Individual Liability for Corporate Acts in New Hampshire – Personal Liability for Unpaid Wages

If you are an employee whose wages are overdue or a family member of friend are an officer of a corporation in New Hampshire or Massachusetts, you should be aware of your potential personal responsibility and liability for debts that the company may owe.

Generally, the corporate form protects officers and directors of a corporation from being held personally responsible for corporate acts.  This means, for example, that those with claims against the corporation, must try to recover against the corporation, and the corporation only, for the claim.  In the case of unpaid wages, however, the law in both New Hampshire and Massachusetts allows an individual who has unpaid wages to bring claims directly against individual officers and directors who may be personally liable for these amounts.

New Hampshire law, RSA 275:42, V, provides that “the officers of a corporation and any agents having the management of such corporation who knowingly permit the corporation to violate the provisions of RSA 275:43, 44 (the wage statutes) shall be deemed to be the employers of the employees of the corporation.”

A determination of whether an officer or agent “knowingly permitted” the corporation to violate New Hampshire’s laws concerning the payment of wages will be fact specific to each case. However, the Supreme Court has analyzed the following factual considerations in its decisions:

• Whether the individual had responsibility for the corporation’s day-to-day operations
• Whether the individual knew that the corporation could not meet its payroll obligations
• Whether the individual knew of corporate assets that could have been used by the corporation to satisfy its payroll obligations
• Whether the individual directed the corporation to repay loans to the individual rather than use such funds to meet the corporation’s payroll obligations
• Whether the individual was aware of the terms of any written contract setting forth the corporation’s contractual obligations to pay compensation to an employee

See Richmond v. Hutchinson, 149 NH 749 (2003).

Massachusetts law is even stronger in favor of personal liability.  It provides, by statute M.G.L. C. 149 §148, that the “The president and treasurer of a corporation and any officers or agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation within the meaning of this section.”  Under this statute a “President and Treasurer” are liable for these debts.  It applies to those “Officers or agents” who “control, direct, and participate to a substantial degree in formulating and determining policy of a corporation.”  Wiedmann v. The Bradford Group, Inc. 448 Mass. 698 (2005).

Moreover, an individual who proves that he or she was not paid wages owed is entitled in New Hampshire to liquidated damages, in amount equal to the unpaid wages, attorneys’ fees, and costs.  In Massachusetts, again, the law is stronger in favor of the employee.  It provides that such an employee shall be paid treble (meaning three times) the total amount of wages owed, plus attorney fees, and costs.

If you are an employee who is owed unpaid wages, and require legal assistance, contact us for a free employment law consultation.  As always, if we can help, we will.  If we cannot, we will do our best to direct you to someone who can.