Managers of LLCs Can be Personally Liable Under the Massachusetts Wage Act

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In a June 13, 2013 decision, the Massachusetts Supreme Judicial Court clarified that managers of Limited Liability Companies (LLCs) can be individually liable for violations of the Massachusetts Weekly Payment of Wages Act, and, thus, be personally responsible for treble damages and attorneys’ fees.

In Cook v. Patient Edu, LLC, the lower court had originally dismissed claims asserted against the two managers of the defendant LLC for failure to pay more than $68,000 in compensation owed to the plaintiff under an employment contract.  In dismissing the claims, the lower court reasoned that because the Wage Act, by its plain language, only imposes liability upon the “president and treasurer of a corporation and any officer or agent having the management of the corporation or entity;” it does not impose liability on “managers of a limited liability company.”  The SJC, taking the case from the Appeals Court on its own motion, reversed the lower court’s decision, ruling that “… a manager or other officer or agent of an LLC, limited liability partnership or other limited liability business entity may be a ‘person having employees in his service,’” and thus may be civilly or criminally liable for violations of the Wage Act.

In reaching its decision, the SJC observed that the Wage Act requires

‘every person having employees in his service’ to pay those employees their wages either weekly or bi-weekly (or on a less frequent basis in certain circumstances)…  The Wage Act provides also that the president and treasurer of a corporation, as well as ‘officers or agents having the management’ of the corporation, ‘shall be deemed to be the employers of the employees of the corporation within the meaning of this section.’

As a result, the purpose of the Wage Act was to hold employers responsible for paying their employees.  That the LLC did not exist as a form of business association when the Wage Act was amended to provide individual liability to certain corporate officers did not immunize managers of LLCs from the obligations to pay their employees.  The SJC concluded that, in light of the history of the Wage Act, the legislative intent of the Wage Act was to make employers liable and to hold individual managers responsible as employers, regardless of the form of business entity.  Accordingly, because managers of limited liability companies, limited liability partnerships and other limited liability business entities are no different from managers of corporations, they are subject to potential individual liability under the Wage Act.

Many lawsuits brought under the Wage Act are triggered upon the failure to pay accrued wages on the last day of an employee’s employment.  I have written often on the perils of violation of  the Massachusetts Wage Act.  With recent focus on individual liability, especially in limited liability entities, in-house counsel may wish to renew efforts to review termination practices with managers to ensure that they are not inadvertently exposing the company – and themselves – to such liability.

Topics:  Attorney's Fees, LLC, Managers, Personal Liability, Treble Damages, Wage Act, Wages

Published In: Business Organization Updates, Civil Remedies Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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