Can directors of an Ontario corporation be personally liable for unpaid employee wages?

Yes, this is one of the more significant personal liability risks for directors of Ontario corporations. Under the Ontario Business Corporations Act and the federal Canada Business Corporations Act (if federally incorporated), directors can be personally liable for up to six months of unpaid wages if the corporation fails to pay its employees.

This liability applies to all directors who were directors during the period when the wages were earned and unpaid. It does not matter whether you were an active director or an outside director who was not involved in day-to-day payroll decisions. The liability can be joint and several among directors, meaning a creditor can pursue any one director for the full amount.

To defend against a wage liability claim, a director must show they acted with due diligence — meaning they took all reasonable steps to prevent the failure to pay wages. This is a high bar. Directors who are not involved in operations should ensure they have mechanisms to monitor payroll compliance. If a corporation is experiencing financial difficulty and payroll is at risk, directors should take immediate steps and seek legal advice. Resignation does not always protect against liability for wages that were already owed before the resignation.