Seriously, they told me my check was in the mail.... and I believed them. How do I protect myself during an employer's bankruptcy?

January 16, 2011 11:19 PM

My employer filed for Chapter 11 Bankruptcy with little warning. What can I and my fellow employees (both currently employed and those recently laid off) do to protect ourselves?

While anyone who's in a situation like this might feel hurt or angry, we feel as if we've been lied to repeatedly in the last few months and many of us no longer trust the upper management of our small company.

What can we do to protect our health insurance (some of us have chronic issues that may preclude us from other insurance), our holiday/sick time/vacation, and receive currently unpaid wages?

[Backstory, possibly a teal dear, but it might help explain why we feel that we need to protect ourselves.]

At Thanksgiving, our direct deposit suddenly stopped working and we began to receive paper checks. The explanation was that due to the holiday, it was easier to provide paper checks. (Our payday is Thursday so this seemed possible though not probable.) That week, some employees, especially those outside of our main region, had their paychecks bounce.

This has continued (paper checks, a few bouncing each pay period) up until this last payday, Thursday, when we were told that due to a snow storm that hit the region on Monday, checks would be a day late and we'd receive them on Friday. I was told, in person, by a member of upper management, that my check would be available on Friday.

On Friday morning we received an email from one member of management that stated that due to the bankruptcy filing, our checks would be mailed on Monday (Today, which is a federal holiday). The email also implied that the error was actually on the part of the payroll processor, rather than the previously blamed snow or the bankruptcy that had been mentioned in the same email.

This was the first most of us had heard of the filing. We did not officially learn of the bankruptcy for another hour when we received a memo via fax. The memo stated that they plan to eventually seek to liquidate and/or reorganize the company, though they are currently only seeking Chapter 11.

Within the last 6 months the company has closed two stores, one due to being very under-performing and one unexpectedly to avoid eviction and seizure of goods.

(And yes, most of us are looking for other work. Everyone is helping each other with their resumes.)

posted by aristan to work & money (9 answers total)

I suspect you guys need to lawyer up, possibly en masse.

Speaking as a four-year VFX vet (during which four years the industry's seen at least four major facilities go down, and one payroll processor commit epic malfeasance and then implode in a storm of mistresses and unpaid withholdings), remember that paper checks are kind of like that old Ian Fleming canard-- once is happenstance, twice is coincidence, three times is a conspiracy. I say that for everyone's benefit-- if paper checks start happening as a regular thing at your normally payroll-processed office, take that as a warning and start securing exit routes.
posted by fairytale of los angeles at 12:11 AM on January 17, 2011

If you have any outstanding debts (car loan, credit card) see if you can still buy payment protection insurance on them.
posted by Mike1024 at 12:18 AM on January 17, 2011

You and your fellow employees should contact the bankruptcy court as potential creditors. You should also contact your local unemployment office to get the ball rolling there.

Note that payroll issues like this are a result of cash flow problems, and sometimes indicate tax issues as well, so make sure your employer did proper withholding on what they paid.
posted by zippy at 1:25 AM on January 17, 2011

zippy is right on. Talk to a bk lawyer. You and your coworkers can file as priority creditors, which basically means that you get to cut in the line of who gets paid and who does not out of the business's revenue. IANAL, and most of my knowledge is of Chapter 7's, but I believe this tidbit still applies.
posted by Aizkolari at 3:00 AM on January 17, 2011

See if you can take any remaining vacation time right now, because you're going to lose it. Use that time to look for new work.
posted by blue_beetle at 7:49 AM on January 17, 2011

Ask your HR person to document in writing how much vacation time you are currently owed.
There was a lot more transparency from management when the small company I worked for went bankrupt, and our HR person was kind enough to volunteer this information for each employee so that we could have it as evidence that we were owed money in the bankruptcy proceedings. Of course we never saw that money because there weren't enough assets left over to pay us out, but it's good to be prepared.

I absolutely think you'd be within your rights to take a bunch of vacations days now, but if your management people are sketchy you might be the one to (a) get your checks later, and (b) have them bounce, in response.

You should all be cleaning any personal files/bookmarks/records off your computers, the same as you'd do if you were thinking of quitting. Who knows when they'll tell you to not come in anymore, or when you'll show up to find the computer has been sold and your job today is simply to carry boxes? A smart company would wipe the hard-drives first, but a company going bankrupt may not care.

The worst part for us was that COBRA health insurance coverage isn't available if the company no longer exists. You should all be applying for individual health insurance ASAP if you want to avoid any time without coverage. Those with chronic conditions who are unlikely to be approved should start researching high-risk pools and any drug-company assistance if they have expensive name-brand prescriptions. Schedule all your drug refills as soon as you're eligible, in hopes of getting them filled before the insurance ends. And schedule your next dentist appointment for exactly the date when your insurance will pay for it again (usually 6 months after your last cleaning/checkup), in hopes of getting in before the coverage ends.
posted by vytae at 8:50 AM on January 17, 2011 [1 favorite]

I'm not sure what happens with Flex Spend accounts, but if you have one, the funds may disappear when your job/employer does. Look into it as it may behoove you to spend all remaining funds asap.

Also, do as much as you can to jump ship while the company is still afloat. Much easier to get a job while employed than not.

Beyond that, depending on the atmosphere and your relationships, it may be open knowledge to management that everybody is looking for new jobs. If that is the case, you may wish to secure letters of recommendation and/or agreements to provide references.

Best of luck and do whatever you can to avoid being the last one on the sinking ship.
posted by Elminster24 at 9:34 AM on January 17, 2011

Having been an HR person in a similar situation. I want to mention that it is possible that your employer has already stopped or missed payments to the health plan and employees may not find they have no coverage until they go for treatment or refills. I suggest calling the number on your insurance card and making sure that coverage is still in effect before electing any procedures.

On the side, payroll paper checks really are not easier and a bounced payroll check is a major warning sign. If you hear of this happening it is time to jump ship. All that paper checks do is allow the employer to float the payroll money for a few days to either wait to receive payment or pay other bills.
posted by saradarlin at 10:38 AM on January 17, 2011

Thank you to everyone who's answered so far, I really appreciate the help. I stopped by and spoke with the receptionist today and asked some questions. We don't have an HR person, all HR duties are handled by the comptroller, so needless to say most of us doubt his accuracy or sincerity.

I did learn that there was indeed a mixup at the processor as we've changed bank accounts for payroll and the processor used the old account number. (The receptionist was shredding the 'bad' checks when I walked in). She also stated that we'd be receiving a check for our vacation time as it was earned, but we would lose any holiday or sick time if it wasn't taken soon. Needless to say, Myself and the one other person in our department with sick/holiday time are trying to figure out the best schedule to take it ASAP.

Our checks were made available today, though it did little good as today was a bank holiday. I cashed my check at the Wal-mart, just to insure I actually got paid.

I appreciate you all sharing information with me and those who haven't commented yet, please feel free to do so as I'm sadly sure that I am not the only person in this situation.
posted by aristan at 4:35 PM on January 17, 2011