Nonprofit directors immune from ex-employees’ claims

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Where uncompensated directors of a nonprofit organization did not engage in “willful misconduct or a knowing violation of the criminal law,” they were immune from claims by former employees under the Virginia Nonstock Corporation Act, or VNCA.

Background

Patients Out of Time, or POT, is a nonprofit organization. Michael Aldrich, Denis Petro, Irvin Rosenfeld, Melanie Dreher and Dustin Sulak were uncompensated members of the POT Board of Directors at all relevant times.

Plaintiff Laramie Van Duzer Silber is the former Chief Operating Officer of POT, and plaintiff Jeanne Van Duzer Lang is the former Chief of Staff. They bring claims under the wage payment law, or WPL, and for breach of contract, based on defendants’ alleged failure to pay appropriate wages in a timely fashion. They also bring a claim under the Conscientious Employee Protection Act, or CEPA, alleging they were terminated for objecting to and reporting on POT’s failure to comply with fundraising and federal tax law.

Plaintiffs Silber and Lang, and defendants POT, its unpaid directors and Mary Lynn Mathre have filed cross motions for summary judgment.

Choice of law

Like at the motion to dismiss stage, defendants insist Virginia law should apply to plaintiffs’ substantive legal claims. Defendants have not provided any persuasive, new material facts from discovery to support their contention that the court’s prior decision that New Jersey law applies is not the law of the case.

WPL

To hold defendants liable under the WPL, the court must make three findings: (1) POT and Mathre were employers of plaintiffs; (2) plaintiffs were employees under the statute and (3) defendants violated the statute. All three elements are satisfied here.

First, the WPL defines an employer as “any individual, partnership, association, joint stock company, trust, [or] corporation … employing any person in this State.” In addition, it explicitly notes that “[f]or the purposes of this act the officers of a corporation and any agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation.” These definitions encompass both Mathre and POT.

Second, the court finds that plaintiffs were employees, and not independent contractors, under the WPL. Third, the WPL requires employers to pay employees the full wages due to them at least twice during the calendar month on regular pay days designated in advance. Here, the invoicing provision in plaintiffs’ contracts with POT, requiring plaintiffs to invoice POT for work performed, violated the WPL.

Plaintiffs’ motion for summary judgment as to their WPL claim is granted on the issue of liability. However, as there is a dispute over the wages that are owed to plaintiffs, a jury must still determine the appropriate damages under the WPL.

CEPA

Defendants attack plaintiffs’ CEPA claim on three grounds: (1) plaintiffs are not employees under the statute, (2) plaintiffs are not members of the class of individuals CEPA was designed to protect and (3) plaintiffs were not retaliated against.

First, it is unclear whether plaintiffs are employees under CEPA’s specific terms. A reasonable juror could find — based on the facts in the case — that the relevant 12 factors weigh in favor of either employee or non-employee status. There is a genuine dispute of material fact as to whether plaintiffs reported POT’s noncompliance with federal and state law and were fired for doing so, so this too is an issue for a jury.

Breach of contract

Defendants argue that “Plaintiffs were paid by PO[]T for work for which they submitted invoices” and that, by not submitting invoices, it is “Plaintiffs, not PO[]T, who failed to perform under the terms of the contracts” due to not fulfilling a contractual prerequisite. Defendants also criticize as insufficient the evidence that plaintiffs have proffered in support of their hours of unpaid work. As evidence is mixed on the issue whether defendants failed to pay plaintiffs for hours they worked, the parties’ motions for summary judgment are denied.

Unpaid directors

Defendants also argue that the unpaid defendant directors have immunity under the VNCA. Defendants are correct. First, the court determines that Virginia law, and not New Jersey law, applies to this argument.

Under the statute, unpaid officers and directors are immune from liability in all civil proceedings except when they have “engaged in willful misconduct or a knowing violation of the criminal law.” The defendant directors’ inaction does not rise to the level of willful misconduct.

Plaintiffs’ motion for summary judgment granted in part, denied in part. Defendants’ motion for summary judgment granted in part, denied in part.

Lang v. Patients Out of Time Inc., Case No. 3:20-cv-00055, Sept. 1, 2023. WDVA at Charlottesville (Moon). VLW 023-3-529. 19 pp.