Legal Updates

In a closely-held company that violated employee rights it is more plausible to pierce the corporate veil

October 20, 2018
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An employee was employed as a cook in an events venue, when every few years she was passed to be employed by another company of the family.  After about 10 years the employee resigned due to her medical condition and demanded her rights both from the company which employed her and from its shareholder.

The Court held that both the company and its shareholder are personally liable to payment of the employee's rights.  Under law one may pierce the corporate veil, i.e., attribute company debts to its shareholders, when it is proven that the principle of the company separate legal entity was usurped in order to defraud a person, oppress a creditor or commit an act that harms the company's purpose with regard to its ability to repay its debts. Here it is a family company and the scales tip to the piercing of the corporate veil because the chances of mixing and blurring the dividing line between the benefit of the company and the benefit of the family is greater. The employment of the employee by the shareholder and his father under various companies, combined with the conclusion that many violations of rights were committed against the employee, such as: faulty registration of salary slips, failure to transfer an amount deducted from the employee's salary to the pension fund,  as well as non-provision for pension in part of the period, constitute a range of circumstances justifying piercing the corporate veil.