Employee Rights When Employer Goes Bankrupt in San Diego

By Corey Hanrahan

Many employees in San Diego are concerned about their future after learning that their employer is going bankrupt. Employees will be affected by the bankruptcy in two ways: they may lose their job or they may not be paid for work already completed. After an employer declares bankruptcy, the company’s assets are liquidated and used to pay off creditors. This means that if a company owes money to its employees, it cannot use those assets to pay them what is owed.

Employees might have to go through a lengthy court process as part of bankruptcy proceedings and income from work completed before the bankruptcy filing might not be paid until later during this court process or might never be paid at all if there are insufficient funds. In some cases, employees will not receive any payments because of how long it takes for litigation to occur and how much time passes before the courts make a final ruling on claims filed against employers who went bankrupt earlier on in these proceedings.

“…Employees should consult with an employment attorney who specializes in employee rights issues when seeking out legal advice related to possible lost wages

Employees should consult with an employment attorney with experience in employee rights issues when seeking out legal advice related to possible lost wages due to an employer’s bankruptcy filing or potential unemployment based on an anticipated layoff that could result from a business closure.

If an employer with 20 or more employees goes bankrupt, the federal government may have to step in to protect the employees. Employees have protections under the Worker Adjustment and Retraining Notification Act (WARN) if their employer closes or moves more than 50 miles from their location. The WARN Act protects workers from losing their jobs without appropriate notice.

The law also protects employees from being laid off without sufficient notice; ensures that they are not terminated before retirement eligibility; and provides them with assurance of a 60-day retention period for health benefits and other benefits such as COBRA continuation coverage. The WARN Act protects workers by requiring employers to give ample notice before shutting down a business, relocating a business, or terminating an employment due to relocation of the company’s headquarters.

This allows employees time to find new jobs and make necessary arrangements before they will be jobless or involuntarily relocated. For example, if certain employers are closing their doors, they sometimes must give at least 60 days written notification before closing its doors so that all of its employees can prepare themselves accordingly so as not to lose any wages due to lack of work offered in a shrinking economy where jobs are scarce for qualified applicants. 

If your employer goes bankrupt, there are certain employee rights that you should be aware of. In the state of California, employees are given certain protections under the law. For example, if you are owed wages or commissions, you are considered a priority creditor and must be paid first. This means that even if your employer is unable to pay everyone who is owed money, you may still receive your wages.

If you have been laid off or had your hours reduced as a result of your employer’s bankruptcy, you may be entitled to unemployment benefits. Please contact The Hanrahan Firm if you have any questions about your employment, or your rights to wages.