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
58 Pages Posted: 14 Mar 2008 Last revised: 29 Oct 2014
Date Written: March 12, 2008
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: Suggested Citation