The Massachusetts Supreme Judicial Court recently issued a decision holding that managers of a limited liability company (LLC) could be held individually liable, civilly or criminally, for the payment of employees’ wages. In Cook v. Patient EDU, LLC, et al., 2013 Mass. LEXIS 464, the plaintiff, Peter G. Cook (Cook), filed suit against the company, Patient EDU, LLC, its president and another manager (defendants).

In December 2008, Patient EDU hired Cook as director of business development and strategic partner development with a base salary of $70,000 and a guaranteed draw of $30,000. Cook resigned on May 21, 2010 at which time Patient EDU LLC owed him over $61,000 in wages and approximately $7,000 in unreimbursed expenses. After filing the lawsuit, the defendants filed a motion to dismiss on behalf of the two managers, alleging that the Massachusetts Wage Act, M.G.L. c. 149, § 148, does not impose liability on the managers of a LLC. The defendants contended that the statute imposes liability on “any officers or agents having the management of [the] corporation,” which does not include LLCs. The trial court agreed and dismissed the claims against the two managers although the complaint against Patient EDU, LLC remained intact.

Cook appealed the dismissal and the Supreme Judicial Court (the SJC) heard the appeal. The SJC concluded that the Massachusetts Wage Act does impose civil and criminal liability on a manager of a LLC. The SJC reasoned that the language of the Wage Act must be read in a manner that does not limit liability solely to officers and managers of certain business entities. The SJC determined that, by imposing liability on corporate and public officers under the Wage Act, the Legislature intended to ensure that any manager who “controls, directs, and participates to a substantial degree in formulating and determining policy of a corporation” would be civilly or criminally liable for the employer’s obligation to pay wages owed to its employees.

With the expansion of individual liability under the Wage Act, employers should review their payroll practices as a violation of the Wage Act could result in liability to their managers for treble damages, attorneys’ fees, and costs.