We all know it’s tough out there in the economy today. Just the other day we ran across a posting to a forum in which a very anxious fellow was asking how he could get money he’s owed from a former employer who’s now going through bankruptcy. Other forum members related similar stories about being told by former employers that because the company is in bankruptcy people can kiss those unpaid wages goodbye.
Now what an online forum says is one thing. What the law says is quite another.
And at least in Washington, our Supreme Court has clearly held that the fact that an employer has declared bankruptcy does not excuse the officers of that employer from paying unpaid wages. The case of Morgan v. Kingen, 166 Wn.2d 526 (2009), involved a lawsuit brought by former employees against the CEO and CFO of a casino that was now involved in bankruptcy proceedings. The former employees claimed that they had not been paid a cumulative total of $179,000 in unpaid wages. The CEO and the CFO did not dispute that the wages were unpaid but argued that their failure to pay was not “willful” because the bankruptcy court deprived them of the ability to choose to pay the wages owed.
The Court grappled with the issue of whether “financial status” (i.e. bankruptcy) is a defense to avoid personal liability for paying wages owed to employees. After discussing its previous decision on this issue, the Court held that “bankruptcy of the corporation is not a means to escape personal liability by those who failed to pay wages owed.” The Court noted that in Washington there is a strong policy favoring full payment of wages that have been earned. The Court rejected the competing policy offered by the CEO and the CFO, and supported by a long list of very interested business groups, that failing to allow bankruptcy to excuse payment of wages owed would dissuade entrepreneurs from starting businesses in Washington.
So as useful as online forums can be for getting help with how to change your oil or to refinish furniture, they’re probably not the best place to get your legal information or assistance—especially where hard earned wages are concerned.