ARTICLE
7 December 2015

New New York Law Expands Liability For Non-Payment Of Wages

FK
Frankfurt Kurnit Klein & Selz
Contributor
Frankfurt Kurnit provides high quality legal services to clients in many industries and disciplines worldwide. With leading practices in entertainment, advertising, IP, technology, litigation, corporate, estate planning, charitable organizations, professional responsibility and other areas — Frankfurt Kurnit helps clients face challenging legal issues and meet their goals with efficient solutions.
Here's some important news for persons owning interests in companies operating in New York that are registered in other states.
United States Employment and HR
To print this article, all you need is to be registered or login on Mondaq.com.

Here's some important news for persons owning interests in companies operating in New York that are registered in other states.

Background. Last year, the New York State legislature passed a law imposing personal liability on certain members of limited liability companies (LLCs) - the members with the ten largest ownership interests - for the failure of the company to pay employee wages. The Wage Theft Prevention Act (WTPA) accomplished this change through an amendment to the New York Limited Liability Company Law. Specifically, the WTPA made the ten members with the largest percentage ownership interest of each New York State LLC personally liable, jointly and severally, "for all debts, wages or salaries due and owing to any of [the LLC's] . . . laborers, servants or employees, for services performed by them for [the LLC]." This LLC provision, which took effect on February 25, 2015, expanded on an existing law that imposed individual liability on the ten largest members of New York corporations. But the WTPA did not apply to corporations incorporated out-of-state.

New provision applies to foreign corporations. On November 20, 2015, Governor Cuomo signed an amendment to the New York Business Corporation Law extending this provision to foreign corporations that operate and have employees in New York. Shareholder liability for foreign corporations is not automatic. For example, before an employee can charge a shareholder for unpaid wages, the employee must first provide written notice to the shareholder that the employee intends to hold the shareholder liable for the employee's unpaid compensation. Employees must provide this notice within 180 days after termination of employment, or within 60 days after the employee has demanded and received the opportunity to examine the corporation's books and records, whichever is later. The employee must also begin a lawsuit seeking a judgment against the corporation or LLC for the unpaid wages, and attempt to execute upon the judgment. Once an execution is returned unsatisfied, the employee must commence a second lawsuit against the shareholders within ninety days. This amendment to the New York Business Corporation Law takes effect on January 19, 2016.

The take-aways. For employers, the issue of liability for non-payment of wages may arise during periods where cash flow is under stress. Employers should minimize exposure by prioritizing payment of employees' compensation. For employees, the notice requirements are paramount: failure to serve required notices can be fatal to a later claim for payment.

www.fkks.com

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

ARTICLE
7 December 2015

New New York Law Expands Liability For Non-Payment Of Wages

United States Employment and HR
Contributor
Frankfurt Kurnit provides high quality legal services to clients in many industries and disciplines worldwide. With leading practices in entertainment, advertising, IP, technology, litigation, corporate, estate planning, charitable organizations, professional responsibility and other areas — Frankfurt Kurnit helps clients face challenging legal issues and meet their goals with efficient solutions.
See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More