The 9th U.S. Circuit Court of Appeals in San Francisco has ruled that three managers of a bankrupt casino can be held liable for employee’s unpaid wages under federal law.

     The CEO, the CFO (co-owners of the casino) and the manager of labor relations claimed that they had no duty to pay employees’ wages when the casino changed from Chapter 11 bankruptcy to Chapter 7 liquidation.  Under the State laws of Nevada they weren’t liable, but one of the former employees of the casino filed a federal lawsuit under the Fair Labor Standards Act and based on this suit the court ruled that the managers were liable under the federal law.  The court’s written opinion says the CEO, CFO and the labor-relations manager were “independently liable under the FLSA.”

     This ruling should send a message to all business owners.  As a business owner you should not run up payroll debt and then declare bankruptcy.