Heaps and Sykes v. Nuriche

Utah Supreme Court
2015 Utah LEXIS 61, 2015 UT 26, 345 P.3d 655 (2015)

ELI5:

Sections

Rule of Law:

The Utah Payment of Wages Act does not impose personal liability on the managers or officers of a limited liability company for unpaid wages, as the statutory definition of "employer" requires the individual to be the party actually employing the worker, a role fulfilled by the corporate entity rather than its agents.

Facts:

In 2008, Ron Heaps and Phillip Sykes (Employees) co-founded Nuriche, LLC, a Nevada company registered to do business in Utah.
The other founding members (Managers) promised the Employees specific compensation and benefits packages for their work.
The Employees worked for Nuriche for several years based on these agreements.
In 2011, Nuriche terminated the Employees.
Following the termination, Nuriche and its board of managers refused to pay the Employees the $150,000 in past-due salaries and benefits that had been promised.
The limited liability company subsequently became defunct, leaving the wages unpaid.

Procedural Posture:

Employees filed a complaint in the Third District Court of Salt Lake alleging breach of contract and violation of the UPWA against Nuriche and its individual Managers.
The individual Managers moved for summary judgment, arguing they could not be held personally liable.
The district court granted summary judgment in favor of the Managers, ruling that the UPWA does not extend wage liability to individual officers.
Employees obtained rule 54(b) certification of the summary judgment rulings.
Employees filed a timely notice of appeal to the Supreme Court of Utah.

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Issue:

Does the definition of "employer" under the Utah Payment of Wages Act extend personal liability for unpaid wages to the individual managers of a limited liability company?

Opinions:

Majority - Justice Parrish

No, the Utah Payment of Wages Act (UPWA) does not impose personal liability on individual managers because they act merely as agents of the company and do not personally "employ" the workers. The Court reasoned that while the statutory definition of "employer" includes agents and officers, it contains a critical modifying clause: "employing any person in this state." Under plain language analysis, the managers did not employ the staff; the LLC did. Furthermore, Utah corporate law generally maintains a distinction between a corporation and its officers to limit personal liability. The Court noted that when the Legislature intends to pierce this corporate veil (as in insurance or alcohol statutes), it does so expressly, which it failed to do in the UPWA. Additionally, because the UPWA carries criminal penalties, the statute must be strictly construed to provide fair warning; a vague definition cannot support criminal liability for managers. Finally, the Court rejected the Employees' interpretation as absurd, noting that if all agents were "employers," then every employee could technically be liable for every other employee's wages.

Analysis:

This decision significantly reinforces the corporate veil in Utah, specifically regarding employment disputes. By declining to follow the "operational control" or "economic reality" tests applied by federal courts (under the FLSA) and other state courts (such as Pennsylvania and Washington), Utah has signaled a strict adherence to statutory plain language over remedial policy goals. The ruling prevents plaintiffs from bypassing insolvent corporate entities to sue solvent officers for back pay unless a statute explicitly authorizes such personal liability. This places the burden on the legislature, rather than the judiciary, to create exceptions to limited liability protection for wage claims.

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