It seems that in each passing year, business owners face increasing challenges from constricting labor laws:
- The Fair Labor Standards Act (FLSA), a federal law, has for years been a threat to business owners due to rampant litigation by workers who allege improper wage and hourly compensation. Business owners should be aware that the FLSA threat exists on multiple levels, not merely employee wage lawsuits, but also federal and state labor audits and investigations.
- Recent changes to the FLSA law by the federal government came into effect in December 2016 and heightened the risk of non-compliance and lawsuits.
- In addition, owners and investors are personally liable for FLSA violations, which means that even if a business is owned in an LLC or corporation, the owner’s personal assets are vulnerable.
- Two New York appellate court decisions in 2017 have now increased the potential liability of owners of home healthcare and home health aide businesses.
- A proposed new New York State law (known as the “SWEAT” law, for Securing Wages Earned Against Theft) would allow a lien against a business accused of improperly withholding wages from its workers, even when the withholding issues are merely alleged, not proven.
- A recent New York law, the Wage Theft Prevention Act (WTPA), imposes additional requirements on employers. In 2015, New York passed a law imposing personal liability on the ten largest shareholders of any company (including foreign companies doing business in New York) that does not pay its liabilities for labor law violations.
- Our clients in the restaurant and hospitality industries are particular (but not the only) targets of aggressive labor lawyers. The media reported multiple new lawsuits in 2017 against prominent restaurants in New York City and nationwide, including the Batali group which had already settled a prior FLSA claim in 2012.
Business owners and investors must take appropriate steps to contain the multiple FLSA threats and protect their business and personal assets from FLSA and other labor law attacks. We advise business owners from restaurateurs to construction contractors on how to protect their assets. The asset protection acts as a preventative, discouraging the plaintiffs from proceeding with litigation and providing our clients with tremendous leverage to force a settlement on favorable terms.
We recently represented the owner of a major construction company who was a defendant in an FLSA lawsuit brought by a group of former employees. We protected his personal and business assets by transferring them to a network of family limited partnerships (FLPs) as part of a comprehensive estate plan. Although he lost the FLSA case and had a $4 million judgment entered against him, the protection afforded by the FLPs provided sufficient leverage to force a negotiated settlement for significantly less than half of the judgment.