Elsener v. Brown, 2013 IL App (2d) 120209 (Sept. 2013) examines when personal liability will attach to a corporate officer under Section 13 of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (the “Wage Act”) where that corporate officer lives out-of-state.
Facts: After plaintiff sold the business journal he founded to an Ohio corporation, plaintiff signed a three-year employment contract the Ohio company’s Illinois subsidiary to stay on as the journal’s publisher. The contract paid plaintiff an annual salary of $85,000 and provided that if he was terminated without cause, he was entitled to a severance payment equal to the amounts owed through the contract’s expiration. Defendant signed the employment contract as president of the Illinois subsidiary that became plaintiff’s employer.
After plaintiff was fired just 14 months into the three-year term, he sued the Illinois entity and the company president under the Wage Act. At trial, plaintiff was awarded over $200,000 against the corporate officer who then appealed.
The Court found that defendant, an Ohio resident, was subject to Illinois’ long-arm jurisdiction since he was a corporate officer of an Illinois business entity. See 735 ILCS 5/2-209(12). The court rejected defendant’s “fiduciary shield” doctrine, which immunizes an out-of-state defendant for taking actions in a state that are required by his employer. The court found that the defendant purposely availed himself of Illinois courts by voluntarily agreeing to serve as corporate president of the Illinois publishing subsidiary. ¶¶ 41-47.
Substantively, the Second District noted that Section 5 of the Wage Act requires an employer to pay final compensation to a separated employee no later than the next regularly scheduled payday. 820 ILCS 115/5, ¶ 49-50. Here, the plaintiff was fired in August 2009 and the next payday was in September 2009. Under Section 5 of the Wage Act, plaintiff became entitled to the full amount of his salary through the contract expiration date (about 22 months worth of payments) on the next payday. ¶ 70.
The Court also affirmed the defendant knowingly permitted a Wage Act violation and was personally liable under Wage Act Section 13. Under Wage Act Section 13, personal liability attaches only if the corporate employer has the ability to pay. So, if an employer goes out of business, the employee normally can’t sue the corporate officer under the Wage Act since there’s no willful violation by the corporate officer. ¶¶ 66-67.
Here, though, the chronology was that plaintiff was fired in August, 2009 and the corporate employer didn’t file bankruptcy until several months later in March 2010. At the next payday – September 2009 – the corporate employer had the ability to pay plaintiff’s contractual severance based on evidence submitted in the employer’s bankruptcy case. Defendant’s intentional conduct was also established by the multiple emails from plaintiff to defendant requesting his severance payment and defendant’s refusal to pay. ¶ 77.
Take-aways: Elsener’s glaring unanswered question is whether a corporate officer can be liable where there is no underlying finding that the corporate employer violated the Wage Act. Elsener, ¶ 54. Here, plaintiff only went to trial against the individual officer and so there was no judgment entered against the corporate employer (due to its bankruptcy). But since the defendant failed to raise this argument at trial, the Court held that the argument was waived. The answer would seem to be “no” – an officer cannot be liable without a parallel liability finding against the corporate employer.
Other key holdings from the case include (1) a corporate employer’s agent can still be considered “in this state” under the Wage Act even if he lacks a physical presence in Illinois; (2) a corporate officer’s knowledge of a separated employee’s wage claim can be shown by plaintiff’s unanswered written requests for payment.