My company owes me (and other employees) 5 paychecks (plus travel expenses)… what can we do?

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My company owes me (and other employees) 5 paychecks (plus travel expenses)… what can we do?

California.For the past 7 months, our paychecks have been regularly late, and lately, they’ve been piling up. I am currently owed 5 paychecks, plus some reimbursement for travel expenses (I paid for the room) from a business trip. I’ve been patient so far, but they’re causing me to be late on bills now. Also they require all in-house employees to be “contract” employees (making us take out our own taxes) and rarely approve overtime but set deadlines that force us to work extra hours if we intend to meet those deadlines. What can/should I do (and yes, I intend to find new work)?

Asked on June 2, 2009 under Employment Labor Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

First, about the paychecks and the travel expenses--they absolutely owe them to you. (I'm going to assume that you can prove the hours and the expenses--you have time sheets or the equivalent, receipts, etc.) You can bring a legal action against them to recover the money, as well as to recover any other expenses or damages you've incurred because they haven't paid them. For example, if you had to charge expenses because you didn't have the cash, you can look to recover the interest; if you bounced checks, you can look to recover bounced check fees. Of course, to effectively bring a legal action, you'll need an attorney, but if there are several of you who are all affected, you can pool your resources and hire an attorney jointly to reduce the cost.

However, if they're not paying you, you may wish to consider stoping working for them--or at the very least, you could tell your company you will not do any more work until they pay (most if not all). You need to make the judgement as to whether to try that based on your reading of whether they have any money, how much leverage you have, etc.

Note that if they look like they may declare bankruptcy, you *really* want to try to get whatever you can out of them first--once they declare bankruptcy, money owed to employees becomes just another obligation of the bankrupt company, and you're left fighting for the scraps with other creditors. Not to mention that bankruptcies can drag on for a *long* time, during which you would not be paid.

As to the other issue--there are rules for determing whether a worker is an independent contractor (and so responsible for own taxes, including self-employment taxes) or whether they are an actual "employee" for whom the company has to withhold and pay part of FICA. Businesses cannot just arbitrarily classify a worker as one or another, but instead have to follow the rules, which include looking at whether the employee works onsight and whether the employee is directly managed by company staff (generally, independent contractors are given goals or tasks--edit this book, sell these encyclopedias, program this software, etc.) but are not actively managed in how they do it. If you were an in-house worker, odds are you were actually an employee and the company should have been withholding for you.

Furthermore, if you were an employee but were not an "exempt" employee, such as a manager or a professional (like a lawyer), odds are the company MUST pay overtime for hours over 35 during a week.

If you think you were mistakenly treated as an independent contractor when you were actually an employee and should have gotten overtime, you should call your state's Labor Dept. and get them involved.


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