Court Watch

The rapidly-increasing trend to try to access the perceived deep pockets of franchisors for employment-related claims against their franchisees suffered a setback in the case of Orozco v. Plackis, Bus. Franchise Guide (CCH) '15,316 (U.S. Ct. of Appeals, 5th Cir., July 3, 2014). Plackis was the owner of the corporation that was the franchisor of Craig O's Pizza and Pasteria shops. Orozco was a cook at a location owned by a franchisee corporation formed by Sandra and Arnold Entjer. After Orozco's wages were reduced by the Entjers in an effort to stem the decreasing profitability of their restaurant, Orozco resigned and brought an action against the Entjers for violation of the Fair Labor Standards Act (FLSA) alleging failure to pay overtime and the required minimum wage. After settling with the Entjers, Orozco added Plackis as a defendant claiming that he was also legally an employer of Orozco under the FLSA. The FLSA defines an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 28 U.S.C. '203(d). Plackis was named personally since, if a person is found to have operating control over employees within a company, he or she can be personally liable for the FLSA violations of the company ' even, apparently, if he is not an owner of the offending entity.

After a jury trial presided over by a magistrate judge, the jury found for Orozco and against Plackis. Following the verdict, various motions by Plackis for judgment as a matter of law were denied by the magistrate judge. Plackis appealed.