From Condition of Limited Liability to Exceptional Remedy: The History of Shareholder and Director Liability for Unpaid Workers' Wages in Canada

Law & History Review, Vol. 26, pp. 57-98, 2008

CLPE Research Paper No. 08/2008

58 Pages Posted: 14 Mar 2008 Last revised: 29 Oct 2014

See all articles by Eric Tucker

Eric Tucker

York University - Osgoode Hall Law School; Cleveland State University, Cleveland-Marshall College of Law

Date Written: March 12, 2008

Abstract

This article is part of a larger study of the recurrent dilemmas that arise when protective labor law conflicts with the norms of capitalist legality. In this particular case, shareholder liability for unpaid workers' wages was first enacted in mid-nineteenth century New York State as a condition of providing investors with easy access to the corporate form at a time when there was deep unease about its legitimacy. The Canadian debate was more muted, but prominent reform politicians expressed similar concerns about the corporation, leading them to impose first shareholder and then director liability for unpaid workers' wages. In the latter part of the nineteenth-century, as the legal norms of separate legal personality and the limited liability of the makers and managers of corporations hardened into legal bedrock, the understanding of director liability as a condition of incorporation was inverted by the judiciary and treated as an exceptional privilege to be enjoyed only by the most vulnerable workers. In the late twentieth century, the Supreme Court of Canada adopted a similar line of reasoning to justify its holding that workers were not entitled to recover unpaid termination and severance pay from directors when their corporate employers defaulted.

Keywords: labor law, shareholder liability, director liability, unpaid wages

JEL Classification: K22, K31

Suggested Citation

Tucker, Eric, From Condition of Limited Liability to Exceptional Remedy: The History of Shareholder and Director Liability for Unpaid Workers' Wages in Canada (March 12, 2008). Law & History Review, Vol. 26, pp. 57-98, 2008; CLPE Research Paper No. 08/2008. Available at SSRN: https://ssrn.com/abstract=1105575

Eric Tucker (Contact Author)

York University - Osgoode Hall Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416 736-5578 (Phone)
416 636-5736 (Fax)

Cleveland State University, Cleveland-Marshall College of Law ( email )

2121 Euclid Avenue, LB 138
Cleveland, OH 44115-2214
United States

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