The Intersection of State Corporation Law and Employee Compensation Programs: Is it Curtains for Veil Piercing?

Abstract

This manuscript addresses the intersection of the corporate law doctrine of piercing the corporate veil and federal regulation of the employment relationship. Unlike any other published work, this manuscript focuses upon the issues in the context of non-cash and deferred compensation programs. While the relevant federal regulation subjects individuals to personal liability in a plethora of contexts, the regulation does not explicitly address the viability of a state law action for piercing the corporate veil. Attention to this issue has increased since the United States Supreme Court left open the question in its February 1996 decision in Peacock v. Thomas, 64 U.S.L.W. 4095 (U.S. Feb. 21, 1996). The manuscript begins its approach to this issue by examining the structure of the relevant federal law and undertaking a detailed analysis of the litigation that ultimately culminated in the Peacock decision. It examines the theory undergirding the corporate law doctrine of piercing the corporate veil and evaluates the application of the doctrine to a variety of federal regulatory schemes. Finally, the manuscript analyzes the unique barriers which arguably prevent the joining of a state law claim to pierce the corporate veil with a cause of action alleging a substantive ERISA violation. While the authors recognize the breadth of federal pre-emption in this context, they argue that the existing pre-emption jurisprudence does not and should not prevent utilization of state law veil piercing doctrine.

JEL Classification: J33,K22, K31