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Can I be expected to work without pay?
A: No -- that would be involuntary servitude, under the U.S. Constitution, 13th Amendment -- which is beyond the powers of any U.S. Court to order (except in a public emergency).
If I resign so I can look for work without breaking my fiduciary duty, will I become inelligible for unemployemnt benefits?
A: You state that you are on the "board of directors." Directors are not employees of a corporation -- only officers are. If you are a corporation employee or officer, then you can resign your job, and continue as a director -- so, there would be no breach of fiduciary.
Hope this helps.
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It's actually your duty of loyalty that would be at issue -- not your fiduciary obligations. Regardless, unless your employment contract states that you will not resign, which once again, would be unenforceable as involuntary servitude, then you are free to terminate your employment "at will." And, as soon as you do, you no longer have a duty of loyalty.
Seeking new employment while remaining employed would be more likely to implicate your duties to the corporation, than would your resigning first.
I could be wrong, but I'm not seeing a problem in your resignation here.
Re unemployment benefits, there is no Michigan appellate case law on point with your facts.
In Warren v. Caro Community Hospital, 457 Mich. 361, 579 N.W.2d 343 (Mich. 05/19/1998), the Michigan Supreme Court writes:
You are currently unemployed, because you are not being compensated for your labor. Your unemploment is involuntary, because you have not caused your nonpayment of wages. If the bankruptcy court is likely to ultimately approve your back wages, then that could be a mitigating factor weighing against your right to unemployment benefits, because it would mean that you were entitled to be paid -- you just had to wait to receive the payment
Conversely, federal law doesn't require employees to work without compensation -- to the contrary, the Fair Labor Standards Act requires that employees must be compensanted at least at the minimum wage.
The botXXXXX XXXXXne here is that I cannot give you a definitive answer about UI benefit rights associated with a bankruptcy court's approval of insider wages and the insider's temporary nonreceipt during the pendency of the bankruptcy action, because the issue, as far as I can tell, has not been litigated in the jurisdiction. I doubt that the DLEG uemployment office can tell you how it would rule, though you can certainly contact them and ask someone what he/she thinks. After that, you'll have to pick a course and then follow it.
For me, my decision would be based upon the likelihood of my being awarded back pay. If yes, I would probably stay, because the back pay will exceed the UI benefits.
An insider's right to wages during Chapter 11 is based on whether or not the compensation is "overly generous." In my view, if the business is ongoing and capable of coming out of Chapter 11, the that suggests to me that you will eventually be paid -- which suggests that resigning may be counterproductive.
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