No Individual Liability for Board Members and Investors Under MA Wage Act

As I have written before, the Massachusetts Weekly Payment of Wages Act obligates employers to pay all earned wages to employees in a timely fashion. The Wage Act also specifies that the “president and treasurer of a corporation and any officers or agents having the management of such corporation” are personally liable for violations. In Segal v. Genitrix, LLC, et al., the Massachusetts Supreme Judicial Court, interpreting the phrase “agent having the management of the corporation” for the first time since it was added to the Wage Act in 1935, ruled that, as long as board members and investors acted in their ordinary capacities, they were not such agents and could not personally be liable for violations.

In Segal, the former president and chief executive officer of Genitrix, asserted that two former board members of the company, H. Fisk Johnson III and Stephen Rose, should be individually liable for wages that Segal claimed he was owed for services he performed for the company. Neither Johnson nor Rose was the president, treasurer, or any other officer of Genitrix. The Appeals Court, relying on Cook v. Patient Edu, ruled that Segal might have viable claims against Johnson and Rose, notwithstanding that neither was an officer, because Rose and Johnson were making decisions on the financial policies of the company when they were directing how investment monies were to be used by Genitrix. Indeed, at trial, a jury had found exactly that.

More than three years later, however, the SJC ruled that neither Johnson nor Rose had any individual liability under the Wage Act, because neither were the president, treasurer, or other officer of Genitrix or an “agent having the management of the corporation.” As an initial matter, the SJC stated:

If personal liability is to be imposed on these defendants, who served as directors and investors, it must be because they meet one of the express categories of corporate actors identified by the Legislators: the president, treasurer, or officer or agents having the management of the company. Such officer or agents have assumed and accepted individual responsibility for the management of the corporation, justifying the imposition of personal liability for Wage Act violations.

Based on the facts of the case, the SJC determined that neither Johnson nor Rose were ever appointed, or had authority to act, as agents of Genitrix, and, as investors, they were expressly forbidden from acting as agents pursuant to applicable investor documents. The Court also found that none of Johnson’s or Rose’s activities indicated that either had management of the corporation. In fact, based on the evidence, including Segal’s own testimony, the day-to-day operations of the company, including the control over payroll, fell solely upon Segal.

For in-house attorneys, the lesson to be learned here is that clarity (in the appointment of, and in the authority conferred upon, officers and agents, and in the roles of board members) regarding day-to-day operations and decisions concerning pay, in particular, will help to set expectations and understandings of whether certain individuals have “assumed and accepted individual responsibility for the management of the corporation, justifying the imposition of personal liability for Wage Act violations.”