Can I be sued for a check that was cashed after I put a stop payment on it?

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Can I be sued for a check that was cashed after I put a stop payment on it?

We wrote a check to an employee as an advance $300 and then he did not show up for work. We issued a stop payment. He then successfully cashed the check 3 days later at a check cashing establishment, but our bank did not honor it when they tried to deposit. They are now threatening legal action. My bank says that we are not liable but I am getting concerned by the tone of the calls that we are getting.

Asked on June 11, 2012 under Employment Labor Law, Texas

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

You are not liable. Check cashing places do not have the same legal restrictions or mechanisms in place as banks. With banks and the laws surrounding expidited funds availabilty, the bank has a system in place to ensure monies are debited from the check depositers account if the check is honored by the original payor and payor bank. A check cashing place has no recourse but to sue the entity who presented the check to cash -- somehow your employee knew the check would not be honored is my guess. Therefore, the check cashing place should go after the employee not you and you can continuously inform them they are not violating the Fair Debt Collection Practices Act because you are not a debtor.


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