Relates to the liability of members of limited liability companies for wages due to laborers, servants or employees.
TITLE OF BILL: An act to amend the limited liability company law, in relation to the liability of members for wages due to laborers, servants or employees
PURPOSE: To impose limited liability upon the top ten members of a Limited Liability Company for wages due employees; comparable to the liability imposed by Business Corporation Law Section 630 (Liability of shareholders for wages due to laborers, servants or employees) for personal services rendered by employees, upon the top ten members of a Limited Liability Company.
SUMMARY OF PROVISIONS: Section one creates a new sub-section (c) under the existing section 609 of the Limited Liability Company Law (Liability of members, managers and agents), imposing liability upon the top ten members of a Limited Liability Company for personal services rendered by its employees, upon the return of an execution unsatisfied against the Limited Liability Company upon a judgment recovered against it for such services.
Section two is the effective date.
JUSTIFICATION: Currently, in recognition of the fact that employee wages are significantly different from other debt obligations of a business, New York's Business Corporation Law Section 630 imposes liability upon a corporation's top ten shareholders for unpaid wages and personal services rendered by its employees.
In order to reinforce the public policy that earned wages and employee compensations should take a priority position against other company debts regardless of the technical form of the employer entity, this bill mirrors the liability imposed by BCL section 630, in the Limited Liability Company Law, as it serves no legitimate public purpose to continue shielding the owners of such a business entity against wages earned by its employees. All other limited liability protections remain unaffected.
Any action to enforce such liability against a member must be based upon a judgment first obtained against the employer company which failed to pay wages, the execution of which has been unsuccessful, which would normally leave the unpaid worker without recourse. This bill would provide the successful plaintiff the ability to proceed against the company's top ten owners in the event that the company has been made insolvent or otherwise dissipated its assets.
LEGISLATIVE HISTORY: This is a new bill.
FISCAL IMPLICATIONS: None to the state.
EFFECTIVE DATE: This act shall take effect immediately.
STATE OF NEW YORK ________________________________________________________________________ 6912 IN SENATE March 28, 2014 ___________Introduced by Sen. MARTINS -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions AN ACT to amend the limited liability company law, in relation to the liability of members for wages due to laborers, servants or employees THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The limited liability company law is amended by adding a new section 612 to read as follows: S 612. LIABILITY OF MEMBERS FOR WAGES DUE TO LABORERS, SERVANTS OR EMPLOYEES. (A) NOTWITHSTANDING THE PROVISIONS OF SECTION SIX HUNDRED NINE OF THIS ARTICLE, THE TEN LARGEST MEMBERS OF A LIMITED LIABILITY COMPANY, AS DETERMINED BY THE FAIR VALUE OF THEIR BENEFICIAL INTEREST AS OF THE BEGINNING OF THE PERIOD DURING WHICH THE UNPAID SERVICES REFERRED TO IN THIS SECTION ARE PERFORMED, SHALL JOINTLY AND SEVERALLY BE PERSONALLY LIABLE FOR ALL DEBTS, WAGES OR SALARIES DUE AND OWING TO ANY OF ITS LABORERS, SERVANTS OR EMPLOYEES OTHER THAN CONTRACTORS, FOR SERVICES PERFORMED BY THEM FOR SUCH LIMITED LIABILITY COMPANY. BEFORE SUCH LABORER, SERVANT OR EMPLOYEE SHALL CHARGE SUCH MEMBER FOR SUCH SERVICES, HE OR SHE SHALL GIVE NOTICE IN WRITING TO SUCH MEMBER THAT HE OR SHE INTENDS TO HOLD HIM OR HER LIABLE UNDER THIS SECTION. SUCH NOTICE SHALL BE GIVEN WITHIN ONE HUNDRED EIGHTY DAYS AFTER TERMINATION OF SUCH SERVICES, EXCEPT THAT IF, WITHIN SUCH PERIOD, THE LABORER, SERVANT OR EMPLOYEE DEMANDS AN EXAMINATION OF THE RECORDS UNDER SUBDIVISION (B) OF SECTION ONE THOUSAND ONE HUNDRED TWO OF THIS CHAPTER, SUCH NOTICE MAY BE GIVEN WITHIN SIXTY DAYS AFTER HE OR SHE HAS BEEN GIVEN THE OPPORTUNITY TO EXAMINE THE RECORDS. AN ACTION TO ENFORCE SUCH LIABILITY SHALL BE COMMENCED WITHIN NINETY DAYS AFTER THE RETURN OF AN EXECUTION UNSATIS- FIED AGAINST THE LIMITED LIABILITY COMPANY UPON A JUDGMENT RECOVERED AGAINST IT FOR SUCH SERVICES. (B) FOR THE PURPOSES OF THIS SECTION, WAGES OR SALARIES SHALL MEAN ALL COMPENSATION AND BENEFITS PAYABLE BY AN EMPLOYER TO OR FOR THE ACCOUNT OF THE EMPLOYEE FOR PERSONAL SERVICES RENDERED BY SUCH EMPLOYEE. THESE SHALL SPECIFICALLY INCLUDE BUT NOT LIMITED TO SALARIES, OVERTIME, VACA-EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD14577-01-4 S. 6912 2
TION, HOLIDAY AND SEVERANCE PAY; EMPLOYER CONTRIBUTIONS TO OR PAYMENTS OF INSURANCE OR WELFARE BENEFITS; EMPLOYER CONTRIBUTIONS TO PENSION OR ANNUITY FUNDS; AND ANY OTHER MONEYS PROPERLY DUE OR PAYABLE FOR SERVICES RENDERED BY SUCH EMPLOYEE. (C) A MEMBER WHO HAS PAID MORE THAN HIS OR HER PRO RATA SHARE UNDER THIS SECTION SHALL BE ENTITLED TO CONTRIBUTION PRO RATA FROM THE OTHER MEMBERS LIABLE UNDER THIS SECTION WITH RESPECT TO THE EXCESS SO PAID, OVER AND ABOVE HIS OR HER PRO RATA SHARE, AND MAY SUE THEM JOINTLY OR SEVERALLY OR ANY NUMBER OF THEM TO RECOVER THE AMOUNT DUE FROM THEM. SUCH RECOVERY MAY BE HAD IN A SEPARATE ACTION. AS USED IN THIS SUBDIVI- SION, "PRO RATA" MEANS IN PROPORTION TO BENEFICIAL SHARE INTEREST. BEFORE A MEMBER MAY CLAIM CONTRIBUTION FROM OTHER MEMBERS UNDER THIS SUBDIVISION, SUCH MEMBER SHALL, UNLESS HE OR SHE HAS BEEN GIVEN NOTICE BY A LABORER, SERVANT OR EMPLOYEE UNDER SUBDIVISION (A) OF THIS SECTION, GIVE THEM NOTICE IN WRITING THAT HE OR SHE INTENDS TO HOLD THEM SO LIABLE TO HIM OR HER. SUCH NOTICE SHALL BE GIVEN BY HIM OR HER WITHIN TWENTY DAYS AFTER THE DATE THAT NOTICE WAS GIVEN TO HIM OR HER BY A LABORER, SERVANT OR EMPLOYEE UNDER SUBDIVISION (A) OF THIS SECTION. S 2. This act shall take effect immediately.