New Jersey Law Says Officers May be Personally Liable For Unpaid Wages

By Eric B. Meyer

Want another reason not to enter into a long-term contract with an employee?

Most employment arrangements in the United States are at-will. That is, the employee may be fired (or may quit) at any time for any reason.

Conversely, a term employment agreement is for a specific period of time (usually a number of years) and includes a promise to pay an employee compensation over that entire period. Some of these contracts include performance milestones that could void the contract if not satisfied. Others are guaranteed and not dependent upon employee performance.

Why you should avoid employee contracts

The New Jersey Wage Payment Law requires employers to pay wages to employees when due. For purposes of the obligation to pay wages, the officers of a corporation who are responsible for its management, are to be treated as “employers.”

Why does this matter? Because if the business goes belly up or otherwise doesn’t pay employee wages when due, then the officers can be held personally liable.

Article Continues Below

That is precisely what the New Jersey Superior Court, Appellate Division, reaffirmed last week — without taking any pot-shots at Philadelphia athletes who have gone bust — in this decision, where the 10-year employment agreement at issue specified that the plaintiff would be “entitled to receive her base salary without regard to her performance for any targets, sales goals or achievements.”

The lesson here for employers: Don’t enter into that contract. And if you are inclined to enter into a term agreement with an employee, leave yourself some outs based on performance, company options, or otherwise.

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.

You know that scientist in the action movie who has all the right answers if only the government would just pay attention? Eric B. Meyer, Esq. gets companies HR-compliant before the action sequence. Serving clients nationwide, Eric is a Partner at FisherBroyles, LLP, which is the largest full-service, cloud-based law firm in the world, with approximately 210 attorneys in 21 offices nationwide. Eric is also a volunteer EEOC mediator, a paid private mediator, and publisher of The Employer Handbook (www.TheEmployerHandbook.com), which is pretty much the best employment law blog ever. That, and he's been quoted in the British tabloids. #Bucketlist.

Topics

Leave a Comment

Your email address will not be published. Required fields are marked *