XIII. State or Federal Statute Imposes Personal Liability Upon a Member, Manager, or Other Agent Acting for the LLC
Both the federal government and state legislatures have from time to time supplemented the common law of agents and servants. Often these statutes impose personal liability on LLC and corporate officials. For example, in North Carolina, each responsible officer of an LLC is personally liable for all sales taxes collected, and "responsible officer'' includes an LLC manager.102 The Doon ALI CLE lists 23 federal statutes that might impose liability on an LLC member or manager.103
A. South Carolina Payment of Wages Statute
One of these statutory modifications that can impose personal liability on a member or manager is the South Carolina Payment of Wages statute.104 The critical aspect of the South Carolina Payment of Wages statute is S.C. Code Ann. § 41-10-10. which defines "Employer" to mean not only every person, firm, partnership, association, corporation, receiver, but critically, "any agent or officer of the above classes employing any person in this state.. ." Managers, and often members of LLCs, are almost always an agent of the LLC and thus personally liable for the many duties imposed by the statute. The failure of the manager (or member acting as an agent of the LLC) to perform the many statutory duties, and particularly a failure to pay an employee is subject to penalties - and most important personal liability for the payment of the unpaid wages which may be trebled.105
This statute has already been applied against managers of an LLC.106 Peculiarly, this LLC was not a South Carolina LLC, but rather a North Carolina LLC doing business in Myrtle Beach. However, no one raised any question as to whether it was or was not appropriate to apply the South Carolina statute to this North Carolina LLC. There were three members of the LLC and the Master found that all three were liable to the plaintiff (a doctor who claimed unpaid wages of $778,000), expenses, and attorney fees. However, a majority of the court of appeals found that one of three was not liable.
However, we find the master erred in finding Appellant Timothy Gunn personally liable to Allen. Timothy Gunn was listed as a member of Pinnacle [the LLC] and owned fifteen percent of the company. Appellants assert there was no evidence that he was an officer or agent of Pinnacle, that he was involved in the operation of the company, or that he had any knowledge or contact with Allen. The only testimony about Timothy's involvement in Pinnacle came from his brother, Robert Gunn, who testified Timothy invested $40,000 in Pinnacle, and "it was [his] way of trying to get [his], rise my brother up a little bit out of his station in life, see if this would help him." Therefore, without evidence that Timothy Gunn knowingly permitted Pinnacle to violate the Act, we cannot hold him liable simply because he was a member of Pinnacle.107
The concurring judge would have also dismissed another one of the members.
In this case, Allen [plaintiff doctor] entered into an employment agreement with Pinnacle Healthcare Systems, LLC (Pinnacle), a manager-managed limited liability company organized by Robert Gunn. Rick Joyce was designated a member of Pinnacle and was involved in handling the company's payroll and finances. Although Joyce's involvement with the company's finances provided him knowledge that Pinnacle was violating the Act by not paying Allen's wages, as a member of the company, Joyce lacked the authority to make any decisions regarding the payment of wages. See S.C. Code Ann. § 33-44-404(b)(1), (2) (2006) ("[E]ach manager has equal rights in the management and conduct of the [manager-managed] company's business ... and any matter relating to the business of the company may be exclusively decided by the manager or, if there is more than one manager, by a majority of the managers ....") (emphasis added).
Joyce's lack of authority may be determined from the extent of his involvement with Pinnacle's finances. Each pay period, Joyce would receive a fax from Pinnacle's operating manager that designated who was to be paid and the amount of the payment. Joyce would then input the information from the fax into Pinnacle's system so a payroll service could issue payments. Although Joyce knew how much each employee was being paid, he lacked the authority to make any decisions regarding payroll. Accordingly, I would find Joyce was not "permitting" Pinnacle to violate the Act. * * * Furthermore, without the authority to act on behalf of Pinnacle, Joyce is not an "agent or officer" of the company. See S.C. Code Ann. § 33-44-301(b)(1) (2006) ("A member is not an agent of the company for the purpose of its business solely by reason of being a member."); S.C. Code Ann. § 33-44-101 cmt. (2006) ("In a manager-managed company agency authority is vested exclusively in one or more managers and not in the members."). Therefore, I would reverse the trial court on this issue since Joyce was not an agent or officer who knowingly permitted Pinnacle's violation of the Act.108
There have been numerous decisions applying the Payment of Wages statute, the conclusions in some of them are worth noting. First, an officer (agent) will be personally liable merely if he knowingly permits the business to violate the Act, there is no requirement of proof of "injustice or fundamental unfairness will be promoted." Dumas v. InfoSafe, 320 S.C. 188, 463 S.E.2d 641 (Ct. App. 1995). Actions which may violate the Act have been described. For example, in Evans v. Taylor Made Sandwich Co., 337 S.C. 95, 522 S.E.2d 350 (Ct. App. 1999), there is discussion of facts which might have been a violation of the Act. The court noted that it was a jury question whether there was a violation. For example, the employer said he would pay six cents for each sandwich the employee made - did this mean literally one sandwich or one "package" containing two sandwiches?
The South Carolina Supreme Court concluded that § 41-10-10 does not apply to independent contractors, although it often may be a jury question whether the worker is an "employee" or an "independent contractor." Adamson v. Marianne Fabrics, Inc. 391 S.E.2d 249 (S.C. 1990).109 The imposition of treble damages is not automatic, Temple v. Tec-Fab, Inc., 381 S.C. 597, 675 S.E.2d 414 (S. Ct. 2009).110
The employee does not need to show that the employer willfully failed to...
