Employment Law Alert

SJC Holds LLC Managers May Be Personally Liable Under MA Wage Act

July 1, 2013

The Massachusetts Supreme Judicial Court (“SJC”) recently ruled that language in the Massachusetts Wage Act imposing personal liability on officers and agents of a “corporation” applies equally to managers of a limited liability company (“LLC”).  In doing so, the SJC rejected a Superior Court decision reaching the opposite conclusion. 

In Cook v. Patient EDU, LLC, et al. (SJC-11272), Peter Cook alleged that after becoming employed by the defendant LLC he received no salary for the first six months and then was paid only a portion of the wages he was due when his employment ended.  Cook sued the LLC and its two managers for unpaid wages under the Wage Act, M.G.L. c. 149, §§ 148, 150.  The Wage Act provides that “[t]he president and treasurer of a corporation and any officers or agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation. . . .”  Thus, officers and agents of a corporation may be personally liable for violations of the Wage Act, which provides for treble damages, attorney’s fees and costs. 

The defendant LLC managers moved to dismiss the claims against them and the Massachusetts Superior Court agreed, ruling that managers and officers of an LLC cannot be held individually liable under the Wage Act because an LLC is not a corporation and only “officers or agents having the management of [a] corporation” can be found individually liable under the Act.  The Superior Court found the language of the Wage Act “unambiguous,” and the Court was therefore bound in its decision by the plain meaning of the statute.  Cook appealed the judgment of dismissal to the Massachusetts Appeals Court and the appeal was transferred to the SJC.

Agreeing with Cook, the SJC overturned the Superior Court’s decision.  The SJC noted that when the provision of the Wage Act “making corporate officers individually liable for payment of wages was added in 1932 … the LLC did not exist as a form of business association.”  The SJC stated that it did “not read the provisions of [the Wage Act] as a legislative effort to single out for individual liability only the officers or managers of the specific types of entities mentioned in the statute.”  Rather, the SJC discerned “a clear legislative intent to ensure that individuals with the authority to shape the employment and financial policies of an entity be liable for the obligations of that entity to its employees.” 

The SJC concluded 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] if he ‘controls, directs, and participates to a substantial degree in formulating and determining policy’ of the business entity.”

The SJC’s Cook decision eliminates the uncertainty concerning whether LLC managers are exposed to the same individual liability under the Wage Act faced by officers and agents of corporations.  The decision reinforces the importance of avoiding Wage Act violations, including making impermissible deductions from employee pay and failing to pay all wages owed, particularly at termination. 

If you have questions about this topic, please contact any member of our Employment Law Group.

ELA Alert Banner

Did you know subscribing to our e-newsletters is absolutely free?