Appeals Court Sets Standard for Holding Managers Liable under Wage Act

The Massachusetts Court of Appeals recently shed a bit more light on what’s required to hold managers of a corporation liable for an employer’s failure to pay earned wages to employees. Citing to a standard that provides for individual liability in company decision-makers who control or substantially contribute to policy determinations, the Court dismissed a suit against several defendants who, it found, did not perform “corporate management functions.”

“We reject the notion that directors may be held liable [under the Massachusetts Wage Act] solely on the basis of their titles,” the Court concluded in Perrin v. Collaborative Engineers, Inc. None of the defendants served as president or treasurer, job titles that carry automatic liability under Mass. Gen. L. ch. 149, §148. Instead, they were full-time employees, directors and minority shareholders. The company’s daily operations were controlled by a separate defendant, and individual liability in others was therefore inappropriate despite apparent authority to at least influence corporate policy.

Under the Massachusetts Wage Act, the president and treasurer of a corporation are personally liable for a failure to pay wages, as are any other managers who control, direct or substantially participate in policy formulation. The statute requires prompt payment of wages earned by employees. Violations of the law result in mandatory triple damages and the assessment of legal fees against offending employers. The statute appears as Mass. Gen. L. ch. 149, §§148-150, and includes a section limiting employers’ uses of independent contractors.