Court Dismisses LLC Members’ Labor Law Wage Claims Because the Pleadings Describe Equity Participants Rather Than Employees

Posted: August 31, 2026 / Written by: Channing J. Turner / Categories Commercial, Motion to Dismiss

Court Dismisses LLC Members’ Labor Law Wage Claims Because the Pleadings Describe Equity Participants Rather Than Employees

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 the managing members’ motion to dismiss the second amended complaint.

Plaintiffs, minority members of two limited liability companies that operate a New York restaurant, alleged that the managing members diverted business opportunities, withheld distributions and financial information, operated competing ventures, diluted one plaintiff’s ownership interest by amendment, and terminated plaintiffs’ employment. Their first cause of action sought unpaid wages under Article 6 of the Labor Law and retaliation under Labor Law § 215. Applying the “economic reality” test, and treating the operating agreements as documentary evidence, the Court held that plaintiffs had not alleged an employer-employee relationship. The Court explained:

Plaintiffs argue that an individual may simultaneously hold an ownership interest in a business and qualify as an employee. The Court agrees that ownership status does not categorically preclude employee status. However, the inquiry remains one of economic reality. . . . The pleadings therefore describe plaintiffs primarily as equity participants in a jointly owned hospitality venture, not as wage-dependent employees whose Labor Law claim arises from an employer-controlled employment relationship. Article 6 is not a vehicle to recast disputes among LLC members over distributions, management authority, and business opportunities as wage claims.

Because plaintiffs were not adequately alleged to be employees, the retaliation claim failed as well. The Court also dismissed the implied covenant, fiduciary duty, unjust enrichment, conversion, declaratory judgment, and disgorgement claims, dismissed the derivative contract claim without prejudice for failure to plead demand futility with particularity, and denied dismissal of the breach of contract, accounting, and double derivative claims.

The attorneys at Schlam Stone & Dolan LLP frequently litigate disputes among the members and managers of closely held businesses, including claims arising out of their employment relationships. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.

To read more about when a person with an ownership stake in a business may pursue a wage claim, see Schlam Stone & Dolan’s related Commercial Division Blog posts on a decision denying dismissal of a Labor Law claim where the parties’ dispute over the plaintiff’s employment status could not be resolved on a motion to dismiss and a decision dismissing a company’s counterclaim against its minority members to recover bonuses, holding that an employer may not recover back wages paid during a period of completed employment.