New York Expands Shareholder Liability For Unpaid Wages
On November 20, 2015, Governor Andrew Cuomo signed an amendment to the New York Business Corporation Law (“BCL”)[Section 630], extending personal liability for unpaid wages – including but not limited to salaries, overtime, vacation, holiday and severance pay; employer contributions to or payments of insurance or welfare benefits; employer contributions to pension or annuity funds - to the top largest shareholders of a foreign corporation. BCL § 630 already imposes liability for unpaid wages on the top ten largest shareholders of a domestic (non-public) corporation.
This most recent amendment to the BCL comes on the heels of last year’s amendment to the Wage Theft Prevention Act, which added a provision to the New York Limited Liability Company Law [Section 609(c)], imposing personal liability for unpaid wages on the ten members of a domestic LLC with the largest ownership share. Although last month’s amendment to the BCL removes the domestic incorporation limitation, no similar amendment was made to the LLC law.
New York’s amendment to BCL § 630 does not change certain key requirements of the statute, which must first be satisfied before an employee can seek to impose liability on an individual shareholder. For example, the employee must send written notice to the shareholder that he intends to hold him liable under this section within one hundred and eighty days after termination of the employee’s services, or within sixty days after the employee has been given the opportunity to examine shareholder records. Additionally, an employee cannot commence an action to enforce such liability against a shareholder until the employee obtains a judgment against the corporation and the execution of that judgment is returned unsatisfied. Once the execution is returned unsatisfied, the employee must commence his or her action against the shareholder within ninety days. NY CLS Bus Corp § 630(a).
This amendment to the BCL takes effect on January 20, 2016.
REMINDER: As of December 31, 2015, New York State's minimum wage increases to $9.00 per hour.