For the third time, a superior court judge has weighed in on the question whether managers of limited liability companies can be held personally liable for the severe penalties provided by the Massachusetts Wage Act. Mark the score now as two to one in favor of such liability. On December 17, 2012, a Middlesex County Superior Court judge ruled that the Act’s failure to reference LLC managers like it corporate presidents and treasurers does not absolve those managers of personal liability.
“The touchstone of section 149 liability remains that ‘[e]very person having employees in his service’ can be liable. I decline, therefore, to rule that there can be no individual liability in the limited liabiliy corporation setting as a matter of law,” wrote Justice Paul Wilson. Instead, the court concluded, claims of individual liability against LLC managers can proceed if those managers have responsibilities that are functionally equivalent to those typically performed by corporate presidents and treasurers. The court went on to conclude that a plaintiff’s claim against a high-ranking manager stated a plausible claim while one against his report did not, despite the fact that the latter individual was in charge of the company’s Massachusetts operations and supervised the employee at issue.
The decision follows two cases that analyzed the same question on motions to dismiss. In the first, Cook v. Patient, decided in 2011, a superior court judge concluded that, because the Wage Act does not specifically reference LLCs but does provide that corporate officers are personally lialbe for unpaid wages, no claim could be brought against LLC managers. A second, Keefe v. Enterrise Associates, LLC, came out the opposite way in 2012. This most recent decision by Justice Wilson is McCarthy v. D’Agostino. It and the decision in Keefe comport more closely with the Wage Act’s language and intended meaning, at least in this writer’s view, since the law plainly applies to individuals who fail to pay wages due. Because the limited liability statute was not in existence when the Act was passed, it seems likely that the Massachusetts Legislature’s omission of any reference toLLCs cannot reasonably be read to intend an exclusion for managers of that form of entity, which is, in effect, merely a different form of corporate shield.
The issue has high importance to employees who are not paid wages due to them by their employers. If LLC managers can escape wage payments by hiding behind a corporate shield, they may often avoid those payments altogether by claiming they lack the funds needed to make them. The Wage Act appears to have been specifically drafted to avoid this by requiring the timely payment of wages earned. It incents employers to make those payments by providing for triple damages, legal fees, personal liability, and even criminal liability for transgressors. Suing the individuals who make wage payment decisions has long been a valuable tool for employees seeking to recover money they earned.