Many courts, including the Court of Appeals for the Second Circuit, have ruled that under certain circumstances an individual can be a statutory “employer” under the Fair Labor Standards Act, liable for minimum or overtime wages usually along with a corporate entity. The scope of such potential liability and the precise formulation of the “economic realities” test associated with that analysis remain points of contention. A recent decision highlights that standing alone status as a non-profit board chairperson does not open the door to such liability. Coley v. Vannguard Urban Improvement Ass’n, 2014 U.S. Dist. LEXIS 135608 (E.D.N.Y. Sept. 24, 2014).
In Coley, one individual defendant moved to dismiss because he was merely chairman of Vannguard’s board of directors, not the Brooklyn-based not-for-profit’s executive director or other manager. The chairman of the board asserted the Plaintiffs failed to allege that he engaged in activities demonstrating any control over their employment terms. Noting that under New York law “an individual board member is not empowered to act on behalf of its organization—only the board as a whole is—and voting members of boards are not liable for the acts of the board merely by virtue of their status as board members,” Judge Pamela Chen agreed with the defendant, ruling that the allegations of the complaint failed to set forth a claim against him. The Court stated that Plaintiffs’ complaint “made no allegation that Mr. Hansard, in his capacity as an individual board member, [was] empowered to act, or acted, on behalf of the board in employment matters at Vannguard,” and further failed to allege that he scheduled Vannguard’s workers or maintained its employment records.
Clearly, the potential for individual liability is a deterrent to those who would otherwise serve not-for-profits as Board members, or in any other capacity. All such organizations must analyze and seek to minimize such liability, so that they can focus on their core mission and ensure their ability to attract qualified, committed Board members.