When is the Limited Liability of an LLC Manager not Limited in Massachusetts?

llcpicFailure to pay wages subjects the managers of an LLC to individual liability under the Massachusetts Wage Act. (So says the Supreme Judicial Court in the case of Cook v. Patient EDU, LLC SJC-11272).

While most business owners in Massachusetts understand the importance of a limited liability company, they may misunderstand the level of protection that the entity provides.  It is generally correct that the managers of an LLC are not individually liable for the debts accumulated by the LLC.

There are certain statutory exceptions to limited liability. 

The Massachusetts Wage Act (G.L. c.149, § 148) provides penalties for failure to pay employee wages.  Officers of corporations are specifically included as liable parties under the statute but there is not mention of LLC management.  Liability under the Act includes treble damages, attorney’s fees and cost.

In a ruling that was not much of a stretch considering the language of the statute, the SJC held that managers of an LLC, who would be in charge of paying the wages at issues, may be held liable under the statute.  The reasoning is contained in the statutory language that intended to hold those responsible for paying wages liable for any failure to comply with the Act.  It was already clear that corporate officers could be held liable under the statute and now the SJC has extended that liability to LLC mangers.

LLC managers must make certain that wages are paid to employees.

What is the moral of this tale?  If you are a Massachusetts employer make certain that any wages due your employees are timely paid.

Questions about employment law in Massachusetts?  Call the Western Massachusetts Law Firm for Business, Gogel & Gogel, or visit us on the web at www.gogel-gogel.com