand, the defendants were three Castaways managers namely Dan Shaw, Chairman and Chief Executive Officer during plaintiffs’ termination and had 70 percent Castaway ownership, Michael Villamor who was handling labor and employment matters and had 30 percent Castaway ownership, and James Van Woerkom, Chief Financial Officer.

Shaw successfully removed the case to the United States District Court for the District of Nevada and filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) while Villamor and Van Woerkom each separately filed motions to dismiss.

The district court granted all their motions and dismissed the plaintiff’s claims.

The district court ruled that the defendants were not “employers” under Nevada law hence they lacked standing to bring a claim. Consequently, plaintiffs could not maintain a cause of action under the Fair Labor Standards Act (FLSA) against the defendants.

The United States of Court of Appeal made the following rulings:

1. Defendants as individual managers could not be held liable for the unpaid wages as "employers" under Nevada law
   
   The definition of "employer" under Fair Labor Standards Act was not limited by the common law concept of "employer" and depends on the "economic reality" of the relationship.


2. Plaintiffs adequately stated a claim under FLSA
   
   Granting that the allegations of the plaintiff’s were true that defendants had control and custody of plaintiff class and their employment, their claim withstood a motion to dismiss.
   
   Castaway’s bankruptcy did not affect liability of its individual managers under the FLSA.

Hence, the appeal court affirmed the decision of the district court that plaintiffs could not hold a state claim against the managers but reversed in part its decision as to plaintiff’s claim under FLSA. The case was remanded for further proceedings.