Minority LLC Member Can Be an Employee of LLC Under Massachusetts Wage Act

Adam Shafran, a partner at the firm, recently represented James Raleigh in an action in Middlesex Superior Court, James Raleigh v. Lighthouse Life Sciences Partners, LLC et al. (Middlesex Superior Court, No. 2281CV00230). James Raleigh (“Raleigh”) was a member and minority owner (10 percent) of Lighthouse Life Sciences Partners, LLC (“Lighthouse”) and worked for the company as an “Independent Sales Agent” pursuant to a contract. Raleigh contends that Lighthouse unilaterally changed his compensation in August of 2021 in violation of the terms of the contract and also misclassified him as an independent contractor. He brought an action in Superior Court seeking damages for breach of contract, misclassification under the state’s Independent Contractor Statute, and unpaid wages. With regard to the misclassification claim, and on a motion for summary judgment, Lighthouse argued that Raleigh’s minority shareholder status and 10 percent ownership stake in the LLC, precluded him from being an employee under the Massachusetts Wage Act. The court disagreed and held that a minority member of an LLC can be an employee of the LLC for purposes of Massachusetts wage laws. This is the first Superior Court decision to have expressly made such a holding. The breach of contract and unpaid wages claims are still in dispute and proceeding to trial. The case was highlighted in the July 26, 2024 issue of Massachusetts Lawyers Weekly. Read the article for more details “Minority owner of LLC can bring Wage Act claim” (subscription required).