Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
New York has amended its Limited Liability Company Law (LLC Law) to hold the top 10 members of a foreign limited liability company liable for wages owed as a result of work performed within New York State, effective February 10, 2020. Previously, the law did not provide that out-of-state LLC members could be liable for wages owed. The amendment (A453) expands LLC Law § 609(c) to expressly hold members of out-of-state LLCs personally liable for “all debts, wages or salaries due and owing” for services performed within the state.
Under the LLC Law, the top 10 largest members are determined by the percentage of each member’s ownership interest at the start of the period when unpaid services were performed. Those members can be held jointly and severally liable for debts stemming from unpaid services. However, if they pay more than their pro rata share of debts owed they may seek contributions from other members with a separate lawsuit. The LLC Law requires workers claiming missing wages to provide written notice to members that they intend to hold them liable under § 609(c), within 180 days after termination of services. The amendment does not change these procedural provisions but merely clarifies that members of both New York and foreign LLCs will be treated the same under the LLC Law. The nearly identical New York Business Corporation Law (§ 630) already provides for shareholder liability for both foreign and domestic corporations for debts, wages, or salaries due for services performed within the state.
In a December 12, 2019 announcement, Governor Cuomo explained that the amended legislation would close “a loophole that for too long allowed certain companies to hide behind their complicated corporate structure to avoid wage theft laws currently on the books.” LLCs with operations in New York need to be aware of the amended provisions and make structural or financial changes as appropriate. Companies should review their wage and hour practices and procedures to ensure full compliance with all state and local laws.