When small entrepreneurial ventures collapse, disputes sometimes arise regarding who constituted an “employee” of the business and whether they were paid proper wages. As the venture has failed, the issue of individual liability often is raised. In a new decision, Utah’s highest court clarifies that Managers of a limited liability company are not liable for allegedly unpaid wages on the basis of that role. Heaps v. Nuriche, LLC, 2015 UT 26 (Utah 2015).

The court agreed with the individual managers of the failed LLC that they did not “qualify as employers under the plain language of the [Utah Payment of Wages Act] . . . [because plaintiffs’] proposed construction of the statute conflicts with other provisions of Utah law that limit the liability of LLC and corporate officers.” Because “any supervisory power” the managers may have exercised “arose from their positions as officers and agents of [the LLC] – not as direct employers . . . [and] the managers did not personally employ [plaintiffs],” they were not liable. The court further observed that its conclusion was “buttressed by long-accepted principles of Utah corporate law.”

Those starting or unwinding business ventures must pay attention to applicable law assessing potential liability.