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Joseph
Joseph, Lawyer
Category: California Employment Law
Satisfied Customers: 4830
Experience:  Extensive experience representing employees and management
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In an earlier message last week, I mentioned that this company

Resolved Question:

In an earlier message last week, I mentioned that this company is an LLC. The LLC consists of an investment group made up of 2 minor partners and the majority partner is a fund that is involved with ownership of many small companies. They "claim" that they manage companies, but in truth squeeze them to death....at least in our case. Much of our business involves ordering electronic products (monitors) from factories in Europe and Asia. Normally, these factories require full payment before shipping to the U.S. The same cash flow problems that our "investors" claim are the reason they can't/won't pay payroll, commissions and expense reports have made it difficult for our company to receive equipment in a timely manner once we do receive Purchase Orders from our customers. It's a never ending battle and I struggle to keep customers. In the past they did put money into our company, but this year just decided that they would make us fend for ourselves. As I have said, they now owe me 5 payrolls in arrears, $10k in commissions and $1,400 in expenses. I'm just not sure how responsible this group with regard to the REQUIREMENT to pay the employees. They certainly don't seem to care that some of us are on the verge of bankruptcy.
Submitted: 10 months ago.
Category: California Employment Law
Expert:  Joseph replied 10 months ago.
Hello again,

This does seem like a very messy situation.

Did you have any specific question regarding it as a follow up to your previous questions?
Customer: replied 10 months ago.


Approximately 3% of the LLC is owned by 2 individuals. The other approx. 97% is ownd by an Equity Partners Fund.....So, it gets back to what you said a few conversations ago. Since they own all the stock, would bankrupting the LLC still make them ultimately responsible for paying the employees if/when I decide to file a claim? Thanks.

Expert:  Joseph replied 10 months ago.
Hello John,

Yes, even if they were to bankrupt the stock, you would be able to pierce the corporate veil and go after the Equity Partners Fund since they are the (vast) majority shareholders, and it seems that the individual owners are only there to try to create the appearance of an LLC, when it is really the Equity Partners Fund that has complete control and gets to make all the decisions.

A court would hold that they definitely exerted too much control over the company and would not be able to capitalize on bankrupting the company and not paying employees after squeezing anything they can out of the company. (This especially seems to be the case, since the equity partners would have the funds to pay you as an employee, but seem much more concerned about getting money out as soon as it comes in rather than paying the employees who have been bringing that money in).

That said, it would be best for you to file a wage claim before bankruptcy is declared to ensure that you would be a priority creditor when and if they do declare bankruptcy on the LLC.

You can read here for additional information:

http://www.nolo.com/legal-encyclopedia/personal-liability-piercing-corporate-veil-33006.html

As always, please let me know if you have any follow up or clarifying questions.

Thanks and best of luck!
Joseph, Lawyer
Satisfied Customers: 4830
Experience: Extensive experience representing employees and management
Joseph and other California Employment Law Specialists are ready to help you
Customer: replied 10 months ago.

Thank you Joseph. I think you're starting to get familiar with this situation. I look forward to remaining in touch with you.

Expert:  Joseph replied 10 months ago.
Thank you John; happy to help and glad that you're looking forward to staying in touch with me throughout this unfortunate difficult situation you're facing.

I hope that things go well for you, but will happy to answer any further questions for you if they don't appear to be going that way.

Customer: replied 10 months ago.

ok thanks

Expert:  Joseph replied 10 months ago.
Also, if you would, please remember to rate my answer positively so I get credit for my work!

Unless of course you have any further follow up or clarifying questions.
Customer: replied 9 months ago.


Joseph, It's been more than a month since I talked to you about my problem with my employer in CA. I have held back submitting my wage claim to CA Labor Relations Board, hoping for a resolution. I have had a couple pay checks paid...., but as of this Friday they will still be behind 6 payrolls and all of my 2013 commissions (approx. $14k). One of my earlier questions to you had to do with "WHAT IF" the Partners who control 97% of the company decide to declare bankruptcy. You said at the time, the since they own an overwhelming majority and control all the decisions, they wouldn't be able to hide behind the corporate veil of their LLC. I have since discovered that, in addition to having final say regarding decisions, including what checks are paid, they also actually charge the company a Management Fee. I don't think they have been paid the fee, but it is there on our books according to someone I know who has seen them. The Partners insist that they don't want to put anymore money into the company because they have already paid approx. $2.5million over the last few years. The sales pipeline actually has several large "potential" sales that might happen this year still....That's part of the reason I have not filed my claim...If they happen, all this might remedy itself. But, it's also possible that they might not happen too. The President, who is not one of the Partners, has said that he wants to get all payroll, commissions and other payables caught up by the end of the year. My question is this: If the Partners already have $2.5 million in the company, wouldn't they be stupid not to pay the $100,000 for back payroll to the employess? If the State comes in and orders them to pay...., or shut down the company...., and take their loss, wouldn't that be their 2 choices? Please let me know if it would be the right thing for me to do to force their hand into making that decision/choice. Thanks. XXXX XXXXXXX

Expert:  Joseph replied 9 months ago.
Hello John,

This is a new question, so you'll have to open it up as a new question due to JustAnswer site rules.
Customer: replied 9 months ago.


I do have an account now set up with JustAnswer. Not sure how to open it up as a new question. Should I reference my previous conversatons with you? Thanks.

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