Court Rules on Liability of Individual Corporate Officers in New Jersey Wage Lawsuit

Business laws in New Jersey and around the country protect corporate directors and officers from personal liability for most actions undertaken by the business. Courts will only “pierce the corporate veil” and allow suits against individual directors or officers in limited situations, such as illegal conduct by those individuals. In the context of employment, some statutes allow claims against individuals, while others do not. A putative class action alleging violations of a New Jersey wage law sought to hold individual directors liable along with the employers. A federal court, while allowing the lawsuit to proceed against the business entity defendants, ruled that New Jersey’s Prevailing Wage Act (PWA) “does not impute personal liability.” Palmisano, et al v. Crowdergulf, LLC, et al, No. 3:17-cv-09371, mem. order at 1 (D.N.J., May 29, 2018).

The PWA “establish[es] a prevailing wage level for workmen engaged in public works.” N.J. Rev. Stat. § 34:11-56.25. “Public works,” as defined by the statute, includes most construction and maintenance work performed under government contract, or performed on government-owned property. Id. at § 34:11-56.26(5). The “prevailing wage” is the rate paid in accordance with collective bargaining agreements in force in the geographic area of the public work. Id. at § 34:11-56.26(9). Workers must be paid, at minimum, the current prevailing wage, which may vary based on location, type of work, and other factors. If an employer pays a worker less than the prevailing wage rate, the worker may file a private cause of action to recover amounts owed to them. Id. at § 34:11-56.40.

The defendants in the Palmisano case include corporations and limited liability companies that entered into contracts with the State of New Jersey for cleanup work after Hurricane Sandy. The hurricane caused extensive damage to the mid-Atlantic region in late October 2012. It made landfall in New Jersey on October 29, killing thirty-seven people, damaging or destroying nearly 350,000 homes, and causing an estimated $30 billion in damage. The state entered into contracts with companies from all over the country to repair the damage.

According to the plaintiffs’ complaint, one of the defendants contracted to perform “waterway debris removal services.” Palmisano, complaint at 3 (Oct. 25, 2017). Other defendants allegedly worked as subcontractors under this contract. They employed the plaintiffs to operate tug boats and perform other services required by the contract. The plaintiffs allege that they regularly worked more than forty hours per week, but were not paid overtime as required by the PWA.

In addition to the employer business entities, the plaintiffs sued individual officers of the general contractor defendant. These individuals moved to dismiss the claims against them under Rule 12(b)(6), claiming that the PWA did not allow suit against corporate officers. The court agreed, noting that, unlike other New Jersey wage laws, see e.g. N.J. Rev. Stat. § 34:11-4.1, the PWA only applies to individuals or businesses that are directly subject to government contracts. This, the court ruled, does not include corporate officers. The lawsuit is still pending against the business entity defendants.

The employment attorneys at the Resnick Law Group represent employees in New Jersey and New York in claims for wage and hour law violations and other unlawful employment practices. To schedule a confidential consultation to see how we can help you, please contact us today online, at 973-781-1204, or at 646-867-7997.

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