People v. Precision Automotive Parts, Inc., 30 N.Y.2d 190 (1972)

A corporate officer can be held criminally liable for the corporation’s failure to pay wage supplements as required by a collective bargaining agreement if the officer knew or should have known of the non-payment and failed to take steps to prevent it.

Summary

Precision Automotive Parts, Inc. and its president, Edwin J. Trapp, were convicted of violating section 962-a of the former Penal Law (now Labor Law, § 198-c) for failing to pay benefits to union pension and welfare funds as required by a collective bargaining agreement. The New York Court of Appeals affirmed the conviction, holding that the statute was constitutional and that a corporate officer could be held criminally liable if they knew or should have known of the non-payment. The court clarified that the statute’s intent was to hold responsible officers accountable, not nominal officers unaware of corporate affairs, aligning the standard with that applied to wage non-payment under former section 1272.

Facts

Precision Automotive Parts, Inc. was a party to a collective bargaining agreement that required it to make payments to union pension and welfare funds. The corporation failed to make these payments. Edwin J. Trapp was the president and apparently the principal shareholder of the corporation.

Procedural History

Trapp and Precision Automotive Parts, Inc. were convicted in the District Court of Nassau County. The Appellate Term affirmed the conviction. The New York Court of Appeals granted permission to appeal.

Issue(s)

1. Whether section 962-a of the former Penal Law is unconstitutional because it allows criminal enforcement of a civil obligation.

2. Whether section 962-a of the former Penal Law is unconstitutional because it subjects corporate officers to criminal penalties even if they were unaware of the corporate noncompliance or lacked the authority to ensure compliance.

Holding

1. No, because the statute aims to protect employees’ rights to earned benefits by providing penal sanctions against employers who wrongfully withhold those benefits.

2. No, because the statute is interpreted to apply only to those officers who knew or should have known of the nonpayment and failed to take steps to prevent it, similar to the standard applied to wage non-payment under former section 1272.

Court’s Reasoning

The court reasoned that the statute’s purpose was not to enforce civil obligations but to protect employees’ rights, which are a legitimate concern for the legislature. The existence of a civil remedy does not preclude criminal penalties for the same wrong. The statute was enacted in response to People v. Vetri, which highlighted a gap in the law regarding criminal penalties for withholding vacation pay and other benefits, as opposed to wages.

Regarding the second issue, the court acknowledged that the statute could be read to impose criminal liability on officers unaware of the noncompliance. However, the court interpreted the statute in light of its legislative history and its relationship to former section 1272, which addressed wage non-payment. The court stated, “While the language in the statute with which we are concerned here is somewhat differently worded with respect to the responsibility of the corporate officers, we believe that the history of the statute and the circumstances under which it was enacted clearly indicate a legislative intent that the same standards apply.”

The court referenced People v. Ahrend Co., which held that section 1272 applied only to officers who “stand in such a relation to the corporation’s affairs that they actually know of the nonpayment.” The court held that the same standard should apply to section 962-a, meaning that an officer could only be convicted if they “stood in such a relation to the corporate affairs that it may be presumed that he knew or should have known of and taken some steps to prevent the nonpayment.”

Even under this interpretation, the court found that Trapp was properly convicted because the evidence showed he was intimately involved in the corporation’s affairs and knew or should have known of the nonpayment. The court stated, “The evidence indicates beyond any reasonable doubt that the defendant, who was apparently the only active officer as well as the principal shareholder of the corporation, was intimately involved in the affairs of the corporation and that he knew or should have known of the nonpayment.”