Effective January 19, 2016, the top ten shareholders of all privately held corporations—incorporated either in or outside New York—will have joint and several personal liability for "all debts, wages or salaries due and owing" to any of the corporation's employees for all services performed for the corporation in accordance with the amended Business Corporation Law (BCL), § 630. Previously, individual shareholders were personally liable only for New York State corporations. For the purpose of BCL § 630, wages and salaries include, among other things, all compensation and benefits owed to an employee, including salary, overtime compensation, vacation and holiday pay, severance, and employer contributions to insurance and welfare plans and pension funds. This section does not apply to any of the corporation's contractors.

Individual employees who wish to go after shareholders of a privately held corporation must give notice in writing to the shareholders within 180 days after the termination of their services with the corporation, or 60 days in the event that the employee requests an examination of the record of shareholders in accordance with BCL § 624. A shareholder who has paid more than his or her pro rata share in accordance with BCL § 630 may seek contributions from the other liable shareholders in a separate action.

Businesses organized as a corporation must keep this liability in mind when making governing decisions that directly relate to the corporation's employees and their wages and compensation. This amended law removes the shield against personal liability for individual shareholders from foreign corporations. Moreover, individual shareholders should be aware of the potential legal obligation—even otherwise de minimis shares in a business may expose the individual to potential liability. Businesses with questions about their organization or the potential for risk should contact their counsel to ensure that they are in compliance with all applicable wage and hour laws.