Can I collect unemployment because the owner abandoned his business?

January 25, 2007 7:30 PM

Can I collect unemployment because the owner abandoned his business and will not return phone calls or e-mails?

I work(ed) for a small business. The owner has taken ill and was in the office only three hours the last two weeks. The other employee and I found that the rent was a month overdue and other payments to vendors and such have not been paid. We are due to be paid tomorrow and we have reason to believe that these checks will clear. However, we are certain that he will not make the next payroll.

In addition to his illness, it appears that he has totally "given up" and is now trying to ignore the problem entirely. He does not respond to any contact before 4:00 pm and today refused to return any phone calls or e-mails at all. His voice mail is full. Am I justified in immediately leaving and looking for another job? Am I still eligible for unemployment if I leave for this reason without being "officially" terminated or laid off? I live and work in Arizona. If you want to reach me, you can email [e-mail]

posted by anonymous to work & money (9 comments total)

According to this Arizona government site, you will be disqualified if you quit "without good cause." IANAL, but I am guessing that missing payroll would be "good cause," while assuming that payroll will be missed in the future would not.
posted by backupjesus at 7:52 PM on January 25, 2007

In my experience (as an employer,) if the employer does not respond to an information request from the Labor Department by a designated deadline, the person applying for unemployment is granted unemployment pay (assuming the reasons they claim are appropriate.) You might want to ask a lawyer. I believe you might get an answer from a lawyer without them charging you, especially if you know one, or are the friend of a friend...

You can also just call your state's unemployment office and ask them the question. They should be able to offer you a general answer.

Sorry for your circumstances. Best of luck.
posted by davidinmanhattan at 8:19 PM on January 25, 2007

You should find this guy and the business he's starting up just down the street from you. (Just kidding, and sorry about your situation.)
posted by salvia at 8:58 PM on January 25, 2007

I think backupjesus is probably right. My guess would be that you need to stay until your next payday; as soon as your check bounces, I think you can leave your job without jeopardizing your unemployment. There's a good chance you'll even be paid reasonably quickly if you then immediately contact your local labor board.

I don't know if Arizona's labor board is as draconian as California's, but in CA, they'll drive down and put padlocks on the doors and file liens on property to get you paid promptly. They're extraordinarily unforgiving, and move extremely quickly. If the owner has any money, they'll likely get at it.

If he has no immediate cash on hand and the business ends up in bankruptcy, I'm pretty sure that employee salaries are at the top of the list for asset recovery, so chances are very very good that you'll eventually get all your money. Even if the labor board can't squeeze your salary out of him, the bankruptcy court should pay you before anyone else.

If it goes to bankruptcy, though, it could be many months before you get your last paycheck, so plan accordingly. Also keep in mind that most states have a waiting period for unemployment, during which you don't get any money. Because of your unusual circumstances, an unpaid pay period *might* qualify as waiting time, so you'll probably want to contact them ASAP too. That's very much a state-by-state thing.

Hope that helps at least a little... good luck!
posted by Malor at 11:24 PM on January 25, 2007

I'm not an Arizona attorney, but it's been my understanding that creditors are the first ones who get paid. I could be wrong though.
posted by reenum at 7:16 AM on January 26, 2007

Payroll obligations trump any creditor, with the exception of IRS, in my experience, reenum. Could be different in wild Arizona, of course.

"Unemployment" is usually "unemployment insurance" and the reason that it's contested by an employer is that it raises his RATES next year. The employer doesn't actually PAY the unemployed person. As long as he paid his premiums last year, it's irrelevant if he goes belly up, at least as I understand the workings of the system in states where I have experience.
posted by FauxScot at 9:16 AM on January 26, 2007

According to a very knowledgeable source, you should file, and an investigation would have to be done. If they find that the employer did in fact close up shop, then they would be eligible for unemployment based on the reason of separation. However, if you were working for someone who was flaky enough to just disappear, maybe they haven't also been reporting the wages, and you'd have to provide proof-or if you have a 1099.

I'm in an IT shop for a State Unemployment Agency, and I received this info from a high-ranking person in our organization. Of course, your state may handle things differently. But I do encourage you to file. Email is in the profile.
posted by neilkod at 10:05 AM on January 26, 2007

In any case start looking for another job ASAP. Doesn't sound like a place a reasonable person would want to stay. If you find one, unemployment won't even be an issue.
posted by Kimberly at 10:08 AM on January 26, 2007

(you don't have to quit to look for another job, btw)
posted by Kimberly at 10:09 AM on January 26, 2007