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Areas of Interest
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 wstryker@fkks.com, Gavin McElroy at (212) 826 5541 or gmcelroy@fkks.com, or any other member of the Frankfurt Kurnit Executive Compensation & Employment Group.
Other Employment Law Alerts
FTC Bans Certain Non-Compete Agreements
The Federal Trade Commission (FTC) has approved a new Rule which bans for-profit employers from entering into post-employment, non-compete agreements with employees. By a vote of 3 to 2 the FTC determined that these non-compete agreements constitute “unfair competition” under the FTC Act. The Rule is effective 120 days after it is published in the Federal Register. Here’s what employers and executives need to know. Read more.
April 26 2024
New Ruling from the National Labor Relations Board May Require Significant Handbook Revisions
On August 2, the National Labor Relations Board issued a decision, Stericycle Inc. and Teamsters Local 628, that creates a new legal standard for how the NLRB will evaluate workplace rules and policies to determine if such rules interfere with employees’ protected rights to engage in concerted workplace activity under Section 7 of the National Labor Relations Act. Read more.
August 8 2023
New York Releases New Changes to its Model Sexual Harassment Policy and Training Video
On April 11, 2023, the New York State Department of Labor released updated versions of its sexual harassment model policy and training materials. Read more.
April 17 2023
