New York State Passes Law Extending Wage Theft Liability to LLC Members

New York State Passes Law Extending Wage Theft Liability to LLC Members

New York State passed a law that, effective February 10, 2020, permits the imposition of liability on the top ten members of an out-of-state limited liability company (LLC) for violations of New York’s wage and hour laws. The bill amends New York’s LLC law, which previously only extended individual liability for unpaid wages to owners of domestic LLCs.

When the law takes effect, the top ten members of all LLCs, both foreign and domestic, as well as other privately-held corporations, can be held personally liable for unpaid wages for work performed in New York. In determining the top ten members, the law provides that it is calculated based on the percentage of ownership of each member during the time period the violations occurred. For an employee to seek payment from individual members, there must first be a judgment against the employer-LLC itself that has been returned unsatisfied. The employee must also provide the member the employee is attempting to hold individually liable advanced written notice of the employee’s intent to hold that member accountable.

Pursuant to the law, the ten members are both “jointly and severally” liable for the unsatisfied judgment. This means that a judgment creditor can seek payment of the entire amount from one member. However, any member who has paid more than his or her pro rata share may seek contribution from the other members.