LLC Members Personally Liable For Failure To Pay Wages?
As I wrote in a post earlier today [Annual Notice Provision Eliminated From Wage Theft Prevention Act], Governor Cuomo signed legislation yesterday amending certain provisions of the Wage Theft Prevention Act. In addition to eliminating the annual notice provision, the amendments enhance certain penalties and make it easier to pursue repeat violators who attempt to evade the provisions of the act by setting up new businesses with similar operations and ownership.
One of the other significant provisions of this legislation [L.2014, ch.537], is the inclusion of an amendment to the New York Limited Liability Company Law. The amendments now impose personal liability on the members of a limited liability company with then ten largest ownership interests for the failure of the company to pay the wages of its employees. These amendments are similar to provisions already contained in the New York Business Corporation Law. Although the liability is also joint and several, employees wishing to take advantage of these provisions must first satisfy certain conditions, including providing written notice to the member against whom a claim will be made.
Over the last several years, the Legislature has made it a priority to protect employees from employers who fail to pay wages. These amendments are part of that effort, and the they simply bring the provisions of the Limited Liability Company Law more in line with the provisions that already apply to most other business entities in New York.
Annual Notice Provision Eliminated From Wage Theft Prevention Act
In January, I wrote about the notice requirements of the Wage Theft Prevention Act that apply to both new employees and existing employees. [See Employers: Do Not Forget Your Annual Employee Wage Theft Prevention Act Notice]. The Act required employers in New York to provide all new employees with a written notice setting forth the employee’s rate of pay and other pay-related information. The Act also required employers in New York to provide another written notice containing the same information to all other employees annually, before February 1 of each year.
Not surprisingly, the annual notice provision was roundly criticized by employers and business groups across the state because of the administrative burden and expense imposed on employers. The Rochester Business Alliance noted that the required written notice contained the same information that employees already receive on their paystubs.
Earlier this year, the Legislature passed an amendment to the Wage Theft Prevention Act, eliminating the annual notice requirement, and yesterday, Governor Cuomo signed the bill into law (L.2014, ch.537). The amendments also increase certain penalties for non-compliance and include provisions making it easier to establish successor liability against employers who attempt to evade the provisions of the law by purporting to set up new companies.
In his approval memorandum, the Governor noted that he was signing the bill into law, even though there were some technical and substantive problems that will need to be addressed. I would expect the Legislature to act on these issues early in the new year.