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December 4th, 2015
New New York Law Expands Liability for Non-Payment of Wages
Here's some important news for persons owning interests in companies operating in New York that are registered in other states.
Background. Last year, the New York State legislature passed a law imposing personal liability on certain members of limited liability companies (LLCs) - the members with the ten largest ownership interests - for the failure of the company to pay employee wages. The Wage Theft Prevention Act (WTPA) accomplished this change through an amendment to the New York Limited Liability Company Law. Specifically, the WTPA made the ten members with the largest percentage ownership interest of each New York State LLC personally liable, jointly and severally, "for all debts, wages or salaries due and owing to any of [the LLC's] . . . laborers, servants or employees, for services performed by them for [the LLC]." This LLC provision, which took effect on February 25, 2015, expanded on an existing law that imposed individual liability on the ten largest members of New York corporations. But the WTPA did not apply to corporations incorporated out-of-state.
New provision applies to foreign corporations. On November 20, 2015, Governor Cuomo signed an amendment to the New York Business Corporation Law extending this provision to foreign corporations that operate and have employees in New York. Shareholder liability for foreign corporations is not automatic. For example, before an employee can charge a shareholder for unpaid wages, the employee must first provide written notice to the shareholder that the employee intends to hold the shareholder liable for the employee's unpaid compensation. Employees must provide this notice within 180 days after termination of employment, or within 60 days after the employee has demanded and received the opportunity to examine the corporation's books and records, whichever is later. The employee must also begin a lawsuit seeking a judgment against the corporation or LLC for the unpaid wages, and attempt to execute upon the judgment. Once an execution is returned unsatisfied, the employee must commence a second lawsuit against the shareholders within ninety days. This amendment to the New York Business Corporation Law takes effect on January 19, 2016.
The take-aways. For employers, the issue of liability for non-payment of wages may arise during periods where cash flow is under stress. Employers should minimize exposure by prioritizing payment of employees' compensation. For employees, the notice requirements are paramount: failure to serve required notices can be fatal to a later claim for payment.
If you have questions about how the Wage Theft Prevention Act applies to your business or employment, or if you have other employment law questions, please contact Wendy Stryker (212) 705 4838 or email@example.com, Gavin McElroy at (212) 826 5541 or firstname.lastname@example.org, or any other member of the Frankfurt Kurnit Executive Compensation & Employment Group.
Other Employment Law Alerts
The FFCRA Implementation Date is Coming Up – How to Get into Compliance
Employers are reminded that the new Families First Coronavirus Act will go into effect commencing on April 1, 2020 and continuing through December 31, 2020. Employers should not only be aware of the law’s key provisions, but know how to stay complaint and provide mandatory notice to employees. Read more.
March 30 2020
Aid for Small Business and Employees Affected by COVID-19
On March 27th, the House passed and the President signed the Coronavirus Stimulus package, now known as the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act pumps $2.2 trillion into the American economy to combat the effects of the Coronavirus. Below is a summary of the key provisions of the CARES Act that will provide assistance to workers and small businesses. Read more.
March 28 2020
Updates to Federal and State Employee Leave and Sick Leave Laws
The ongoing COVID-19 crisis has prompted a number of new federal and state laws related to employee leave and sick leave. This alert will highlight recent changes in federal and New York law. Read more.
March 23 2020