United States: The Applicability Of The Massachusetts Wage Act Swells In June 2013

In late June 2013, the Massachusetts Supreme Judicial Court ("SJC") and the Massachusetts Appeals Court (the "Appeals Court") issued two decisions broadly expanding the breadth of the Massachusetts Wage Act (the "Wage Act") by (i) increasing the types of entities and individuals subject to penalties for violations of the Act and (ii) extending the protections of the Act to out-of-state employees of Massachusetts-based employers, even where those employees did not primarily perform their duties within the commonwealth's borders.

Limited Liability Company Managers May Face Individual Liability for Violations of the Massachusetts Wage Act

Since at least the 1930s, Massachusetts law has been well-defined. Under the Massachusetts Wage Act, a corporation's "president and treasurer . . . and any officers or agents having the management of such corporation" ("Managing Agents") have personal liability for wages that a corporation fails to pay to its employees. Beginning in 2008, the corporation's failure to pay wages when they were due exposed the corporation, and its Managing Agents, to the risk of not only having to pay the unpaid wages, but also, as a penalty, treble damages to the unpaid employees.

This risk of personal liability and enhanced damages has long been an important consideration for sophisticated corporations and their professional advisors. Particularly when a corporation has encountered financial difficulties, the statutory obligations to employees under the Massachusetts Wage Act, the potential for personal liability of the Managing Agents and the risk of treble damages have been key factors to consider—not just for the troubled corporation, but for its lenders and creditors, as well.

But what about a limited liability company ("LLC")? Unlike corporations, LLCs do not have shareholders. Instead, owners of an LLC are members, not shareholders, and hold membership interests, and not stock, in the LLC. Unlike a corporation, an LLC is not required to have a president or treasurer. Instead, an LLC is managed by a "managing member" or "manager."

The Massachusetts Wage Act is silent on whether managing members of an LLC have personal liability akin to the liability of a corporation's Managing Agents. Does the form of the enterprise matter, such that a corporation's Managing Agents have personal liability for unpaid wages, but an LLC's managing member has no such personal liability? Is an LLC sufficiently similar to a corporation that the courts should impose liability on an LLC's managing member? The existing case law on this vital subject has been vague at best and conflicting at worst.

On June 13, 2013, in Cook v. Patient Edu, LLC, the SJC put these questions to rest. The SJC took an expansive reading of (and arguably rewrote) the Massachusetts Wage Act, and held that a manager of an LLC who "controls, directs, and participates to a substantial degree in formulating and determining the financial policy of a business entity" may have personal liability under the Wage Act. This ruling clarifies a previously ambiguous area of Massachusetts law, and likely will inform negotiations among a troubled LLC, its managing members and their creditors. Creditors of financially troubled LLCs will likely come under greater pressure to make concessions necessary to ensure employees are paid timely and in full to avoid the adverse consequences of personal liability of potential treble damages arising from failure or delay in paying employees in full.

The facts of this case are all too familiar to businesses encountering cash-flow problems, such as startups and other emerging businesses. Mr. Cook filed an action for unpaid wages under the Massachusetts Wage Act and sought treble damages against (i) Cook's employer, Patient Edu, LLC, a Massachusetts limited liability company; and (ii) two managers of the LLC. The LLC managers successfully moved to dismiss the claim in the Superior Court, arguing that managers of an LLC were not individually liable under the Wage Act because the individual liability provision of the statute applied only to those employed by corporations, and not by LLCs. "The president and treasurer of a corporation and any officers or agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation within the meaning of this section." G.L. c. 149, § 148 (emphasis supplied). (It is important to note that when the provision of G.L. c. 149, § 148, making corporate officers individually liable for payment of wages, was added in 1932, the LLC did not exist as a form of business association.)

The SJC indicated that it was interpreting the language of the Wage Act "according to the intent of the Legislature," which was to protect wage earners. It opined that "[i]f a liberal, even if not literally exact, interpretation of certain words is necessary to accomplish the purpose indicated by the words as a whole, such interpretation is to be adopted rather than one which will defeat that purpose." To that end, the SJC worked around the literal language of the individual liability section of the Act applying to "corporations," and analyzed the beginning clause of the Act, which states that "[e]very person having employees in his service shall pay" (emphasis supplied) those employees their wages either weekly or biweekly (or on a less frequent basis in certain circumstances). The SJC held that because a manager or other officer or agent of an LLC, limited liability partnership or other limited liability business entity may be a "person having employees in his service," that person may be civilly or criminally liable for Wage Act violations if he "controls, directs, and participates to a substantial degree in formulating and determining policy" of the business entity.

There are at least three key takeaways from the Cook opinion for employers and legal counsel:

  1. Those advocating a narrow interpretation of Cook are likely to focus on the actual holding, which narrowly imposes liability only on LLC managers who "control[ ], direct[ ], and participate[ ] to a substantial degree in formulating and determining the financial policy" of the LLC. It may be challenging in larger entities to identify precisely which manager "controls, directs and participates to a substantial degree" both "in formulating and determining" the LLC's financial policies. The restrictive limiters (only managers who control, direct and participate to a substantial degree) may mean, as a practical matter, that very few individuals have meaningful risk of personal liability where an LLC fails to pay employees timely and in full.
  2. Those advocating a broad interpretation of Cook are likely to focus on two aspects of the opinion. First, notwithstanding that the Massachusetts Wage Act nowhere mentions LLCs, the SJC nevertheless ignored the plain meaning of the statute and instead relied on the perceived legislative intent (more on this below) to extend the statute's imposition to certain managers of an LLC. Second, the SJC's broad interpretation of the Massachusetts Wage Act appears to suggest that it applies to hold individuals liable where individuals involved in other business entities [such as limited liability partnerships ("LLP"), joint ventures, business trusts and loan participations and syndications, to name a few] also have personal liability for unpaid wages. The SJC's careful wording—that one who "controls, directs, and participates to a substantial degree in formulating and determining the financial policy of a business entity—by its terms is not limited solely to managers of LLCs. Further case law will develop the breadth and limitations of the SJC's words.
  3. In rejecting a conclusion based upon the plain meaning of the Massachusetts Wage Act, the SJC pointedly rejected the method of statutory interpretation favored by the current members of the United States Supreme Court. That Court in recent times has emphasized, repeatedly and emphatically, that statutory interpretation that rejects the actual language of a statute in favor of the presumed legislative intent is erroneous. It will be fascinating to observe how the starkly differing approaches of the SJC (which generally has the final say in the interpretation of Massachusetts statutes) and the United States Supreme Court will play out when a Massachusetts statute becomes the subject of a Supreme Court case.

Therefore, like their corporation counterparts, managers and members of limited liability business entities should ensure that all employee wages (to include commissions that are due and payable and vacation pay) are paid according to the time lines set forth in the Wage Act. Failure to do so may result in individual liability for mandatory triple damages under the Wage Act. This cautionary reminder applies equally to managers of limited liability business entities contemplating insolvency issues, including bankruptcy. LLC managers and officers of other limited liability business entities who control, direct and participate to a substantial degree in formulating and determining policy of the business entity will remain liable for Wage Act violations even after the employer files for bankruptcy.

Another Recent Appeals Court Ruling

Although the Wage Act is silent on the issue of whether it applies to out-of-state employees, the Appeals Court holds that the Act applies to out-of-state employees of Massachusetts employers where Massachusetts had the most significant relationship to the employee's employment.

On June 19, 2013, the Appeals Court added another layer of complication for Massachusetts employers striving to be compliant with the Wage Act. In Dow v. Casale, the Appeals Court, using a multifactorial choice-of-law analysis, held that a mobile salesperson who resided in Florida was entitled to the protections of the Wage Act.

The Appeals Court's choice-of-law analysis was quite fact-specific and relied on the following factors:

  • The employer was a corporation with a sole place of business in Massachusetts.
  • The chief executive officer, also named individually in the claim, was a Massachusetts resident.
  • The customers which the sales employee acquired entered into business with the employer/corporation in Massachusetts.
  • The employee's business cards identified the employer/corporation's Massachusetts contact information as that of the employee.
  • Paychecks were issued from Massachusetts.
  • The employee came to Massachusetts on business multiple times each year.
  • The employer communicated with the employee from Massachusetts via email and telephone.
  • The employment agreement between the employee and employer provided that it was governed by and interpreted under the law of Massachusetts.

Accordingly, Massachusetts employers should be aware that the protections of the Wage Act may, depending on the circumstances, protect employees working outside of Massachusetts. As such, employment practices related to such employees should be reviewed prudently to ensure compliance with Massachusetts law.

If you have any questions about this Alert or would like more information, please contact Bronwyn L. Roberts, Jeffrey D. Sternklar, any member of the Employment, Labor, Benefits and Immigration Practice Group, any member of the Business Reorganization and Financial Restructuring Practice Group or the attorney in the firm with whom you are regularly in contact.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions