Donovan v. Agnew

In Donovan v. Agnew, 712 F.2d 1509 (1st Cir.1983), the Court had to decide if appellants Agnew and Bradley, who together were president, treasurer, secretary, and members of the Board of Directors of Maxim Industries, Inc., were personally liable for minimum wage and overtime violations of the FLSA. In Donovan v. Agnew, the Court began its analysis by recognizing that individuals ordinarily are shielded from personal liability when they do business in a corporate form, and that it should not lightly be inferred that Congress intended to disregard this shield in the context of the FLSA. See id. at 1513. In this vein, the Court cautioned that the Act's broadly inclusive definition of "employer" should not be afforded too much weight. "Taken literally and applied in this context it would make any supervisory employee, even though without any control over the corporation's payroll, personally liable for the unpaid or deficient wages of other employees." Id. Similarly, the Court found it "difficult to accept, as the Secretary argues and as some courts have apparently held, that Congress intended that any corporate officer or other employee with ultimate operational control over payroll matters be personally liable for the corporation's failure to pay minimum and overtime wages as required by the FLSA." Id. At the same time, however, the Court also acknowledged that the language of the Act does not support the proposition that officers of a corporation can never be held personally liable for unpaid wages, and we recognized that Congress intended the FLSA's reach to transcend traditional common law parameters of the employer-employee relationship. See id. In reaching this conclusion, the Court observed that the Supreme Court has looked to the "economic reality" of a situation, rather than to "technical" common law concepts, to define the scope of the employer/employee relationship under the Act. See id. The Court further noted that Congress has never contradicted the Court's "economic reality" interpretation of the Act. See id. at 1514. Although such Supreme Court cases occurred in the distinguishable context of determining whether an individual should be excluded from the Act's coverage as an independent contractor, we noted that "lower court decisions disregarding the corporate form to find individual corporate officers 'employers' within the meaning of the Act are not of such recent vintage that we can be sure that they have escaped Congress' attention." Id.