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Effective February 10, 2020, the top ten members of an out-of-state limited liability company ("LLC") can be held personally liable for violations of New York's wage and hour laws. The bill, signed on December 12 by Governor Andrew Cuomo, amends New York's LLC Law which previously only extended individual liability for unpaid wages to owners of domestic LLCs (text available here).
When the law takes effect, the top ten members of all LLCs, both foreign and domestic, as well as other privately held corporations, can be held personally liable for unpaid wages for work performed in New York. In determining who the top ten members are, the law provides that it is calculated based on the percentage of ownership of each member during the time period the violations occurred. In order for an employee to seek payment from individual members, there must first be a judgment against the LLC itself that has been returned unsatisfied. The employee must also provide the member they are attempting to hold individually liable advanced written notice of their intention.
Pursuant to the law, the ten members are both "jointly and severally" liable for the unsatisfied judgment. This means that a judgment creditor can seek payment of the entire amount from one member. However, any member who has paid more than his or her pro rata share may seek contribution from the other members in a separate lawsuit.
Given this potentially new exposure to liability, owners of foreign LLCs with employees in the state of New York should review their pay practices to ensure compliance with local wage and hour laws. We will continue monitoring developments in this area and provide updates where relevant.
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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