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Managers of LLCs Can Be Individually Liable for Unpaid Wages

Posted on Jun 14th, 2013

 

The Massachusetts Supreme Judicial Court recently held that managers of LLCs can be held liable individually for unpaid wages under the Massachusetts Wage Act. Specifically, 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’ under G.L. c. 149, § 148, and thus may be subject to liability for violations of the Wage Act,” [citations omitted].

The issue before the court was whether the legislative intent was to include managers of LLCs in the group of possible violators of the Massachusetts Wage Act, and the court found that it did. The court found a clear legislative intent to hold all individuals who contribute to a business’ fiscal and employment policies responsible for how employees are treated.

What does this mean for day to day business? LLCs of all sizes now have one more thing to consider when taking out director and officer and employee practices liability insurance. Since these kinds of policies are crucial to risk management for any business and this case signals a new kind of risk, this case should be on your radar.

If you have any questions about this topic, please feel free to email us.