Historically, the Utah Payment of Wages Act (UPWA) has never provided a clear path for resolution of most wage claims. Important issues such as who is liable for failure to pay wages and what private rights of action exist have long been unclear and undecided. Recently, the Utah Legislature amended the UPWA, created personal liability for unpaid wages, and provided a private right of action for all unpaid workers. With these changes, Utah will probably see a significant increase in wage and hour litigation. Furthermore, nearly every action is likely to name individual agents or officers of the company.
Until now, litigation under the UPWA has been limited because it has been uncertain whether most unpaid workers had a private right of action, what they could collect if they had one, and from whom they could collect. Prior to the recent amendment, the text of the UPWA provided a private right of action to collect a penalty (and not the underlying unpaid wages) only where the worker was terminated, not paid all owed wages within 24 hours, and sent a timely demand for payment. See U.C.A. § 34-28-5. The UPWA also created an administrative remedy for wage claims between $50 and $10,000 through the Utah Labor Commission. See U.C.A. § 34-28-9 (1)(c-d). However, it provided no remedy for employees who resigned or were owed more than $10,000. It was also unclear who could be named a defendant when actions could be brought.
The original version of the Utah Payment of Wages Act defined an employer as:
[E]very person, firm, partnership, association, corporation, receiver or other officer of a court of this state, and any agent or officer of any of the above-mentioned classes, employing any person in this state. U.C.A. § 34- 28-2 (1)(c) (emphasis added).
Many practitioners assumed that this definition created personal liability for agents and officers of a company and plead a violation of the UPWA against an agent or officer when the company would be unable to pay the judgment. However, that legal theory was extinguished in Heaps v. Nuriche, LLC, 345 P.3d 655 (Utah 2015), where the Utah Supreme Court rejected the argument that managers of a limited liability company were personally liable for failure of the company to pay unpaid wages to terminated employees merely because such managers were agents or officers of the company. Heaps v. Nuriche, LLC, 345 P.3d 655, 659 (Utah 2015).
In response, the Legislature created a private right of action for all categories of wage claims. The UPWA now requires all wage claims between the amounts of $50 and $10,000 to be filed with the Utah Labor Commission. See PAYMENT OF WAGES ACT AMENDMENTS, 2017 Utah Laws Ch. 85 (H.B. 238); U.C.A. §34- 28-9.5 (effective May 9, 2017). It also provides a private right of action which can be filed in state court for all claims which are over $10,000, and provides a penalty. Id. Wage claims below $10,000 can also be directly filed in court, so long as they are accompanied by other claims and the aggregate value of all claims exceeds $10,000. Id.
The Legislature also amended the UPWA definition of employer to mirror the oft -litigated definition of employer in the Fair Labor Standards Act (FLSA). The FLSA definition of employer is as follows:
Employer includes any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization. 29 USCA § 203(d).
The FLSA places personal liability for violations upon certain individuals in each company. However, there are several tests used across the federal circuit courts to determine who in the company that might be. Federal circuit approaches vary, and the 10th Circuit has yet to rule, but other federal courts consistently focus on the economic realities of the employment relationship, in which an assessment of a particular agent or officer’s operational control is the leading point of analysis. See Jensen v. Redcliff Ascent, Inc., 2014 WL 2739297 *1-2 (D. Utah 2014) (unpublished). The intent of the analysis is to place liability upon individuals within the company who have control over the terms and conditions of the aggrieved employee’s employment and to avoid placing liability upon passive owners, investors, or uninvolved coworkers.
Many wage claims have been laid aside because of the unlikely ability to collect on a breach of contract action from a failing company. However, unpaid workers can now pursue the assets of individual agents and officers under a clearly defined cause of action. Claims which were once abandoned are now likely to be vigorously pursued and those who control the terms and conditions of the workers’ employment will be named as defendants. Jason Haymore