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Business Foreclosure with unpaid employee wages, payroll…

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Business Foreclosure with unpaid...

Business Foreclosure with unpaid employee wages, payroll taxes, etc...it seems that the lender in first lien position comes ahead of the employee wages in liquidation, but I also hear that employee wage law suits can come after anybody and everybody they may name in the suit, including managers, payroll clerks, owners, shareholders, etc....notwithstanding foreclosure proceedings. I am an employee/manager, and I am unclear what my legal exposure is here in the after math of this business foreclosure.

Lawyer's Assistant: Since laws vary from place to place, what state is this in? And has any paperwork been filed?

I live in NC, but the business had locations in 5 states and employees in a few more than that.

Lawyer's Assistant: Has anything been filed or reported?

There is a foreclosure agreement between the company and the first lien position lender. I am not sure what else should or has been filed. To my knowledge, this has not been filed as a bankruptcy.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

What details could I share that would help match me to a lawyer that is a good fit for this kind of scenario?

Submitted: 1 month ago.Category: Legal
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Answered in 23 hours by:
3/14/2018
Lawyer: Michelle-mod, Moderator replied 1 month ago
Michelle-mod
Michelle-mod, Moderator
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Customer reply replied 1 month ago
I would love some feedback still.
Lawyer: Legal Eagle, Lawyer replied 1 month ago
Legal Eagle
Legal Eagle, Lawyer
Category: Legal
Satisfied Customers: 10,429
Experience: Licensed to practice before state and federal court
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Hello! I am a licensed attorney, admitted to practice in state and federal court. I have a nearly 100% satisfaction rating (click here for more info) so all that means is that you can count on me to help today. Because I want to provide you with the most accurate answer possible, do you mind if I take a moment to review your question?

Please keep in mind that our conversation does not include an attorney-client relationship and this is for general information purposes only.

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Lawyer: Legal Eagle, Lawyer replied 1 month ago

Thanks very much for your patience. Did you have any ownership stake in the organization? Also, were you denied any wages at all?

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Customer reply replied 1 month ago
I do have unrecieved wages. I do have an ownership position.
Lawyer: Legal Eagle, Lawyer replied 1 month ago

I see what you mean. Ok, so when you mentioned that the business was foreclosed upon, could you describe that more for me? Usually, foreclosures are only appropriate when a lender is foreclosing on some lien they have against personal property or real property, not against a business itself. Did you mean that the business just dissolved?

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Customer reply replied 1 month ago
There was a foreclosure agreement between the company and the 1st position lien holder. The position is secured by all assets and A/R.
Customer reply replied 1 month ago
The agreement stipulated that when management determined the business was no longer a viable going concern, the foreclosure agreement would come out of escrow and go into affect.
Customer reply replied 1 month ago
What management did not anticipate was upon foreclosure the foreclosing lender took a position to not pay payroll taxes and even some pay two employees for the final pay.
Lawyer: Legal Eagle, Lawyer replied 1 month ago

I see what you mean. Thank you for clarifying. So, to answer your question, employees are entitled to pay for all hours that they have worked regardless of the position of the company. A lien holder has the right to the assets of the company if it is dissolved and liquidated. These two issues are separate. The business is still responsible for making sure that you get paid, but the lien holder is the one that will be able to recover the money from any assets that are sold of the company. Whoever is still running the business must still ensure that payroll is met even if their assets are being sold.

In your case, as a part owner of the company, it is likely that you are responsible for making sure payroll is met, but you will also have to ensure that the lien holder gets their share of the money. The trouble is that employees like yourself could go to the department of labor and still hold the organization accountable for making the payroll requests. The company's failure to do so could result in additional fines and penalties they would have to pay.

What other questions did you have for me today that I can help you out with:-)?

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Customer reply replied 1 month ago
Should we allow that scenario to play out, we fear IRS would seek recoupment of payroll taxes from the officers or even owners long after the foreclosure company has liquidated assets and has moved on. In some wage law scenarios I have heard claims can even be made against any named party including managers, payroll clerks, etc.
Lawyer: Legal Eagle, Lawyer replied 1 month ago

I understand your concern. Generally, if the IRS or your state taxing agency gets involved, they're only going to be concerned with getting money from the company itself. Unless the government can prove that the owners acted in a fraudulent or intentional manner to defraud the employees or taxing agencies, it is unlikely anyone would be held personally liable, including managers or payroll clerks. Owners of the company might be held liable; however, employees are not going to be held liable because they're just agents. The only exception would be if the agents acted fraudulently or intentionally themselves. Does that make sense?

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Customer reply replied 1 month ago
The laws seem mutually exclusive and conflicting. 1st lien holders come ahead of employees in liquidation, but law dictates that employees must be paid. If there is not enough money for both, then one if the two parties is short paid.
Customer reply replied 1 month ago
The Lender will fight for creditor rides with no concern for employee rights. The company owners want to fight for employee rights and limit their personal liabilities, but have a little leverage over the lender.
Lawyer: Legal Eagle, Lawyer replied 1 month ago

I can totally understand your concern with this. The law does seem conflicting. Lien holders and employees seem to share equal footing. I think that what's important is that you and the other owners speak with the lien holders about this and come to an agreement. The reason is because the government has authority and if they seize assets to help make payroll, the lien holders will have to beg a judge to let them get paid. If the lien holders are smart, they'll use that money to pay the obligations first and then take the rest.

What other questions did you have for me today that I can help you out with:-)?

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