Comment by eds | Hacker News Reader

Comment by eds | Hacker News Reader

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No. Your article is from 2002 and, at the end, refers to a case then before the Colorado Supreme Court. Here's the outcome (2003):

"After finding a lack of precedent from the Colorado Supreme Court construing individual officer liability under the Wage Claim Act, we certified the following determinative questions...

1. Are officers of a now-bankrupt corporation individually liable for the wages of the corporation's former employees under the Colorado Wage Claim Act? ...

2. If so, are all officers individually liable due to mere status as officers or must the officers have been high ranking or active decision-makers? ...

The Colorado Supreme Court then answered the first reframed question, holding "under Colorado's Wage Claim Act, the officers and agents of a corporation are not jointly and severally liable for payment of employee wages and other compensation the corporation owes to its employees under the employment contract and the Colorado Wage Claim Act." Id. (emphasis added). This response clearly answers the first question certified by this court and moots our second question. We REVERSE the district court's summary judgment order..."

http://ca10.washburnlaw.edu/cases/2003/02/00-1324.htm

More specifically:

Citing general treatises and texts on corporate law, the majority sets out general precepts like “insulation from individual liability is an inherent purpose of incorporation; only extraordinary circumstances justify disregarding the corporate entity to impose personal liability . . . a corporate officer is not the employer responsible for creating the contractual employment relationship and is not personally responsible for a breach of that relationship . . .” Id. The court rejected the employees' argument, viewing it as making every corporate officer a surety (guarantor) for the corporate obligations. Thus, the court found, that under general principles of corporate law, the officers of Nations Way were insulated from liability by the general principles of corporate and agency law.

Thanks for the update. I lived in CO in the late 1990s and actually had an employer take a while to pay me, which is why I incorrectly assumed that the law was the same, when it has in fact changed.

It is actually more difficult than I thought it would be to locate an accurate list of which states have which positions in this matter.

It seems that courts in many states are starting to lean against officers being responsible for unpaid wages.

What's the state where you think officers are responsible for the contractual obligations of the corporations that employ them?

You are mis-interpreting my point: it is not officers being responsible for contractual obligations in general, it is (or at least was) an exception carved out for wages owed employees.

There seems to be a lot of debate over when/if an officer can become an "employer" as defined in the law.

Here are some URLs that cover what I am talking about:

WA: http://www.turnaround.org/Publications/Articles.aspx?objectI...

PDF with more discussion of the issue, includes discussion of the Federal FLSA and the case of CA: http://web.omm.com/files/upload/D&O%20Liability-WARN%20A...

NY (10 largest shareholders of non-public company held liable): http://www.eminutesonline.com/why-in-the-world-would-anyone-...

Federal law (FLSA): http://www.klehr.com/?t=11&la=690&format=xml

Since the company that is not paying is often headed for bankruptcy, these situations often spill over to bankruptcy court, where the judge has a great amount of leeway to determine who gets paid and when.

I read your first example (CA), which states:

In Reynolds v. Bement, 36 Cal. 4th 1075 (2005), the California Supreme Court observed that, “[U]nder the common law, corporate agents acting within the scope of their agency are not personally liable for the corporate employer‟s failure to pay its employees‟ wages.” Id. at 1087.

Now I'm finished reading, and, hopefully, talking about this. Like I said, it's extremely unlikely that the owners, investors, or officers of a VC-funded company would be on the hook for salaries after the company went bankrupt. That's a good thing. Surprisingly few things need to go wrong for a company to BK. Who'd start a company if that event meant they'd lose their house?

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