Court Holds Minority LLC Members Are Equity Participants, Not Employees, Under New York Labor Law

Posted: August 17, 2026 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Motion to Dismiss, Commercial

Court Holds Minority LLC Members Are Equity Participants, Not Employees, Under New York Labor Law

On July 27, 2026, in Bourbiaux v. Probst, Index No. 651161/2025, Justice Robert R. Reed of the New York County Commercial Division granted in part and denied in part defendants' motion to dismiss.

Among other claims addressed in the decision, plaintiffs, minority members of two LLCs, asserted a claim under Article 6 of the New York Labor Law for unpaid wages and a retaliation claim under Labor Law § 215, contending that their status as members did not preclude them from also qualifying as employees. The Court disagreed, applying the “economic reality” test:

Courts applying the Fair Labor Standards Act . . . and the New York Labor Law use the “economic reality” test to determine whether an employer-employee relationship exists. The test is not controlled by labels, titles, or ownership status alone. Rather, it looks to the totality of the relationship, including whether the alleged employer had the power to hire and fire the worker, supervised and controlled work schedules or conditions of employment, determined the rate and method of payment, and maintained employment records. The ultimate concern is whether, as a matter of economic reality, the worker depended on another's business for the opportunity to render service, or instead participated in the business as an owner, member, or co-venturer. . . .

[T]he operating agreements . . . establish that plaintiffs were members of Bordelle with defined ownership interests, rights to profit allocations and distributions, and access to company information. The agreements further vest management authority in Probst and Castet while recognizing Plaintiffs as equity participants in the enterprise. . . . The pleadings, viewed as a whole, describe a dispute among business co-venturers concerning the management and economics of their shared enterprise rather than the type of wage-dependent employment relationship regulated by Article 6 of the Labor Law. (citations omitted).

Because plaintiffs failed to allege an employer-employee relationship, the Court dismissed the unpaid wages and retaliation claims.

The attorneys at Schlam Stone & Dolan LLP have extensive experience representing members and managers of closely held companies in business divorce disputes, including disputes over whether an owner's role in the business also gives rise to employee status. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.

To read more about wage claims under the New York Labor Law, see Schlam Stone & Dolan's related Commercial Division Blog posts on a decision holding that allegations of withheld severance pay stated a claim under Labor Law § 193 following the No Wage Theft Loophole Act and a decision holding that a wholesale failure to pay wages could not support a Labor Law § 193 claim.