What can I do if my payroll check bounces?

Asked on July 26, 2015 under Employment Labor Law, Michigan


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

First, if you haven't already, tell your employer what happened, ask them why it happened, and ask them to re-issue the check. Assuming this was a stupid, but more-or-less one-time glitch--for example, they forgot to move funds from one account to another to cover payroll; some checks from customers/clients didn't clear in time; etc.--then there isn't much to do once you get and deposit the new check. Legally, your employer should have to compensate you for any costs, fees, etc. you incurred due to this, like any overdraft fees; if they don't do that voluntarily, you'd need to decide whether it's worth suing over, since a lawsuit would be the only way to make them them pay--and even a small claims suit, acting as your own attorney, would likely cost as much or more than you'd get back.

If this wasn't a simple, one-time error, though, the situation is very different. If the employer does not reissue the paycheck, you could sue them for the wages they owe you plus any costs, fees, etc. And if they miss additional checks while you are suing, those additional losses could be added to the amount you're entitled to get in court.

However, the real issue isn't your legal right to be paid, since there is no doubt of that: the issue is whether, regardless of your rights and any legal actions you take, will or can you be paid. If the problem is the employer's business has or is failing, they may not have the money for payroll; or if someone is embezzling, diverting, pocketing, etc. the money from the company instead of using it on operations and payroll, again, there may be no money to recover. It doesn't matter if you win a lawsuit if the employer you sued has no money to pay the judgment.

If the employer is a corporation or LLC, you can only sue the employer itself; if it goes out of business, has no funds, etc., there is no where else to get the money from. If the employer is a sole proprietorship or non-LLC partnership, you could, however, potentially sue the owner(s) as well, and possibly recover from their own personal funds or assets.

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