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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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Can a company file BK to avoid a judgment for unpaid overtime,

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Can a company file BK to avoid a judgment for unpaid overtime, OSHA violation penalties and interest, Penalties for having no workers comp. insurance for 7+ years, and EDD fines, penalties, and interest from paying employees under the table for years with their personal checking account? Also, paying these employees with their own personal account, would this fall in the category of co-mingling funds, which would in turn pierce the corporate vial?

Can these agencys go after these people personally for piercing the corporate vail, for they are worth Millions.

Thank-you for your help.
Submitted: 3 years ago.
Category: California Employment Law
Expert:  socrateaser replied 3 years ago.
Hello,

Executive Management and company owners can be held personally liable for failure to remit workers compensation and unemployment insurance contributions. This effectively avoids any relief in bankruptcy, because such fines are not dischargeable. However, the fines wouldn't help an employee, because the fines are paid to the government.

The employee has a priority claim for up to $11,725 in prebankruptcy wages if earned during the 180 days prior to filing bankruptcy. Bankr. Code 507(a)(4).

The facts you describe could show that the owners should be held personally liable, because the company is really an alter ego for the owners, rather than a separate organization. You would have to bring an adversary proceeding in bankruptcy court (i.e., a lawsuit), show that the employer and the owners are really one and the same, that they have plundered the company, rather than pay wages to the employees, and that they should be forced into personal involuntary bankruptcy or disgorge their profits to the bankruptcy estate.

For a bankruptcy attorney referral, see this link.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!


socrateaser, Lawyer
Satisfied Customers: 34860
Experience: Retired (mostly)
socrateaser and other California Employment Law Specialists are ready to help you
Customer: replied 3 years ago.

 

Thank-you so muchCustomer-

 

From your knowledge would using personal credit cards to buy business materials to get points, buying personal plane flights with company cards to write off personal vacations. Paying employees with personal checks for years to avoid taxes, and building a home down in Cabo, Mexico using company funds sound to you like the corporate veil was broken.

 

Thank-you again, when you respond back I will Accept Answer and Extend a tip to you!

Expert:  socrateaser replied 3 years ago.
Using personal credit cards to purchase business materials is pretty standards stuff for small businesses. I don't see this as a problem for the employer. Personal vacations paid for by the company is a little mre serious, and possibly tax evasion. Paying employees with personal checks, and not making payroll tax deductions, effectively makes the individual the employer, not the company. This would give an employee an action against the owner and it wouldn't matter that the employer files bankruptcy.

The issue for the employee is that if he/she has not been reporting taxes on the personal payments, then the employee has his/her own problem with tax evasion. So, this could be a real double-edged sword.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!


socrateaser, Lawyer
Satisfied Customers: 34860
Experience: Retired (mostly)
socrateaser and other California Employment Law Specialists are ready to help you

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