United States: Massachusetts Appeals Court Declines To Rule On Non-Profit Board Member Immunity Under Wage Act

In a highly technical, twenty-page opinion, a three-judge panel of the Massachusetts Appeals Court declined to answer the question of whether volunteer members of boards of directors of nonprofits can be held personally liable to workers for unpaid wages under the Massachusetts Wage Act. With the issue unresolved, for the time being, volunteer board members will continue to face some uncertainty about their possible personal liability.

The case, Lynch v. Roxbury Comprehensive Community Health Center, Inc., No. 18-P-179 (Nov. 30, 2018) involved a nonprofit that was struggling financially. The chair of the nonprofit's volunteer board of directors—who was also holding himself out as the organization's "president" and "acting CEO"—decided to use the entity's limited funds to pay vendors instead of paying wages. Employees brought a class action lawsuit under the Massachusetts Wage Act, seeking recovery from the nonprofit, as well as from the board chair individually. Under the Massachusetts Wage Act, the president and treasurer of a business entity, and any officers or agents managing the entity, can be held personally liable for the entity's failure to pay wages. The board chair sought to have the case against him dismissed on grounds that he was immune under state and federal laws protecting volunteers.

The state law relied upon by the board chair, G.L. c. 231, sec. 85W, provides that, with certain exceptions, anyone serving without compensation as an officer, director or trustee of a nonprofit charitable organization cannot be held liable for civil damages as a result of acts or omissions relating to performance of duties to the nonprofit. Similarly, the federal Volunteer Protection Act, 42 U.S.C. sec. 14503, provides that, with certain exceptions, volunteers cannot be held liable for harm caused by acts or omissions within the scope of the volunteer's responsibilities to a nonprofit.

The Appeals Court first drew a distinction between statutes that offer absolute immunity from being sued and statutes that offer qualified immunity from liability subject to various exceptions. The Appeals Court held that neither of the statutes relied on by the board chair offer volunteer nonprofit board members absolute immunity from Wage Act lawsuits, and that, at best, the statutes might only provide qualified immunity from liability. However, the Appeals Court did not answer that question, and instead raised the issue of whether these immunity statues even applied to Wage Act claims at all. The Appeals Court left these matters open for another day and another case.

In the meantime, it is worth noting that in Segal v. Genitrix, LLC, 478 Mass. 551 (2017), the Massachusetts Supreme Judicial Court held, in the for-profit context, that board members will only be personally liable for Wage Act violations if they have accepted as individuals significant management responsibilities over the entity similar to those performed by a president or treasurer, particularly in regard to the control of finances or payment of wages. The volunteer nonprofit director in this case was acting as the entity's president and CEO. The question left unanswered by the Appeals Court is whether such a volunteer director, who could otherwise be found personally liable under the Wage Act because he was managing the entity, would be immune because he was a volunteer. Under the Segal case, volunteer nonprofit directors who are not actively engaged in financial management activities similar to those that would be performed by a president or treasurer, likely would not be personally liable under the Wage Act, regardless of whether statutory immunity applies.

Since every situation is unique, nonprofit boards should consider consulting with counsel to determine their risk of exposure under the Wage Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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