New York Expands Member Liability for Unpaid Wages

New York Expands Member Liability for Unpaid Wages

      New York has long had a statute applicable to both domestic and foreign corporations providing for the imposition of liability on the 10 largest shareholders for failure to pay wages. See New York Business Corporation Law § 630. In the same vein, in 2014 New York adopted a statute providing, inter alia, that the member that the 10 largest members of an LLC bear joint and several liability for certain unpaid wages. In order for an employee to move against the members, they must satisfy certain notice requirements and, as well obtain a judgment against the LLC that remains unsatisfied for 90 days. N.Y. LLC Act § 609(c).

      As drafted, this statute has been applicable only to LLCs organized in New York. Looking at the issue from the opposite perspective, it has not been applicable to the members of a foreign LLC transacting business in New York.

      Well, that is the case until February 20, 2020. That day an amendment to § 609 of the New York LLC Act will go effective, it providing, in effect, that the same rule applicable previously to the 10 largest members of the domestic LLC will be equally applicable to the 10 largest members of a foreign LLC. With this change, foreign LLCs doing business in New York need to pay even more attention to compliance with wage and hour laws. At the same time, ne'er-do-wells will not be able to use foreign LLCs as a “planning opportunity” with which to engage in wage-theft activities.