Shareholder of Massachusetts LLC Permitted to Bring Claim Under Massachusetts Wage Act

The Massachusetts Wage Act provides important protections to employees when their employer does not pay them wages they are owed. A recent Massachusetts Superior Court opinion addresses the narrow (but important) issue as to when an owner of a company can bring a wage act claim (as an employee) against that entity.

Can an owner of a massachusetts llc bring a claim under the massachusetts wage Act?

James Raleigh performed services for Lighthouse Life Science Partners, LLC (“Lighthouse”), classified as an independent contractor. Mr. Raleigh also owned 10% of Lighthouse. That relationship deteriorated (usually the case when there’s a lawsuit) and Mr. Raleigh filed suit, alleging that he was misclassified as an independent contractor and that Lighthouse violated the Wage Act by not paying him all wages he was owed. Lighthouse disagreed, arguing that Mr. Raleigh’s 10% ownership stake meant he could not bring a claim under the Wage Act as an employee.

Juddge Elizabeth Dunigan of the Massachusetts Superior Court disagreed, relying on two Supreme Judicial Court opinions that explained that an individual is an employer for purposes of the Wage Act only if they “have assumed and accepted as individuals significant management responsibilities over the corporation similar to those performed by a corporate president or treasurer, particularly in regard to the control of finances or payment of wages” or are someone “who controls, directs, and participates to a substantial degree in formulating and determining the financial policy of a business entity.” Segal v. Genitrix, LLC, 478 Mass. 551 (2017); Cook v. Patient EDU, LLC, 465 Mass. 548 (2013).

According to Judge Dunigan, the record did not contain sufficient facts to establish that Mr. Raleigh wielded the type of control described in Segal and Cook. She acknowledged that Mr. Raleigh was a minority owner with limited voting rights, but held those facts were overwhelmed by the reality that he had no day-to-day authority over Lighthouse’s daily operations. As a result, we was not an employer and could purse a claim for unpaid wages under the Wage Act.

Raleigh v. Lighthouse is an important case because it provides guidance as to when an individual can and cannot bring a claim under the Massachusetts Wage Act. We don’t confront this issue often, but going forward, when we do, Raleigh will prove to be a helpful roadmap.