Can a company that goes out of business not pay you for the last 2 weeks of work or your earned vacation?
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Can a company that goes out of business not pay you for the last 2 weeks of work or your earned vacation?
My fiance’s employer went out of business suddenly this past week. He did not receive a paycheck for his previous week’s work. There was no notice that the company was shutting it’s doors; he went in on Thursday and was told Friday would be the last day, There was no further instruction about when they would receive their final paychecks or accrued vacation. It’s also rumored that the company hadn’t been paying their health insurance for about 4 months, even though the employees had been paying their portion. At this point, we don’t know when/if he’ll be paid for the last 80 hours he worked.
Asked on February 19, 2012 under Employment Labor Law, Maryland
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Legally, the obligation to pay employees for all work done does not end because a business shuts its doors. Practically, however, it often may as well end--that's because if the business is a corporation (inc.) or limited liability company (LLC), when it goes out of business, there may be no money or assets left to collect from; the owners are shielded from most liability, so they generally can't be personally sued, which means that if they simply drain the bank accounts and stop operations, there is no one and nothing to recover money from.
If the business was a sole proprietorship, on the other hand, the owner would be personally liable and you could sue him or her for the money owed your fiance.
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