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Wisconsin Court of Appeals Finds Criminal Complaint Stated Probable Cause to Hold Business Owner Personally Criminally Liable for Failure to Pay Wages

In State v. Weston, an unpublished decision filed on December 13, 2006, the Wisconsin Court of Appeals reversed a circuit court order dismissing a criminal complaint against the defendant, Michael E. Weston, alleging 33 counts of failure to pay wages pursuant to section 109.11(3) of the Wisconsin Statutes.  That section of the statutes provides in relevant part that an employer who has the ability but intentionally fails to pay wages in order to secure a discount or to annoy, harass, oppress, hinder or defraud the person to whom the wages are due, may be fined not more than $500 or imprisoned not more than 90 days, or both. 

The appeals court held the criminal complaint showed probable cause for the charges against Weston in his individual capacity.  Noting that shareholders of a corporation are normally insulated from personal liability for corporate acts, the court explained that in this case, "the complaint allows for the reasonable inference that Weston and Weston Machine constituted a 'one-man band' with Weston calling the shots and, functionally, being the 'alter ego' of Weston Machine."  Beyond the fact that Weston was the owner and registered agent of Weston Machine, the appeals court found it significant that the reason Weston Machine did not have funds to pay the employees' wages was likely because Weston had fraudulently transferred moneys from Weston Machine to a sham corporation.  The appeals court therefore found the criminal complaint contained sufficient allegations to pierce the corporate veil.

Because the appeals court held Weston could be charged personally with criminal failure to pay wages, the court further held that the fact that Weston Machine itself did not have the ability to pay the wages did not mean the criminal complaint against Weston must fail.  Although under the statute there can be no criminal liability for failure to pay wages if the employer lacks the ability to pay, the appeals court held it was enough that Weston, as Weston Machine's alter ego, had the ability to pay. 

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