In Cook v. Patient EDU, LLC, a Superior Court Judge found that two managers of a limited liability company, including its president, were not individually liable under the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148 (Wage Act), for compensation allegedly due under an employment contract. In so deciding, the court differentiated officers of limited liability companies from officers of corporations, who are expressly subject to individual liability under the Wage Act. This decision on an issue of first impression shields managers of limited liability companies from individual liability under the Wage Act.
Peter Cook, a former Director of Business Development and Strategic Partner Development for Patient EDU, a limited liability company, filed suit seeking to recover salary, guaranteed draw payments, and travel expenses allegedly due to him under the terms of an employment contract. Cook also asserted a Wage Act claim against Patient EDU and two of its managers, one of whom served as the LLC’s president. The two managers moved to dismiss the claims against them, arguing that the language of the Wage Act, which provides that “[t]he president and treasurer of a corporation and any officers or agents having the management of such corporation” may be held liable as employers under the statute, excludes officers of a limited liability company.
The Superior Court agreed, stating that the two managers could not be liable under the statute because “an LLC is not a ‘corporation’ within the meaning of the [Wage] Act.” The court looked to the Massachusetts Business Corporation Law, Mass. Gen. Laws ch. 156D § 1.40(a), which defines the term “corporation” as “a corporation for profit … incorporated under or subject to this chapter,” and determined that “a limited liability company is not a ‘corporation’ as that word is used in the General Laws.” The court further reasoned that, had the legislature intended for the statute to apply to limited liability companies, it could have used the term “entity,” which the Business Corporation Law defines to include both corporations and LLCs.
The Superior Court recognized the public policy arguments in favor of a single standard of liability for officers of limited liability companies and corporations, but determined that “where a statute is unambiguous, the court cannot insert therein a provision which the Legislature did not include, even if injustice or hardship results.” The court also remarked that it is the role of the legislature, and not the court, “to remedy the unfairness of which [the plaintiff] complains by effectuating the necessary changes to the Act.”
While there are many cases holding that the Wage Act applies to a limited liability company, this is the first Massachusetts case to discuss the application of the Act to the officers of such an entity. In so holding, the Superior Court has provided officers of such entities with a strong weapon in their arsenal and provided yet another reason for entrepreneurs to adopt the limited liability structure.