A 1099 and a separate LLC put $200,000 in payouts beyond wage-law reach
A North Carolina court has ruled that profit-sharing routed through an employee's own company isn't protected "wages," narrowing a former manager's claims.
The July 30, 2026 decision from the North Carolina Business Court signals something for anyone who designs pay: how a company structures and pays out bonuses or profit-sharing can decide whether state wage law protects those payments.
The case involved a former plumbing operations manager at Efincia Construction, a limited liability company (LLC). His offer letter set a salary plus profit-sharing - 15% of profits from customers developed by current management and 50% of profits from customers or projects he brought in himself, per the court's account of the letter.
Months into the job, the manager set up his own limited liability company, and every profit-sharing payment then went to that company, not to him personally. The payments came by check, with a final wire in August 2022, and were reported to tax authorities on a Form 1099 as nonemployee compensation. His company took in roughly $200,000. His salary, by contrast, was paid to him directly, reported on a W-2, and run through payroll withholdings.
That contrast decided the case. After he resigned in August 2022 and sued, he argued the unpaid profit-sharing was "wages" under the North Carolina Wage and Hour Act. The court disagreed. For more than five years, both sides had treated the...
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