Personal Liability for Unpaid Wages

The South Carolina Payment of Wages Act requires employers to pay all wages owed to employees in full and in a timely fashion.  The Act also makes employers operating an LLC or corporation personally liable for unpaid wages to employees, which can create far-reaching ramifications for business owners in South Carolina.

Typically, business owners have some protection from personal liability provided by the “corporate shield” of an LLC or corporation.  This is not always the case though for unpaid wage claims.  The Act defines “employer” as “every person, firm, partnership, association, corporation, receiver, or other officer of a court of this Sate, the State or any political subdivision thereof, and any agent or officer of the above classes employing any person in this State.” S.C. Code Ann.  41-10-10(1) (Supp. 2010).  Needless to say, this is a fairly broad definition of what an “employer” actually is under the meaning of the Act.

The South Carolina Court of Appeals recently revisited the issue of personal liability for unpaid wages in Allen v. Pinnacle Healthcare Systems, LLC and essentially reaffirmed its ruling in the 1995 case of Dumas v. InfoSafe Corp., by holding that the Act imposes individual liability on agents or officers of a corporation who knowingly permit their corporation to violate the Act by failing or refusing to timely pay employees all wages due.  The Court of Appeals did, however, clarify that members of an LLC cannot be held personally liable for unpaid wages merely due to the fact that they are members of the LLC.  The Court clarified that members of an LLC will be imposed with personal liability if they “knowingly permit the LLC to violate the Act.”

The Payment of Wages Act provides great protection to employees and ensures that they will be paid all of the wages due to them in a timely manner.  Violations of the Act can cause employers to end up paying a lot more than they originally owed to an employee if a civil action is filed.

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4 thoughts on “Personal Liability for Unpaid Wages

    • The Unpaid Wage Act requires employers to pay wages when they are owed. If the employee still works for the employer, then he must be paid in accordance with the regular time and place of payment (e.g. every other Friday or whenever payday is). If the employee no longer works for the employer, then the employer must pay the employee all wages owed within 48 hours or by no later than when the next regular payday would be.

  1. In the case of an LLC that is owned 100% by a C-Corp, and the C-Corp is owned 100% by an individual, where does the owner of the C-Corp stock have personal liability for the unpaid wages of wholly owned LLC?

    • That’s an interesting question for sure. You should read the Allen v. Pinnacle Healthcare Systems, LLC case mentioned in the post. In the case, the court seemed to hold that not all members of LLC’s or officers of corporations are necessarily personally liable right out of the gate, particularly if they do not have any knowledge of or duties related to payment to employees or if they are “silent members” or partners.

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