Business Bankruptcy And Your Employees: 4 Important Issues
If you are a business owner and have a company that is currently struggling, filing a business bankruptcy may provide the best possible solution. Eliminating unsecured debts while liquidating assets or restructuring contracts can address the problem, allowing you to make a fresh start. However, if you employ others, their rights and general well-being are a major concern. The following are four key issues to consider:
- Informing employees of bankruptcy filings.
Under the Worker Adjustment and Retraining Notification (WARN) Act, companies with more than 100 employees are required to notify workers in advance of plant closings and mass layoffs. This could impact you if you file a Chapter 7 bankruptcy, referred to as a liquidation of assets and often used when closing a business. Even if you opt to file for Chapter 11 or 13 bankruptcy, which allows you to remain open while restructuring debts, cutting costs is often part of the process. If your bankruptcy includes eliminating certain positions, you may need to provide the proper notification.
- Employment agreements.
When filing for Chapter 11 or 13 business bankruptcy, you have the option to renegotiate contracts with vendors and suppliers or even cancel them completely if it is in the best interests of all involved. Employee contracts, such as employment and non-compete agreements, are similar, as you can either choose to assume the contract or reject it. However, rejecting it would constitute a material breach. This means the employee would not be subject to certain stipulations, such as non-compete clauses.
- Employment regulations and lawsuits.
When you file a business bankruptcy, an automatic stay goes into effect. This protects you against further collections efforts, including lawsuits. You are still required to follow state and federal regulations and can face penalties if you do not. For example, the Occupational Safety and Health Administration (OSHA) may conduct inspections and employees may file whistleblower or discrimination claims. Any fines, back pay, or damages sought may be given special priority status in your bankruptcy proceedings.
- Back pay and benefits.
Filing for bankruptcy does not relieve you of the obligation to pay your employees. Any back wages owed from the prior 180 day period are given priority status in regards to payment plans. This includes contributions to retirement plans or pension benefit plans. You may also have certain obligations regarding health insurance benefits, including offering continuing coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
Let Us Help You Today
Filing a business bankruptcy can provide a solution for your current financial problems. It can help liquidate assets in the event of a closure or restructure debts, allowing you to overcome temporary setbacks. In considering your options, reach out to the Law Office of Harry D. Lewis. When dealing with employee issues, we protect your rights while guiding you in the best course of action. To request a consultation, give us a call or contact our New York City business bankruptcy attorney online today.