Friday, March 4, 2011

Can I Get Paid in Pennsylvania if the Company Has Filed for Bankruptcy?

Recently, I posted two articles concerning claims for severance by executives and wages by employees of bankrupt companies. 

In Pennsylvania, it is important to understand how these principles intersect with Pennsylvania's Wage Payment and Collection Law ("WPCL").  Perhaps the best discussion of this issue is found in the Protarga bankruptcy decision issued out of Delaware in 2005.  Click Here to read that case.  Another excellent resource is the Belcufine v. Aloe decision issued by the Third Circuit in 1997.  Click Here to read that case. 

Simplified, these cases stand for the following propositions:

1) Individual managers who participated in the decision to withhold wages due and owing prior to the filing of the bankruptcy decision may be individually liable for their decision to withhold and not pay such wages.  Employees may collect attorneys' fees and costs from the individual decision-makers, and may also collect the 25% penalty that is authorized by WPCL against such decision-makers;

2)  Individual managers may NOT be individually liable for wages that were due but unpaid after to the filing of the bankruptcy decision (such as long-term severance payouts);

3)  Long-term Company obligations that become due and owing subsequent to (or during) the bankruptcy, such as severance long-term severance payouts to terminated executives), are capped at 1 year of the severed executive's wages, plus any benefits offered in addition to the severance payments;

4) Executives with such claims may not seek attorneys' fees under WPCL on such claims, nor may they seek the 25% penalty.

Whether we like these decisions or not, they are well-reasoned and likely constitute the law of the land in Pennsylvania, and within the Third Circuit as well.  Other states with laws similar to Pennsylvania's WPCL may also find the rationales in these decisions persuasive. 

John A. Gallagher, Pennsylvania Severance and Wage Lawyer, Paoli, PA, 610-647-5027

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