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ANDREA
ANDREA, Attorney
Category: California Employment Law
Satisfied Customers: 11854
Experience:  JD, LLM (Federal Taxation); Employment Law, Employment disputes
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I was terminated by my employer, a Delaware C corp located

Resolved Question:

I was terminated by my employer, a Delaware C corp located in California. The board has refused to pay me a significant portion of the severance they are contractually obligated to pay me via my separation agreement because the company is not doing well. I see 4 potential outcomes for the company in the near-term:
1) They secure external funding and pay me what they owe
2) They sell the company for an amount greater than what they owe
3) They sell the assets of the company for an amount greater than what they owe
4) They file for bankruptcy protection

Question: how senior is my claim on the company's assets under outcomes 2-4?
Submitted: 2 years ago.
Category: California Employment Law
Expert:  ANDREA replied 2 years ago.

Hi, Welcome to JustAnswer. Thank you for your question

My name is XXXXX XXXXX I would be glad to help. First, let me say how sorry I am that you find yourself in this situation.

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In situations 2 and 3 where the company is sold for more than it owes to others, you would be paid in full.

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In the case of the company filing a Petition in Bankruptcy, you would be placed in the same category as all unsecured creditors, regardless of the dates any claims were made against the company by its creditors. If you believe that the company plans to dissolve immediately after filing its Petition in Bankruptcy, then you should keep a close watch on the company because you want to be sure that you are listed on the Schedule of Creditors once it files its Petition in Bankruptcy. You can ask for this list from the individual who is appointed as the company's Trustee in Bankruptcy,

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I hope I have provided Excellent Service, If you need additional information, please use the "Reply" button to let me know,

.

ANDREA

Customer: replied 2 years ago.

Andrea-


Thanks for your response. I didn't quite clarify the statement "what it owes" and intended to say "what it owes to me". I'm sure it has other obligations and the question I am trying to answer is where my claim sits in the stack of obligations it has to pay with available cash?


 


Suppose there's enough cash from a company or asset sale to pay only some of the creditors. Does my claim get priority over say overdue rent or a payment to the electrical utility, because it is effectively a wage-related obligation?


Thanks,


David

Expert:  ANDREA replied 2 years ago.

Thank you for the clarification. The order of payment should follow the same order as they became due. So, for example, if what they owe you became due before what the corporation owes Creditor X, then they would pay you first. However, if the amount the company receives is less than the total of the amount owed to all creditors it will file bankruptcy and try to discharge most of its debts in bankruptcy or pay less than is actually owed according to a Schedule which the Trustee in Bankruptcy prepares. For example, if the assets of the corporation are enough to pay 75% of the creditors in the same class, then each creditor in that class will receive 75% of what is owed to them and the balance of 25% will be discharged in bankruptcy. What is meant by "Creditors in the same class" is, for example, all unsecured creditors.

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Hope that helps,

.

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I hope I have provided Excellent Service, If you need additional information, please use the "Reply" button to let me know,

.

ANDREA

Expert:  ANDREA replied 2 years ago.

I have to amend my previous Answer. Whether or not your severance package has priority over payments to other creditors is dependant on three issues. 1) Does the company have more than 75 employees; 2) Was your termination part of a mass layoff because the corporation was winding down its operations; and 3) If the amount payable to you through the severance package are deemed "wages".

 

If the corporation meets 1 and 2 above, and if the amounts payable to you in your severance package are deemed to be "wages", then the amounts payable to you have priority over other creditors and are payable after withholding taxes are paid. And, they will not be fully wiped out in bankruptcy.

 

Therefore, you should write a demand letter to your former employer stressing the word "wages" and demanding that the "wages" they are contractually obligated to pay you should be paid immediately, otherwise you will have no alternative but to institute a lawsuit against them for collection of these wages under California Labor Code Section 1401 et seq.

 

 

 

 

I hope I have provided Excellent Service, If you need additional information, please use the "Reply" button to let me know,

 

 

 

ANDREA

ANDREA, Attorney
Satisfied Customers: 11854
Experience: JD, LLM (Federal Taxation); Employment Law, Employment disputes
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ANDREA
ANDREA
California Employment Lawyer
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JD, LLM (Federal Taxation); Employment Law, Employment disputes