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Mulford v. Computer Leasing, Inc.

BER-L-7616-95 (N.J. Super. Law Div. Ber. Cty. 1999) (Unpublished)

CORPORATIONS; OFFICERS; LIABILITY; EMPLOYER-EMPLOYEE—Under the New Jersey Wage and Hour Law, corporate officers with management responsibility may be personally liable for unpaid wages.

A commercial salesperson sued a corporate employer, the corporation’s two shareholders, directors, and officers, and a third individual who was a director and officer of the corporation, but not a shareholder. The Court found that the corporation owed a substantial sales commission to the salesperson and that the three individual defendants were personally liable for any portion of the commission that the corporation did not pay. The corporation was a New York corporation doing business in New Jersey where the salesperson was based. In an earlier opinion, the Court held that sec. 630 of the New York Business Corporation Law applied, placing personal liability on shareholders of the corporation for employees’ compensation. In addition, the Court found that N.J.S. 34:11-57 thru -67 (the wage collection provisions of the Wage and Hour Law) also applied. The company’s employees, such as the commissioned salesperson, were based in and worked from New Jersey. They were also residents of the state. These circumstances and the strong public and statutory policy of New Jersey in favor of protecting payment of employees’ duly earned compensation, led the Court to apply New Jersey law. In its view, “New Jersey has the paramount interest in enforcing its law in this case.” The New Jersey statute imposes personal liability on the managing officers of a corporation by deeming them to be employers of the corporation’s employee. The Wage and Hour Law applies to wages, including compensation paid on a “commission basis.” In addition, the Court concluded that the statute was intended to allow a private right of action for a violation, both against the employer and against its managing officers for unpaid wages. N.J.S. 34:11-7 defines “employer” as any “corporation employing another for hire.” But, to the Court, that definition was deemed to have been supplanted by the subsequent enactment of N.J.S. 34:11-4.1. That later statute defined an “employer” as “officers of a corporation and any agents having the management of such corporation” as well as the corporation itself. According to the Court, subsequently enacted statutory definitions, which are plainly in conflict with earlier statutory definitions, supercede the earlier definitions, particularly where, as here, the later definition is intended to effect a remedial purpose. The third individual was a director and officer of the corporation, but not a shareholder. He testified that, in effect, he had abandoned his duty as director, because his co-directors (the two shareholders) had advised him that he was not to function as a director. Even though, as treasurer, he was in charge of the disbursement of funds for the corporation, including the payment of salespersons’ commissions, he claimed that he could only make a commission payment when directed by the two shareholders and, even where such payment had been authorized in writing by them, he had to check with them to make sure it should be paid. The Court ruled that a director could not abandon or abdicate his or her duty with impunity, especially when it relates to employees compensation as required and regulated by statute. Directors are required to discharge their duties in good faith and act as ordinarily prudent persons would under similar circumstances. “Dummy, figurehead or accommodation directors are anachronisms with no place in New Jersey law. Thus, all directors are responsible for managing the business and affairs of the corporation.” Consequently, the non-shareholder, as a director, was as responsible as the shareholders for managing the business affairs of the corporation, making that director as personally liable as the shareholder-directors.

New Jersey law requires every employer to pay the full amount of wages due to its employees at least twice per month, with certain exceptions. Those exceptions require payment in full at least once each calendar month, on a regularly established schedule, to certain classes of employees. Even if the payment of commissions on a quarterly basis did not violate New Jersey law, the Court found that the corporation and its principal officers having a management authority violated New Jersey law by failing to pay commissions plainly due the salesperson before he was fired, and in any event, soon after firing. New Jersey law further provides that when an employee is discharged, the employer must pay the employee all undisputed wages not later than the regular pay date for the pay period during which the employee’s termination took place. Additionally, under New Jersey law, this particular commission salesperson should have been paid even before being fired. In conclusion, the Court felt that it was not necessary to determine whether the individual corporate directors were liable under the New York law or whether the corporate veil should have been pierced to impose personal liability because, in its view, the New Jersey Wage and Hour Law, by itself, required that the three directors and officers be personally liable to the commission salesperson, jointly and severely.


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