Both the Fair Labor Standards Act (FLSA) and the Arizona Minimum Wage Act (AMWA) require “employers” to pay employees minimum wage for all hours worked. Restaurant owners often use layered LLCs to separate ownership from operations, oftentimes intended to insulate the entities and owners from liability. When a lawsuit is filed against layered LLCs, many ask: Who is an employer? A recent Arizona federal court decision answers this question, serving as a reminder that layered LLCs won’t necessarily insulate certain entities or their individual owners from personal liability.
Order Up: How the Dispute Began
Omar Silva worked as a cook at T-Bird Tavern from February 2024 until early March 2024, earning $18 an hour. During his employment, he was paid in cash, and the kitchen manager generally handled those payments. In his final workweek, March 1 through March 7, 2024, Silva worked a total of 39.3 hours.
The circumstances of Silva’s termination are sharply disputed. Silva claims he was fired by text message and never received his final pay of $707.39. Owner Troy Brandt asserts that he terminated Silva in person, handed him an envelope containing the full $707.39 owed, and watched him count the money.
T-Bird Tavern is owned by Thunderbird Restaurants LLC, which is in turn owned and managed by two other entities: TB Ventures (owned by Troy Brandt) and Ace High Partners (owned by Kelley Cordova). Silva sued all three entities and their owners (collectively the “Tavern”) under the FLSA, the AMWA, and the Arizona Wage Act (AWA) and asked the court to enter judgment in his favor.
Three Ingredients for a Wage Claim
An FLSA minimum-wage claim requires Silva to prove that he was employed by the Tavern, covered under the statute, and not paid at least minimum wage for hours worked in a given workweek. The AMWA test is nearly identical: The person or entity sued must be an employer, Silva must be a qualified employee, and he must not have been paid the applicable minimum wage. Both tests turn on the same two questions—whether a given person qualifies as an “employer,” and whether the worker was actually paid. Both issues were before the court.
Peeling Back the LLC Layers
The Tavern conceded Brandt and Thunderbird Restaurants were “employers,” but argued Cordova, TB Ventures, and Ace High Partners were not since Thunderbird Restaurants alone owned and operated T-Bird Tavern. The court disagreed, noting that FLSA employer status doesn’t turn on contractual labels or corporate layers—it turns on the economic realities of who actually controls the employment relationship, including who can hire and fire, set schedules and pay, and maintain records.
Tracing the ownership chain, the court found control of T-Bird Tavern led directly back to Brandt and Cordova through their respective LLCs, with no other person or entity holding comparable ownership or control. There was no reason, the court held, to let a multilevel holding structure shield those who ultimately owned and controlled the business— meaning all involved, including Cordova personally, must defend the FLSA and AMWA claims at trial.
Different Recipe Under State Law
The AWA defines “employer” more narrowly than the FLSA, covering only an individual, partnership, association, or corporation that directly employs a person. Applying that narrower standard, the court found Silva hadn’t established, as a matter of law, that TB Ventures and Ace High Partners employed him for AWA purposes.
In other words, the same ownership facts that expose Brandt and Cordova to personal FLSA and AMWA liability don’t automatically translate into AWA exposure for their holding companies—a reminder that “employer” isn’t a single, one-size-fits-all definition across overlapping wage statutes.
Bottom Line for Employers
This case underscores two points for Arizona restaurant and hospitality employers. First, layering ownership through multiple LLCs won’t necessarily protect individual owners from personal FLSA and AMWA liability if they exercise control over hiring, pay, or scheduling. Second, and just as important, cash-pay recordkeeping practices should never leave ambiguity about whether and how much an employee was actually paid. Ambiguity in the Tavern’s payroll records turned a routine pay dispute into a factual question that only a jury can resolve at trial.
You shouldn’t pay employees in cash, but those who do should maintain clear, contemporaneous records reflecting the actual amount paid, not merely the hours worked. If paying employees in cash, you should require the employee to sign a written acknowledgment of receipt for each payment.
Jodi R. Bohr is a shareholder with Milligan Lawless, P.C., where she practices employment and labor law, with an emphasis on counseling employers on HR matters, wage and hour compliance, litigation, and workplace investigations. She may be reached at jodi@milliganlawless.com or 602-792-3549.