Assemblymember Phil Steck (D-Colonie) and Senator Hugh T. Farley (R-Niskayuna) announced the unanimous passage of a bill they sponsored to hold out-of-state corporations liable for unpaid wages (A.737/S.4476). The bipartisan legislation passed the Senate on May 27, having previously passed the Assembly on March 30.

Under current law, the ten largest shareholders of a corporation are liable for unpaid employee wages if the corporation goes out of business. However, the courts have held that this law applies only to corporations formed in New York State. This bill would ensure the law is applied equally to both New York-based corporations and out-of-state corporations operating within New York State. Many such corporations incorporate in other states but do business only in New York.

“People deserve to be compensated for the wages they’re owed,” said Assemblymember Steck. “Permitting corporations that do not incorporate in New York to avoid wage liability provides an incentive to incorporate out of state. That is simply wrong and must end.”

“The current law is unfair to workers and New York-based companies,” said Senator Farley. “This bill will ensure that these protections apply to all New York workers, while also ensuring that New York-based corporations are not placed at a disadvantage in relation to out-of-state corporations.”

Wurld Media, which incorporated in Delaware but operated solely in New York State, serves as an example of this harmful loophole. The company stopped paying wages to its employees, though many continued to work because they were promised that the company would be sold and their wages would be satisfied. Although the company was eventually sold and several individuals were prosecuted in connection with the matter, the employees were never paid their owed wages. Even though the company did all of its business in New York State, the law could not be applied because Wurld Media filed its incorporation papers in Delaware.

“This bipartisan legislation seeks to level the playing field for out-of-state and New York-based corporations and ensure all employees are compensated for the work they do regardless of what happens to the company,” Assemblymember Steck said.