Employee Rights When The Employer Is Facing Bankruptcy

Types of Bankruptcy

The type of bankruptcy that the employer files is crucial to determining if the company will move on after the initial changes or whether the entire business will be liquidated. With a Chapter 7 bankruptcy, the owner or partners of the business may have incurred so many debts that the only way to manage the concern is to liquidate everything including the laying off of all employees and workers. This also means that established relationships may be severed if the owner is unable to recover by creating a newer but smaller business. All customers would be cut off from the product or services, and new employees may be denied payment if there are not assets to transfer funds to their accounts.

When the issue concerns a Chapter 11 bankruptcy, this means that the company could survive the issue. This is usually just a reorganization or a restructuring of the company to remove as many ruptures of income and profits as possible. If an entire department is not making any progress or cannot improve revenue, it may be cut with all persons losing their jobs. This may also mean that the newest workers are let go, but this may depend on other factors. Most of the excess debts are taken care of through this reorganization along with lower operating and transactional costs. The company may be utilizing the assistance of a lawyer to work through these concerns.

Possible Recourse

When the employee is affected by bankruptcy through a Chapter 7 filing, he or she is generally out of work due to this process. If the funds are not available for employees to be paid, it may not be possible to seek compensation unless the owner opens a new company after bankruptcy has been completed. It is important to seek the advice and options available through a business lawyer versed in bankruptcy claims. These legal professionals understand what this means and if there are any options open to the employee for viable compensation. Wage employees and others that have pensions or retirement plans in effect already are given a higher priority for payment.

The rights of the employee are different based on the bankruptcy chapter type. However, there are certain regulations in place that require the company to provide up to 60 days’ notice of impending layoffs. Unfortunately, there are exceptions to this. Wages may still be available for those under pending Chapter 11 bankruptcy provided that the employee remains at work and keeps up with daily duties. If the individual is laid off, he or she becomes one of many that are owed money such as creditors, vendors and similar persons. This means there may be some time before any funds are received if it is possible. It may be necessary to contact a lawyer to determine what to do next, and if the company is attempting to evade paying those who money is owed to, litigation may be needed.