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Where A Labor Law Claim Exists Under the NY Statute, There Also Exists Personal Liability
11/13/2016
Where A Labor Law Claim Exists Under the NY Statute, There Also Exists Personal Liability

The law is strongly opposed to holding a corporate officer liable for debts of the corporation. At first, this law was extended to a corporate debt for unpaid wages since the Labor Law statute did not impose personal liability on a shareholder or officer. Stoganovic v. Dinolfo, 92 A.D.2d 729, 730 [1983] (aff’d. 61 N.Y.2d 812 [1984]). NY Business Corporation Law §630 had provided a strict mechanism for holding shareholders of nonpublic corporations liable for unpaid wages. Usually, courts will not expand the remedy provided by the Legislature, since there is “an irrefutable inference” that in any law enacted by the Legislature “what is omitted or not included was intended to be omitted and excluded.” Matter of Petersen v Incorporated Vil. of Saltaire, 77 A.D.3d 954, Second Dept. [2010]. That has completely changed. Now, a corporate officer can be held personally liable for a Labor Law violation. The courts have held that an individual acting on behalf of the corporation can be held personally liable for a wage claim if he or she had the power to hire and fire employees, supervised and controlled the conditions of employment, and determined the rates and methods of payment. Flannigan v. Vulcan Power Group, 642 Fed. Appx. 46, CA2 [2016], or controlled employees' work schedules, kept employment records, and approved any vacations. Bonito v Avalon Partners, Inc., 106 A.D.3d 625, 626, First Dept. [2013]. The requirements for pleading a claim against the corporate officer are now quite relaxed. Examination of the complaint in Cohen v Finz & Finz, P.C., 131 A.D.3d 666, 667, Second Dept. [2015] showed that general, nonspecific allegations are enough. In that case, the complaint only stated that the officer “owned, operated and/or controlled the day to day operations and management, [and] exercised power over personnel and payroll decision, *** including wages and working conditions.” Under this standard, it is hard to imagine a Labor Law claim existing without the ability to allege someone’s personal liability. Corporate officers were never immune from personal liability for “conversion,” the civil law term for theft. It was held that an improper deduction from wages was a conversion. Lynch v City of New York, 108 A.D.3d 94, 101, First Dept. [2013]. Essentially, the courts have come around to deciding that the officers of the corporation should act as guarantors of the payment of wages. Sasso v Millbook Enterprises, 108 Misc 2d 562. Even if the corporation or LLC is out of business or judgment proof the contingent fee attorney now has as an additional target the former officers.

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