## Facts

- Pasha Entertainment Group, L.L.C. (PEG) was formed in 2007 to operate the Pasha Lounge nightclub in Houston, Texas, and operated the club from April 2007 until it closed in September 2008.
- Michael Warren Powers, a founding PEG member and investor, contributed about $100,000 and supervised remodeling before the club opened.
- Powers was not involved in the club’s daily operations, visited the club only five or six times during its 17 months of operation, and did not supervise employees, set job duties, control schedules, or maintain employment records.
- Powers was a signatory on PEG’s checking account and occasionally signed batches of pre-printed checks.
- The general manager (hired by the members) handled hiring and firing, promotions, operating hours, and day-to-day supervision.
- Nicholas Gray worked at the club first as a bartender and later as general manager; as a bartender, he alleged he was not paid an hourly wage and received only tips.
- Gray’s direct interactions with Powers were limited to a compliment on his work and two occasions where Powers asked him to serve specific guests; Gray considered the general manager, not Powers, to be his supervisor.

## Issues

1. Whether an LLC investor-member who funded and helped prepare a business, but lacked day-to-day operational authority, qualified as an “employer” under the Fair Labor Standards Act for purposes of individual liability.

## Decision

- The Fifth Circuit affirmed summary judgment for Powers.
- The court held that Powers was not an FLSA “employer” because the economic reality showed he lacked operational control over Gray’s employment.
- Check-signing authority and sporadic, social-level interactions with Gray were insufficient to create a fact dispute on employer status.

## Legal Principles

- FLSA “employer” status for an individual is determined by the economic reality of actual control over employment, not by ownership title alone.
- Relevant factors include whether the individual: (1) had power to hire and fire; (2) supervised or controlled schedules or working conditions; (3) determined rate and method of pay; and (4) maintained employment records.
- Individual liability generally requires some degree of functional control over how work is performed and over core terms and conditions of employment.

## Conclusion

Because Powers did not hire or fire Gray, supervise his work or schedule, set his pay, or keep employment records, and because his involvement was limited to investment-related activities and incidental interactions, he was not an FLSA employer and could not be held personally liable for the alleged minimum-wage violations.


Gray v. Powers, 673 F.3d 352 (5th Cir. 2012)