When a company faces financial difficulties, bankruptcy can be a way to recover. If restructuring and becoming profitable again is the goal, Chapter 11 is the answer. When becoming profitable again is not feasible, a business owner may opt to file for Chapter 7 bankruptcy instead.
As a manager or business owner facing bankruptcy, it can be difficult to determine the best way to tell your workforce about it. Do not avoid the topic or let rumors develop. As a leader in your company, it is your responsibility to be realistic with employees and tell them the truth about the changes that are coming to the company, whether they will involve a restructuring, downsizing, merging with another company, or going out of business.
If a Layoff is Coming, you Must Comply with WARN
The Worker Adjustment and Retraining Notification Act of 1988 requires employers with 100 or more employees to notify employees at least 60 days in advance about large-scale layoffs. Do not wait to let your employees know that you will be cutting jobs. Although it can be difficult news to break, it is necessary to tell them that layoffs are on the horizon.
Communicate the Type of Bankruptcy the Company is Filing and What Employees Should Expect
Control the bankruptcy narrative. Before rumors arise and misinformation gets out of control, discuss the bankruptcy with your management team. Give them all the details they need to know and need to pass onto their teams, including:
- Whether you have already filed for bankruptcy or you are still planning to file;
- The changes you anticipate and what they can expect; and
- As the bankruptcy process progresses, updates about it.
Your management team and employees will have questions about the bankruptcy. Be prepared to answer them truthfully.
Do Not be Afraid to Discuss the Status of Unpaid Wages
If you file for Chapter 7 bankruptcy, employees will likely be concerned about receiving their pending wages. In a bankruptcy filing, secured creditors have the highest repayment priority. The next highest priority is any parties to whom the company owes wages and commissions.
When a company files for Chapter 11 bankruptcy, each employee is entitled to up to $12,850 of any wages, salary, or commissions he or she earned during the 180 days leading up to the date the company filed for bankruptcy. When the company has sufficient resources to fulfill this obligation, it must do so.
Work with an Experienced Fox River Grove Bankruptcy Lawyer
Facing bankruptcy can be difficult emotionally as well as financially. When you are in this position, work with a bankruptcy lawyer you feel you can trust. Learn more about bankruptcy and all of your options by speaking with one of the lawyers at Newland & Newland, LLP. Contact our office today to schedule your legal consultation with us to get started. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Glenn Carstens)