by Marylou Fabbo, Esq.
Massachusetts wage laws are known to be among the most employee-favorable in the country. Back in June we reported that the Massachusetts Supreme Judicial Court held that even managers of an LLC, a legal form of company specifically designed to provide limited liability to its owners, could be held individually liability for violations of the state’s Wage Act. While Massachusetts employers should remain on their toes when it comes to ensuring compliance with the Wage Act, the Appeals Court has set some limits on personal liability for wage violations.
In Massachusetts, employer liability for paying employees incorrectly or insufficiently is not limited to the legal entity actually employing the individual. The Wage Act defines employers to include an organization’s president, treasurer and/or officers “having the management of such corporation,” and those individuals clearly can face personal liability for Wage Act violations. But what about corporate directors? While not ruling out corporate director liability all together, in Perrin v. The Collaborative Engineers, et al., the Massachusetts Appeals Court held that directors cannot be held personally liable for Wage Act violations based on title alone: There must be evidence that the directors actually performed corporate management functions.
Despite this (very narrow) narrowing of the Wage Act’s reach, the Wage Act remains a landmine to be avoided by employers at all costs. With its stiff penalties, treble damages and attorneys’ fees provisions, what may initially seem as a violation posing modest exposure could quickly blossom into a several hundred thousand dollar class action lawsuit. We find that most frequently the employers defending those lawsuits are those who inadvertently violated the Wage Act because they did not know about some of its requirements. When clients ask us what management training we recommend, we just about always recommend regular wage and hour updates. So if training is in your 2014 budget, think about including an overview of wage and hour laws. It could save you big in the end.