Personal Liability under the Massachusetts Wage Act

The Massachusetts Wage Act states that, “The 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 within the meaning of this section.” So, it has been uncontroversial that the president and treasurer of corporation are liable for employee unpaid wage claims. But what about other “officers or agents”? And what about limited liability companies (“LLC)” and other business entities that are not technically “corporations”?

In Cook v. Patient Edu LLC, decided in June 2013, the Supreme Judicial Court of Massachusetts sent a clear message to all Massachusetts businesses: that managers of a LLC can be held individually liable under the Massachusetts Wage Act for unpaid wages due to an employee. Specifically, the Court warned that any manager who “controls, directs, and participates to a substantial degree in formulating and determining the financial policy of a business entity,” may be held liable for unpaid wages under the statute.

The case arose when Plaintiff Peter Cook filed a lawsuit against defendant Patient Edu LLC for over $68,000 in withheld wages and unreimbursed travel expenses. Mr. Cook didn’t just stop there, but also named two managers as defendants to the suit. Both defendants disputed their individual liability and sought to have the case dismissed.

Under the Wage Act, every person “having employees in his service” shall pay weekly or bi-weekly each such employee the wages earned by him. The law further provides that an employee claiming to be aggrieved by a violation can institute a private action for injunctive relief and damages. However, this section of the Wage Act does not separately define what types of people are civilly liable for violations of the law. Could the managers of Patient Edu be characterized as “having employees in his service” and liable under the statute?

The defendant managers argued that because other provisions of the Wage Act designed to address individual liability do not mention LLCs or managers of any other limited liability entity, they could not be held individually liable. As mentioned above, the Wage Act expressly mentions that presidents and treasurers of corporations as well as officers or agents having the management of the corporation shall be deemed employers under the meaning of the Wage Act. Since the legislature took the time to particularly define types of corporate members who may be found individually liable without any mention of LLCs, the defendants reasoned that LLC members were simply not meant to be included as types of people individually liable under the statute.

The Court found the defendants’ argument to be unconvincing. It explained that just because there is no explicit reference to LLCs within the law, that does not mean that the legislature did not intend for the Wage Act to reach LLC members. In fact, the Court stated the original purpose of the law was to protect wage earners from the unlawful retention of earned wages by employers for long periods of time. It is not reasonable, therefore, to hold any officer or agent having management of a corporation accountable for violations of the Wage Act, but not those managers of other limited liability business entities who control the same policies and practices related to the timely payment of employees. The Court concluded that a manager who controls, directs, and participates to a substantial degree in formulating and determining the financial policy of a business entity may be a person having “employees in his service” and thus may be subject to liability for unpaid wages.

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