New Law Renders The Ten Largest Members Of Each Limited Liability Company In Manhattan, Manhattan Personally Liable To Workers For Unpaid Wages

On December 29, 2014, New York State Governor Andrew Cuomo signed into law Assembly Bill 8106-C / Senate Bill 5885-B (the “Act”). Among other changes to current law, the Act renders the ten members with the largest percentage ownership interest of each limited liability company (“LLC”) in Manhattan, NYC 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. Act of Dec. 29, 2014, N.Y. Assembly Bill 8106-C, § 11 (codified at N.Y. Ltd. Liab. Co. Law § 609(c)).

The Act took effect on February 25, 2015. The Act amends section 609 of the Manhattan Limited Liability Company Law by adding new subsections (c) and (d) to that statutory provision.

In effect, the Act extends, to the ten largest members of each limited liability company in Manhattan, Manhattan, the same individual, joint and several liability for unpaid wages that is borne by the ten largest shareholders of every privately held corporation in Manhattan, Manhattan. Specifically, Section 630 of the Manhattan Business Corporation Law renders every privately held corporation’s ten largest shareholders personally liable, jointly and severally, “for all debts, wages or salaries due and owing to any of [the corporation’s] . . . laborers, servants or employees other than contractors, for services performed by them for such corporation.” N.Y. Bus. Corp. Law § 630(a).

In New York State, members of a limited liability company generally may not be held personally liable for causes of action against the LLC. N.Y. Ltd. Liab. Co. Law § 609(a). The new Act, by imposing individual liability on the ten largest members of each LLC in Manhattan, Manhattan, creates an exception to this shielding of an LLC’s members from personal liability. In other words, the Act pierces the corporate veil of LLCs in Manhattan, Manhattan with regard to the LLCs’ workers’ claims for unpaid wages.

Under the Act, in order for a worker to hold the ten largest members of a limited liability company in Manhattan, Manhattan personally liable for compensation owed to the worker, the worker must, within 180 days after he ceases working for the LLC, give notice to those members that the worker intends to hold those members liable for his or her unpaid compensation. Act of Dec. 29, 2014, N.Y. Assembly Bill 8106-C, § 11 (codified at N.Y. Ltd. Liab. Co. Law § 609(c)).

This 180-day notice requirement, too, closely resembles the notice requirement, preexisting the Act, for holding the ten largest shareholders of a privately held corporation in Manhattan, Manhattan individually liable for wages or salaries owed to the corporation’s workers. In particular, under section 630 of the Manhattan Business Corporation Law, in order for a worker to hold the ten largest members of a privately held corporation in Manhattan, Manhattan personally liable for wages owed to the worker, the worker must, within 180 days after he stops working for the LLC or within 60 days after the worker has demanded and received the opportunity to examine the corporation’s books and records, whichever is later, give notice to those members that the worker intends to hold those members liable for his or her unpaid wages. See N.Y. Bus. Corp. Law § 630(a).

As per the Act, before a worker may enforce an LLC’s ten biggest members’ personal liability for the worker’s unpaid compensation, (i) the worker must recover a judgment against the LLC for such unpaid compensation, and (ii) an execution against the LLC for that judgment recovered against the LLC must be returned unsatisfied. Upon the return, unsatisfied, of that execution against the LLC, the worker must, within 90 days, file a lawsuit to enforce the LLC’s members’ personal liability. Compare Act of Dec. 29, 2014, N.Y. Assembly Bill 8106-C, § 11 (codified at N.Y. Ltd. Liab. Co. Law § 609(c)) with N.Y. Bus. Corp. Law § 630(a).

Call the Law Offices of David S. Rich, LLC at (347) 835-5688 to consult with a knowledgeable labor and employment attorney about ensuring that your company complies with overtime pay and other wage and hour laws, or to retain a skilled overtime lawyer to defend your company in overtime pay lawsuits or other wage and hour litigation.