Employment Law Questions? Ask an Employment Lawyer.
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You would have no "legal" basis for withholding the money for this reason. You could be sued for breach of contract. However, that would typically be the extent of the risk for you, and if you feel that is a risk worth accepting in order to put added pressure on this employer to pay their employees, then it is certainly something you could consider. But it's not as though you would somehow be insulated from a breach of contract lawsuit or not be required to pay what you owe simple because the person to whom you owe the money owes money to their employees.
If I can clarify anything at all for you, please do not hesitate to ask. It is my pleasure to assist you further if necessary....
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In any event, it was a pleasure assisting you and I would be glad to attempt to assist you further on this issue, or a new legal issue, if needed.
Very best wishes.