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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
Employee Classification Update: California’s AB 5 Stalls in State Senate
Here is an update for all employers with employees or independent contractors in California. Read more.
August 14 2019
New York Readies Dramatic New Harassment Rules – What Are the Changes, and Are You Prepared to Comply?
The New York State Senate and Assembly recently passed a bill adding substantial additional protections for employees. The new law will provide additional protections for employees who allege sexual harassment; remove certain employer defenses; alter non-disclosure agreements; extend the statute of limitations for sexual harassment claims; and make changes to the laws governing sexual harassment policies and training. Read more.
July 9 2019
Mandatory Sexual Harassment Training Begins for Certain New York City Employers
April 1, 2019 is an important date for many New York City employers. On that date New York City employers with 15 or more employees (including contractors) who have worked more than 80 hours and at least 90 days in a calendar year, must begin providing mandatory sexual harassment training. Read more.
March 14 2019