In May 2011, a Superior Court judge ruled that managers of a limited liability company (“LLC”) could not be held individually liable for damages under Massachusetts’ Wage Act, Mass. Gen. L. Ch. 149, §148. Now the Massachusetts Supreme Judicial Court (“SJC”) has overruled that decision and found that a manager who “controls, directs, and participates to a substantial degree in formulating and determining” the financial policy of any business entity, including LLCs, can be held personally liable.
The case comes from a lawsuit filed by Peter Cook, who worked as Director of Business Development for Patient Edu, a Massachusetts LLC. In addition to naming Patient Edu, Cook also filed suit against two of Patient Edu’s management team, Steven Graziano and Michael Schulman. After the Superior Court decision came out dismissing the case, Cook appealed the decision, and the SJC took the matter up on direct review, without waiting for the Massachusetts Appeals Court to weigh in on the topic. The SJC concluded that, in enacting the Wage Act, the Massachusetts Legislature intended to protect wage earners from the “long-term detention of wages by unscrupulous employers.” The statute requires “[e]very person having employees in his service” to pay employees their wages on a regular basis. The Wage Act also specifies that the president and treasurer of a corporation, as well as officers and managers who have responsibilities for the management of the corporation, are deemed “employers” under the statute. Although the statute does not specifically mention managers of LLCs or any other limited liability entity, the SJC noted that LLCs didn’t exist in 1932, when the statute was amended to make corporate officers individually liable for the payment of wages. Accordingly, the SJC concluded that it was entirely appropriate to hold managers or other officers or agents of LLCs, limited liability partnerships, or any other limited liability business entity personally liable for violations of the Wage Act.
Bottom line: If you are responsible for management of business operations in a Massachusetts company, you may be held personally liable for violations of the Wage Act. If you have concerns about whether your company’s pay practices might violate Massachusetts law, please contact any one of the attorneys at Skoler, Abbott & Presser, PC.