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holding that Colorado's Wage Claim Act does not make officers and agents of a corporation jointly and severally liable, along with the corporation, for the payment of wages
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No. 01SA380.
February 3, 2003. Rehearing Denied February 24, 2003.
Chief justice MULLARKEY, Justice MARTINEZ and Justice BENDER would grant the Petition.
Certification of Questions of Law Pursuant to C.A.R. 21.1, United States Court of Appeals, Tenth Circuit, Civil Action No. 00-1324, On Appeal from the United States District Court for the District of Colorado, No. 99-N-1306
CERTIFIED QUESTIONS ANSWERED
No. 01SA380, Leonard v. McMorris C.A.R. 21.1, Certified Questions of State Law — Colorado Wage Claim Act — Officer and Agent Personal Liability for Wage Payment — Section 8-4-101(6), 3 C.R.S. (2002) — Section 8-4-104(1)(a), 3 C.R.S. (2002) — Corporate law — Agency Law — Statutory Construction
This case arises out of the bankruptcy of NationsWay, a corporation that had conducted a large trucking business. Employees of NationsWay alleged that officers of the corporation were personally liable under Colorado's Wage Claim Act to pay $12 million dollars in earned but unpaid wages and other compensation the employees were unable to collect in the federal bankruptcy proceeding. The United States Court of Appeals certified its questions concerning Colorado's Wage Claim Act to the Colorado Supreme Court.
The Colorado Supreme Court holds that the General Assembly did not intend for Colorado's Wage Claim Act to impose personal civil liability on officers and agents of a corporation to pay wages and other compensation the corporation owes under its employment contract with the employee but fails to pay.
Law Offices of Evan S. Lipstein, P.C., Evan S. Lipstein, Michael B. Levy Lakewood, Colorado Dyer Shuman, LLP, Kip B. Shuman, Jeffrey A. Berens, Denver, Colorado, Attorneys for Plaintiffs-Appellees
Arnold Porter, James E. Scarboro, Timothy R. Macdonald, Denver, Colorado, Attorneys for Defendant-Appellants
The Temple Law Offices, LLC, Dana A. Temple Denver, Colorado, Previant, Goldberg, Uelmen, Gratz, Miller Brueggeman, s.c. Frederick Perillo Milwaukee, Wisconsin Attorneys for Amicus Curaie for International Brotherhood of Teamsters
Pursuant to C.A.R. 21.1, the United States Court of Appeals for the Tenth Circuit certified to us the following questions of Colorado law:
1) Are officers of a now-bankrupt corporation individually liable for the wages of the corporation's former employees under the Colorado Wage Claim Act, Colo. Rev. Stat. § 8-4-101 et seq (1999)?
2) If so, are all officers individually liable due to mere status as officers or must the officers have been high ranking or active decision-makers?
See Leonard v. McMorris, 272 F.3d 1295 (10th Cir. 2001).
Upon acceptance of the certified questions, we reframed the questions and directed the parties to brief the following four issues:
1) Whether officers of a corporation are individually liable for the wages of the corporation's former employees under the Colorado Wage Claim Act, Colo. Rev. Stat. § 8-4-101 et seq. (2001);
2) If so, whether all of the corporation's officers are individually liable or only the officers who have been high ranking or active decision-makers;
3) If so, whether the Colorado Wage Claim Act imposes personal liability on officers when the corporation declares bankruptcy; and,
4) If so, whether the Colorado Wage Claim Act's "good faith legal justification" clause is a defense to the officer's personal liability to former employees under the Act when the corporation files for bankruptcy.
We answer our reframed first question as follows: No, under Colorado's Wage Claim Act, the officers and agents of a corporation are not jointly and severally liable for payment of employee wages and other compensation the corporation owes to its employees under the employment contract and the Colorado Wage Claim Act. Our answer is dispositive of the two questions the Court of Appeals for the Tenth Circuit certified to us, and we return this case to that court for further proceedings.
I.
The plaintiffs in this case (Leonard) are former employees of NationsWay. The defendants (McMorris) were corporate officers of NationsWay. NationsWay was one of the largest privately held trucking companies in the United States. In May of 1999, NationsWay had more than 3,200 employees in forty-three different states.
On May 20, 1999, NationsWay filed a petition for bankruptcy protection pursuant to Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Arizona. Harold Roth, Senior Vice President and William Ward, Senior Vice President, filed the petition on behalf of the corporation. On February 11, 1999, NationsWay's board of directors had given these two officers the authority to file the petition if, and when, they determined it was necessary in the best interest of the corporation. After filing the bankruptcy petition, NationsWay terminated many of its employees and did not pay wages and other compensation that became due after the petition's filing, because the Bankruptcy Code's automatic stay provision prevented the corporation from making these payments. 11 U.S.C. § 362(a) (2002).
The NationsWay bankruptcy proceeded as a Chapter 11 liquidation and the United States Bankruptcy Court confirmed NationsWay's Chapter 11 plan on October 13, 2000. The employees received, as a result of the Chapter 11 proceeding, approximately $3.0 million in December of 2000 and an additional $350,000 in August of 2001. Leonard claims that the officers of NationsWay are personally liable to pay the difference between what the employees received in the bankruptcy proceeding and the remaining amount of unpaid wages, benefits, and other compensation that NationsWay did not pay them, amounting to approximately $12 million, plus penalties and attorney's fees.
Leonard originally brought this action in a Colorado district court. McMorris removed it to the Federal District Court for Colorado. The Federal District Court, on summary judgment, found eight officers personally liable for unpaid wages and other compensation. Leonard v. McMorris, 106 F. Supp.2d 1098 (D.Colo. 2000).
The Federal District Court relied on three provisions of the Wage Claim Act: 1) section 8-4-101(6), 3 C.R.S. (2002), which includes officers in the definition of employer; 2) section 8-4-104(1)(a), 3 C.R.S. (2002), which states that wages for services earned and unpaid are due and payable immediately when the relationship is interrupted at the volition of the employer; and 3) section 8-4-104(3), 3 C.R.S. (2002), which states that if an employer refuses to pay wages without a good faith legal justification, the employer is liable to the employee for a penalty of fifty percent of the compensation due.
On interlocutory appeal, when the case went from the Federal District Court to the United States Court of Appeals for the Tenth Circuit, that court certified its questions of Colorado law to us because of lack of controlling precedent, and we agreed to exercise our C.A.R. 21.1 jurisdiction. See Leonard, 272 F.3d at 1295-97.
II.
Leonard contends that the plain language of Colorado's Wage Claim Act imposes individual liability on all corporate officers and agents, in all circumstances, for payment of the wages and other compensation the corporation does not pay to employees. We disagree. The plain language of the Wage Claim Act does not say this. In support of the employees' argument, Leonard places reliance on the definition of "employer" in the Wage Claim Act.
However, we find the Colorado Wage Claim Act's definition of "employer" to be ambiguous on the question of personal officer and agent liability. Upon review of the language, design, purpose, and construct of Colorado's Wage Claim Act, we conclude that the General Assembly did not intend to impose personal liability on corporate officers and agents for payment of earned, but unpaid, wages and other compensation the corporation owes to employees.
A.
Standard of Review and Canons of Statutory Construction
We conduct de novo review of the questions of law before us. Gorman v. Tucker, 961 P.2d 1126, 1128 (Colo. 1998). These questions concern Colorado's Wage Claim Act, sections 8-4-101 et seq., 3 C.R.S. (2002). Our fundamental responsibility when construing a statute is to give effect to the General Assembly's intent. Martin v. People, 27 P.3d 846, 851 (Colo. 2001); Reg'l Transp. Dist. v. Lopez, 916 P.2d 1187, 1192 (Colo. 1996). We must read and consider the statute as a whole and give harmonious and sensible effect to all its parts, when possible. Martin, 27 P.3d at 851; Gorman, 961 P.2d at 1128. In the event the statute is ambiguous, we consider the language the legislature chose to utilize, the evident legislative purposes, the consequences of alternative constructions, and legislative history of the General Assembly's discussion, if available. Martin, 27 P.3d at 851. We will not adopt a construction that leads to an absurd result. Reg'l Transp. Dist., 916 P.2d at 1192; Bd. of County Comm'rs v. IBM Credit Corp., 888 P.2d 250, 252 (Colo. 1995).
B.
Colorado's Wage Claim Act Is Ambiguous On The Question Of Officer And Agent Personal Liability.
Leonard's contention of corporate officer and agent personal liability for employee wages and compensation relies entirely on the assertion that the Wage Claim Act's definition of "employer" plainly imposes joint and several liability on corporate officers for payment of wages and compensation due and payable upon termination of the employment relationship by an employer. This definition, section 8-4-101(6), provides:
As used in this article, unless the context otherwise requires:
(6) "Employer" means every person, firm, partnership, association, corporation, migratory field labor contractor or crew leader, receiver, or other officer of court in Colorado, and any agent or officer thereof, of the above mentioned classes, employing any person in Colorado. . .
§ 8-4-101(6), 3 C.R.S. (2002) (emphasis added). The General Assembly adopted this definition in 1959. See Ch. 176, sec. 2, § 80-25-1 et seq., 1959 Colo. Sess. Laws 537. In 1901, when the legislature first adopted the Wage Claim Act, its provisions applied only to corporations. Ch. 55, sec. 1, 1901 Colo. Sess. Laws 128. In 1919, the General Assembly added quasi-public corporations. Ch. 183, sec. 1, § 6981, 1919 Colo. Sess. Laws 617.
Looking at the current definition of "employer," we do not find any words stating that officers and agents of a corporation are individually liable for wage and compensation payment due under the employment contract. In contrast, the Wage Claim Acts of other states, notably Illinois and Kansas, contain such language. Illinois statutes provide that:
Any officers of a corporation or agents of an employer who knowingly permit such employer to violate the provisions of this Act shall be deemed to be the employers of the employees of the corporation.
Ill. Comp. Stat. Sec. 115/13 (2002) (emphasis added).
Liability of Officers and Agents. a) An officer of a corporation or an agent of an employer may be personally liable under Section 13 of the Act for a claimant's wages or final compensation when the officer or agent actively asserted substantial control over the management and financial affairs of the corporation or employer.
Ill. Comp. Stat. Sec. 300.620 (2002) (emphasis added).
The Kansas statute provides:
In case of violation of K.S.A. 44-314, and amendments thereto or 44-315, and amendments thereto, by a corporate employer, either the corporation or any officer thereof or any agent having the management of the corporation who knowingly permits the corporation to engage in such violation shall be deemed the employer for purposes of this act.
Kan. Stat. Ann. § 44.323(b) (2002) (emphasis added); see also N.J. Stat. Ann. § 34:11-4.1(a) (2002) ("For the purposes of this act the officers of a corporation and any agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation"); Mulford v. Computer Leasing, Inc., 759 A.2d 887, 892, 894 (N.J.Super.Ct. Law Div. 1999) (interpreting section 34:11-4.1(a) and holding that principal officers having management authority of the corporation may be liable for wages the corporation fails to pay, but their liability is secondary to that of the corporation).
Three features of the Illinois and Kansas statutes are particularly enlightening on the question of plain language statutory construction. These statutes directly address: (1) the issue of officer and agent personal liability, for (2) wages and compensation due and payable under the employment contract between the corporation and the employee, when (3) the corporate officer or agent has substantial authority for wage payment and/or knowingly permits the corporation to violate its duty of payment to the employee. These acts demonstrate how a legislature may choose to pierce the corporate veil and make some officers and agents personally liable in particular circumstances for payment of unpaid wages.
But, Colorado's Wage Claim Act does not contain language directly addressing the issue of corporate officer and agent personal liability for paying earned but unpaid wages. Leonard would have us read such words into our statute. These are highly consequential words that would alter the normal rules of corporate law. We should not attribute such intent to the General Assembly in the absence of plain or necessarily implied intent to change the pre-existing law through this definition. General principles of corporate law provide that officers and agents acting in their representative capacity for a corporation are not personally liable for those acts.
We reject Leonard's plain language assertion. We find that the General Assembly's choice to include "any agent or officer thereof" in the "employer" definition prompts potential alternative constructions of legislative intent: first, that the General Assembly intended to hold corporations responsible for the acts of their officers and agents; or, second, that it intended officers and agents to have joint and several liability for the payment of earned but unpaid wages. Because the Colorado definition does not contain a plain statement of the General Assembly's intent, we find the language ambiguous and turn to the rules of statutory construction.
We therefore look to the language, design, meaning, purpose, and construct of Colorado's Wage Claim Act to ascertain the General Assembly's intent on the question of joint and several officer and agent liability. Undertaking this examination, we conclude that the legislature did not intend to impose personal liability on officers and agents that is equal to the corporation's liability. In reviewing this question, we are aided by (1) the language the General Assembly actually utilizes in the Wage Claim Act and (2) longstanding Colorado corporate law, which we find our legislature did not intend to supersede.
C.
Colorado's Wage Claim Act
Although the General Assembly has amended the Colorado Wage Claim Act periodically, its basic design has endured since its adoption in 1901. The law has always had two basic components. First, an employer must pay an employee at regular intervals. See § 8-4-105(1), 3 C.R.S. (2002). "It is clear that the intent of these labor laws was to protect employees from exploitation, fraud and oppression by requiring employers to pay workers in United States currency at regular intervals." Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486, 503 (Colo. 1989) (Mullarkey, J. concurring). Second, when the employing entity terminates the employment relationship it created, it must pay the employees all earned but yet unpaid wages and compensation, within the time period the Wage Claim Act prescribes. See § 8-4-104(1)(a), 3 C.R.S. (2002).
The Colorado Wage Claim Act is a powerful law that the General Assembly first enacted in 1901 during a period when labor strife was endemic in the mining regions. Originally, the Wage Claim Act applied only to corporations. Ch. 55, sec. 1, 1901 Colo. Sess. Laws 128. In 1919, the General Assembly added quasi-public corporations. Ch. 183, sec. 1, § 6981, 1919 Colo. Sess. Laws 617. In 1959, the legislature adopted a broad definition of "employer" that gives rise to Leonard's contention in this case. Ch. 176, sec. 2, § 80-25-1 et seq., 1959 Colo. Sess. Laws 537.
The 1901 Wage Claim Act, Ch. 55, sec. 1, 1901 Colo. Sess. Laws at 128-130, followed two decades of labor-initiated efforts to address corporate responsibility for wages and other working conditions. Colorado's labor union movement had its origins in the early 1880s, centering upon reform of the mining industry. Strikes were rancorous and sometimes violent. The Colorado populists managed the election of Governor Davis Waite in the 1892 election, running on a thirty-three point platform for aiding debtors, protecting laborers, and reforming the political structure of the state. Waite failed to gain re-election in 1894, losing to Albert McIntyre who accused the populists of frightening off capital and fostering a spirit of anarchy. Nevertheless, labor advocates continued to campaign for the eight-hour work day, the abolition of company scrip, and the liability of employers for wage payment. In 1899, the General Assembly passed an eight-hour work day law for mine, mill, and smelter workers. The Colorado Fuel and Iron and other companies responded by reducing wages, and the Colorado Supreme Court held that the law violated the right of the worker to sell labor.In re Morgan, 26 Colo. 415, 58 P. 1071 (Colo. 1899). A series of labor disputes climaxed in a May 1901 strike against the Smuggler-Union Company of Telluride. In 1902, Coloradans countered with a constitutional amendment permitting adoption of an eight-hour work law. Colo. Const. Art. V, § 25a; Carl Abbott, Colorado, A History of the Centennial State 126-29 (1976). See also Dale A. Oesterle Richard B. Collins, The Colorado State Constitution, A Reference Guide 14-15, 133-34 (2002).
No legislative history of the General Assembly's discussion when it adopted the expanded definition of employer is available. When we view the "employer" definition in the context of the Wage Claim Act as a whole, we find that the General Assembly's evident purpose was to make the Act applicable to other entities and persons, beyond just corporations and quasi-public corporations. Nonetheless, the Wage Claim Act focuses on the liability of the entity or person who created and maintained the employment relationship for payment of the wages and compensation due and payable under the employment contract.
Recording of legislative committee and floor discussions did not begin until 1973.
Most important to resolution of the present case, none of the substantive provisions of our Wage Claim Act contain language approximating the Kansas and Illinois provisions for personal officer and agent liability. The Colorado Wage Claim Act's definition of "wages" and its employee termination provision make this apparent.
As used in this article. . .
(9) "Wages" or "compensation" means all amounts for labor or service performed by employees, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculating the same or whether the labor or service is performed under contract, subcontract, partnership, subpartnership, station plan, or other agreement for the performance of labor or service if the labor or service to be paid for is performed personally by the person demanding payment.
§ 8-4-101(9), 3 C.R.S. (2002) (emphasis added). Thus, the definition of "wages" refers to the employment contract relationship the business entity or person creates and maintains with an employee.
The due and payable upon termination of the employee relationship provision of the Wage Claim Act, section 8-4-104(1)(a), provides:
When an interruption in the employer-employee relationship by volition of the employer occurs, the wages or compensation for labor or service earned and unpaid at the time of such discharge is due and payable immediately. If at such time the employer's accounting unit, responsible for the drawing of payroll checks, is not regularly scheduled to be operational, then the wages due the separated employee shall be made available to the employee no later than six hours after the start of such employer's next regular workday; except that, if the accounting unit is located off the work site, the employer shall deliver the check for wages due the separated employee no later than twenty-four hours after the start of such employer's next regular workday. . .
§ 8-4-104(1)(a), 3 C.R.S. (2002) (emphasis added). This language, like that of the "wages" definition, plainly refers to the employment contract relationship and focuses on the accounting unit of the entity or person that hired the employee and is responsible for meeting the payroll.
The Wage Claim Act sets forth the employing entity's duty to make periodic payments in section 8-4-105(1):
All wages or compensation, other than those mentioned in section 8-4-104, earned by any employee in any employment, other than those specified in subsection (3) of this section, shall be due and payable for regular pay periods of no greater duration than one calendar month or thirty days, whichever is longer, and on regular paydays no later than ten days following the close of each pay period unless the employer and the employee shall mutually agree on any other alternative period of wage or salary payments.
The original 1901 Act required all corporations, except railroad corporations, doing business within the state to pay their employees "each and every fifteen days, in lawful money of the United States." Ch. 55, sec. 1, 1901 Colo. Sess. Laws 128. See generally, Evan S. Lipstein, Civil Actions Under the Colorado Wage Claim Act, 28 Colo. Law. 65 (Feb. 1999).
The original 1901 Act required all corporations, except railroad corporations, doing business within the state to pay their employees "each and every fifteen days, in lawful money of the United States." Ch. 55, sec. 1, 1901 Colo. Sess. Laws 128. See generally, Evan S. Lipstein, Civil Actions Under the Colorado Wage Claim Act, 28 Colo. Law. 65 (Feb. 1999).
§ 8-4-105(1), 3 C.R.S. (2002). Thus, section 8-4-105(1) imposes a duty to make periodic payroll payments at least once during the calendar month unless the employer and the employee agree otherwise.
Accordingly, the basic design of the Wage Claim Act is to (1) ensure a mechanism for regular payment of employee wages and (2) make all earned but unpaid employee wages and compensation — that are due and payable — available to the employee immediately upon termination of the employment relationship. But, no substantive provision of our Wage Claim Act contains words making officers and agents personally liable for wage payment.
The issue we now turn to is whether the General Assembly intended the Wage Claim Act's definition of "employer" to supersede Colorado's otherwise applicable corporate law, which makes officers and agents of a corporation liable only in their representative capacity, and not personally. We conclude that the General Assembly intended these corporate law principles to function in the context of the Wage Claim Act, not to displace them.
D.
Officers And Agents Act In A Representative Capacity For The Corporation
Insulation from individual liability is an inherent purpose of incorporation; only extraordinary circumstances justify disregarding the corporate entity to impose personal liability. William Meade Fletcher,Fletcher Cyclopedia Corporations § 41 (Perm. ed. 2002 Supp.). Two important principles of law insulate corporate officers from individual liability when they are acting on behalf of the corporate entity.
First, a corporation is always a separate entity distinct from its officers, directors, or investors. Newport Steel Corp. v. Thompson, 757 F. Supp. 1152, 1156 (D.Colo. 1990). Typically, a court will not allow the corporate veil to be pierced, except in certain factual circumstances. The court considers a variety of factors to determine whether the corporate form should be disregarded including:
(1) whether the corporation is operated as a separate entity, (2) commingling of funds and other assets, (3) failure to maintain adequate corporate records, (4) the nature of the corporation's ownership and control, (5) absence of corporate assets and undercapitalization, (6) use of the corporation as a mere shell, (7) disregard of legal formalities, and (8) diversion of the corporation's funds or assets to noncorporate uses.
Id. at 1157.
Second, corporate officers occupy the position of agents in relation to third persons dealing with the corporation. Therefore, personal liability of officers is governed by principles of agency law. Id. at § 266. "Generally, a corporate officer acting in his or her representative capacity and within his or her actual authority is not personally liable for such representative acts unless acting on behalf of an undisclosed principal." Kunz v. Cycles West, Inc., 969 P.2d 781, 784 (Colo.App. 1998). Furthermore, "unless otherwise agreed, a person making or purporting to make a contract with another as agent for a disclosed principal does not become a party to the contract." Restatement (Second) of Agency § 320 (1958).
A corporate officer is not the employer responsible for creating the contractual employment relationship and is not personally responsible for a breach of that relationship, unless he or she created the relationship without disclosing the responsible principal corporation to which he answered as an agent. Instead, an officer acts for the corporation when he or she extends an offer of employment or terminates the employment relationship. See United States v. Van Diviner, 822 F.2d 960, 963 (10th Cir. 1987) (officer was not personally liable for custodial maintenance contract when he acted for a disclosed principal corporation); Winkler v. V.G. Reed Sons, Inc., 638 N.E.2d 1228, 1231 (Ind. 1994) ("It is a matter of black-letter law that where the agent acted within the scope of the agent's authority in signing a contract on behalf of the principal, the remedy of one seeking to enforce the contract is against the principal and not the agent"); Phillips v. Montana Educ. Ass'n, 610 P.2d 154, 157 (Mont. 1980) (officers, as agents of corporation, are shielded from personal liability for acts taken on behalf of the corporation, within the scope of employment, and in furtherance of corporate business interests, including breaching of employment contracts).
E.
The Responsibility Of NationsWay For Wage And Compensation Payment To Employees Upon Termination
In the case certified to us, the entity responsible for creating the employment relationship and meeting the payroll was NationsWay. The officers of NationsWay were not parties to the employment contracts. In addition, the officers were acting in their representative capacity, with actual authority from the NationsWay board of directors, when they filed the bankruptcy petition. The other employees of NationsWay knew that the officers were acting for NationsWay. As agents of NationsWay, the officers were insulated from liability by the general principles of agency law.
The individual officers who filed the petition did not act wrongfully or on their own initiative. Rather they filed the petition at the direction of NationsWay and were discharging their duty to the corporation. Under section 7-108-101(2), 2 C.R.S. (2002), all corporate powers are exercised by or under the authority of a board of directors. State law determines whether a bankruptcy petition is filed by a person with proper authority. Yellow Cab Coop. Ass'n v. Mathis, 144 B.R. 505 (D.Colo. 1992). In Colorado, only a board of directors has the authority to file a petition or authorize its filing. Id. The officers who filed the petition in this case did not have the legal ability to file the petition causing the employees' termination without the permission and authority of the board of directors, which they had.
Under Leonard's view, the officers and agents of corporations are always responsible for wages due as a result of the employment relationship and must act as a surety in the event the payroll is not met. We disagree. We find no provision of the Wage Claim Act — in contrast to the plain language of the Illinois and Kansas statutes — that makes the personal assets of officers available for recourse to other employees of the corporation when the hiring entity discharges them.
We presume that the General Assembly knows the pre-existing law when it adopts new legislation or makes amendments to prior acts. See Vaughn v. McMinn, 945 P.2d 404, 409 (Colo. 1997). The well-established principles of both corporate law and agency law insulate officers from personal liability unless they act outside the scope of their authority.
In contrast to Leonard's contention of blanket personal liability, our Wage Claim Act does provide for agent liability in some circumstances. Section 8-4-117, 3 C.R.S. (2002), provides that "any employer or agent of an employer" who refuses to pay wages, when under a duty to pay, is guilty of a misdemeanor in specified circumstances:
any employer or agent of an employer who, being able to pay wages or compensation and being under a duty to pay, willfully refuses to pay as provided in this article, or falsely denies the amount of a wage claim, or the validity thereof, or that the same is due, with intent to secure for himself or another person any discount upon such indebtedness or any under-payment of such indebtedness or with intent to annoy, harass, oppress, hinder, delay, or defraud the person to whom such indebtedness is due, is guilty of a misdemeanor. . .
§ 8-4-117, 3 C.R.S. (2002) (emphasis added). The plain language of this section makes "employers" and "agents" liable for willfully or intentionally withholding employee wages. Significantly, when we examine the wage payment obligation of section 8-4-104(1)(a), the termination provision, and section 8-4-104(3), the civil penalty provision, we find no similar language making officers or agents liable for wage payment or civil penalties.
Other related provisions of Colorado law demonstrate that the General Assembly did not intend blanket corporate officer and agent liability for unpaid wages and other compensation. In 1903, the General Assembly adopted the Colorado Wage Preference Act to provide that debts to employees shall be considered preferred claims when the employing business is suspended by creditor action:
when the business of any person, corporation, company or firm shall be suspended by the action of creditors or be put into the hands of a receiver or trustee, then in all such cases the debts owing to laborers, servants or employees, which have occurred by reason of their labor, or employment shall be considered and treated as preferred claims and such laborers, or employees shall be preferred creditors, and shall first be paid in full. . .
Ch. 70, sec. 1, 1903 Colo. Sess. Laws 143 (recodified and now appearing as section 8-10-101, 3 C.R.S. (2002)). This provision explicitly recognizes that the person or entity obligated to pay wages and other compensation because of the employment relationship may experience creditor-initiated court proceedings. Although this provision is not directly applicable in federal bankruptcy situations, it evidences the intent of the General Assembly to provide protection for employees in a creditor situation by granting them preferred status, not by giving them the opportunity to collect their wages from the personal assets of officers.
Personal liability of officers for wages in the event of business insolvency would be a sharp departure from corporate law principles, and we would expect the General Assembly to state such intent specifically or by necessary implication. No such language or evident intent appears in Colorado's Wage Claim Act. To the contrary, the General Assembly recognized the problem of corporate insolvency and created in section 8-4-117 an exception to employer and agent criminal liability in circumstances of state creditor proceedings that involve limited corporate control over assets.
Under section 8-4-117, willful failure to pay wages may result in criminal liability except, "`being able to pay wages or compensation' does not include an employer who is unable to pay wages or compensation by reason of a chapter 7 bankruptcy action or other court action which results in the employer having limited control over his assets." § 8-4-117, 3 C.R.S. (2002) (emphasis added).
"In the absence of some exception, neither the officers nor the directors of a corporation are personally responsible for the debts of a corporation merely because they are officers or directors of the corporation." See William Meade Fletcher, Fletcher Cyclopedia Corporations § 1117 (Perm. ed. 2002 rev. vol. 3A). Requiring officers of a corporation to act as sureties for wage payment out of their personal assets in the event of business insolvency or bankruptcy would be a substantial deterrent to serving as an officer. This is not a liability that one normally anticipates in occupying such a position with a company, and the Wage Claim Act provides no clear notice that employee officers of a corporation incur such a legal obligation.
F.
Case Law of Our Court of Appeals
Our court of appeals has had three occasions to consider individual liability under Colorado's Wage Claim Act. In Koontz v. Rosener, 787 P.2d 192 (Colo.App. 1989), plaintiffs brought a wage claim against Rosener, the principal majority shareholder of a real estate brokerage firm, for unpaid wages. The court of appeals found that, plaintiffs asserted only a compensation claim against Rosener individually. Plaintiffs were "employees of Range. . . and therefore, the wage claim should have been asserted against the corporate firm." Id. at 196-97.
Three years later, a different panel of the court of appeals held that officers could be individually liable under the Wage Claim Act. The court of appeals opined in Cusimano that the Wage Claim Act's definition section "clearly discloses an intent to impose personal liability for wages on corporate officers." Cusimano v. Metro Auto, Inc., 860 P.2d 532, 534 (Colo.App. 1992). The court concluded that, "the Colorado Wage Claim Act imposes personal liability on at least high ranking corporate officers based solely on their status as officers." Id. at 534.
We disagree with the court of appeals' holding and decline to follow it. The Cusimano court provides no analysis for its conclusion. Nothing in the plain language of the Wage Claim Act evidences an intent to impose liability solely based on an officer's status or rank. As we have explained in this opinion, the provisions of the Wage Claim Act, when read together, do not support the Cusimano court's conclusion.
In Major v. Chons Bros., Inc., 53 P.3d 781 (Colo.App. 2002), the court of appeals held that personal liability may not attach to an agent under the Colorado Wage Claim Act simply because of his job title. "Instead, the inquiry must focus on whether [the agent's] status in [the corporation] was such that he had some authority or responsibility to affect [the corporation's] wage payment policies." Id. at 786-87. Nevertheless, to the extent this opinion of the court of appeals follows Cusimano, we disagree and decline to follow it. We hold that the definition of "employer" in section 8-4-101(6) in the Wage Claim Act does not function as a personal liability provision.
Upon review of other jurisdictions, we find no court that has construed its state's Wage Claim Act to impose the kind of blanket personal liability on officers and agents Leonard urges us to adopt. Some jurisdictions with an employer definition similar to ours have imposed civil liability for wage payment on officers based on their high-ranking status or for knowing or willful violations of the wage claim act. See Mohney v. McClure, 604 A.2d 1021 (Pa. 1992) (the court, in a per curiam opinion, construed its statute to limit personal liability to top management, or active decision makers); Belcufine v. Aloe, 112 F.3d 633, 639-40 (3rd Cir. 1997) (declining to impose personal liability on officers regardless of rank in a bankruptcy situation because they have no ability to control the payment of wages); Dumas v. Infosafe Corp., 463 S.E.2d 641, 645 (S.C.Ct.App. 1995) (only officer who knowingly permits the corporation to violate the act is personally liable).
We decline to follow such precedent, as it would require us to read into our Wage Claim Act terms like "knowingly permit," "high ranking," or "top management" as the predicate for personal liability. Nothing in the actual language of the wage acts of these jurisdictions attaches personal civil liability to only high ranking officers or knowing violations. This is court made law, apparently deriving from the unwillingness of those courts to use the "employer" definition to impose the kind of blanket liability Leonard urges on us in this case.
G.
Conclusions
Based on our inquiry into the language, intent, design, and construct of Colorado's Wage Claim Act, we conclude that the inclusion of "officer" and "agent" in the definition of "employer" under section 8-4-101(6), 3 C.R.S. (2002) has two functions. First, it makes the entity that has created the employment relationship and owes wages and other compensation under the Wage Claim Act responsible for the actions of its agents and officers. Second, it relates to another provision of the Wage Claim Act that imposes criminal liability on officers and agents for willful or intentional wrongful acts under section 8-4-117, 3 C.R.S. (2002). Contrary to Leonard's contention, neither section 8-4-101(6) nor 8-4-104(1)(a), 3 C.R.S. (2002) impose personal civil liability on officers or agents to make wage and other compensation payments the corporation fails to make. Without evidence of specific intent by the General Assembly to disregard well-established principles of corporate and agency law, we conclude that the extension of such personal liability, even to only high-ranking officers, would be merely an insertion of policy considerations not expressed by the legislature and not for us to make.
III.
Accordingly, we hold that Colorado's Wage Claim Act does not make officers and agents of a corporation jointly and severally liable, along with the corporation, for the payment of wages and compensation due and payable to the employee under the employment contract and the Wage Claim Act. We return this case to the United States Court of Appeals for the Tenth Circuit for further proceedings.
CHIEF JUSTICE MULLARKEY dissents, and JUSTICE MARTINEZ and JUSTICE BENDER join in the dissent.