Does a company in "foreclosure" have to honor employment agreements - specifically severance pay?
My company CEO just announced to the team yesterday that the company has no cash and will be letting all but 5 people go in a mass layoff. Keeping the 5 people is for the purpose of managing an asset sale (patents, IP). As a result, he stated they will not be paying severance (because the have no cash). I have other details about liabilities and receivables (as well as cash in the bank) and know that they are continuing on with a significantly reduce operation. Shouldn't they have to honor the employment agreements since they are still going to be in business?
1 answer | asked May 6, 2010 05:36 AM [EST] | applies to Ohio
Answers (1)
The very first thing to do is to have an attorney look at the "employment agreement" to see whether or not it actually is a binding agreement. If so, and the employer is indeed obligated to pay a severance by contract, an analysis should be made to understand how the company is winding up its business. (You don't state whether or not the company is filing for bankruptcy protection.)
Due to its financial condition and the lack of assets available to pay these severance packages my sense is, even if separated employees should be paid, secured creditors stand ahead of the employees.
But I could be wrong. So, engage an attorney to
determine your options.
Neil Scott Rubin
Attorney at Law, LLC.
P.O. Box 691
Twinsburg, Ohio 44087
phone: 216-923-0333
fax: 330-405-0907
email: nsrubinlaw@hotmail.com
This email message is not meant to: 1) contain my signature; 2) contain legal advice; 3) create an attorney/client relationship; or 4) guarantee confidentiality.
posted by Neil Rubin | May 6, 2010 05:55 AM [EST]
Due to its financial condition and the lack of assets available to pay these severance packages my sense is, even if separated employees should be paid, secured creditors stand ahead of the employees.
But I could be wrong. So, engage an attorney to
determine your options.
Neil Scott Rubin
Attorney at Law, LLC.
P.O. Box 691
Twinsburg, Ohio 44087
phone: 216-923-0333
fax: 330-405-0907
email: nsrubinlaw@hotmail.com
This email message is not meant to: 1) contain my signature; 2) contain legal advice; 3) create an attorney/client relationship; or 4) guarantee confidentiality.
posted by Neil Rubin | May 6, 2010 05:55 AM [EST]
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