How much liability does a co-owner have when the other co-owner of a restaurant does not want to comply with employment laws?

Asked 9 months ago - Livermore, CA

I co-own a restaurant with another person (50/50). I want to comply with DLSE employment law standards such as paying minimum wage, overtime pay, meal/rest break periods, etc. However, my partner does not want to comply to such employment law standards. What is my liability if I'm sued over such issues based on my stance? And what are some ways I can assert pressure onto my partner?

Attorney answers (5)

  1. Neil Pedersen

    Contributor Level 20

    3

    Lawyers agree

    Answered . The nature of your ownership interest is an important consideration. For instance, if you are a co shareholder, and you and your partner treat the corporation as a separate entity from your own finances, it is possible that the greatest risk you face is your investment in the company, but your personal finances may not be subject to collection. To be sure that is the case, you should consult with an attorney to be sure there are no ways to get to your personal finances.

    As to the business, any claim by an employee for failure to pay according to the law would be a liability of the company, and the company will be subject to litigation fees and judgments if the company does not comply with the law. There is no personal liability for failure to pay overtime or minimum wage, meaning you cannot be sued individually, if you set the company up properly.

    First you need to be sure you want to stay in business with someone who is not interested in following the law. That does not suggest things will go well with you should your "partner" believe it is in his or her best interests to move on.

    Second, if you are going to be in business with this person, you need to be sure that your personal assets are fully protected, and getting your own attorney to review your situation is critical.

    Good luck to you.

    This answer should not be construed to create any attorney-client relationship. Such a relationship can be formed... more
  2. Stacy Yva North

    Contributor Level 10

    2

    Lawyers agree

    Answered . As a partner, you may be held equally liable for labor code violations even if you opposed them. I strongly advise you to speak with an employment law attorney about ways to minimize your risks.

  3. Paul Bradley Schroeder

    Contributor Level 12

    1

    Lawyer agrees

    Answered . Compliance with labor laws is not optional. If I were you, I would not be in business with such an individual. From a liability perspective, the key is how the company is structured. If it is a corporation or LLC, and it is run properly, you should not face personal liability. Other forms of business may expose you to personal liability. The fact that you want to comply and your partner does not will not shield you from liability if you did not comply.

    You should consult an attorney on these matters.

  4. John Noah Kitta

    Pro

    Contributor Level 19

    1

    Lawyer agrees

    Answered . You are in a most troublesome situation. If you refer to yourself as co-owners I presume that you and your partner own the restaurant as a partnership so you will be equally liable for all the debts and obligations of the partnership. If your partner has significant assets you can ask him to sign an indemnification agreement where he would be responsible for any penalties or fines resulting from his failure to abide by the law. This would give you a claim for right of reimbursements but still would not remove the fact that you are liable for one half the obligation to the abused party. As previous counsel has informed you, you really need to retain your independent legal counsel and identify any structure that will protect your personal assets. On the other hand you may want to buyout or sell out to your partner. It does not sound as if you will be able to have a viable business relationship over time.

    If you have found this information helpful, please let the attorney know by marking best answer. Thank you.... more
  5. Terrence Jay Moore

    Pro

    Contributor Level 9

    1

    Lawyer agrees

    Answered . You need to be very careful. The State will look to hold the business responsible for the violations. In some cases the state can pierce a corporation but not often. If your partner doesn't want to comply it is time to move on because eventually a potential judgment levied against the entity could attach to the companies assets. It is not worth non compliance.

    The above is not legal advice. It is an illustration of options that can be used in certain situations. I have... more
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