It’s the last thing you expected when you filed a lawsuit against your employer: the company has filed for bankruptcy. You are disappointed and confused about your rights, as bankruptcy is meant to clear certain debts that are owed by your employer in order to give them a fresh start. But you are not an ordinary creditor, like a bank or mortgage company. You are a worker whose rights were violated, and you are in the middle of an employment rights lawsuit against the debtor.
“Can I still sue a company that has filed for Bankruptcy for wrongful termination / discrimination / wages and hour disputes?”
There’s no denying that a Chapter 11 or Chapter 7 bankruptcy filing will complicate things for you. But there’s no reason to give up on your lawsuit and the payment you deserve as the victim of unfair treatment in the workplace. We can discuss your available legal options and help you move forward with your lawsuit. Contact the labor law attorneys of Normandie to learn about your rights during a free case evaluation.
Can I Continue my Employment Rights Lawsuit if My Employer Files for Bankruptcy?
Your right to continue litigation against your employer depends on your ability to be exempt from the automatic stay that’s issued by the bankruptcy court. When a company or individual files a bankruptcy petition, there is a freeze on all litigation against the debtor, including demands for payments from an employment rights lawsuit. Thus, if you have a pending lawsuit for wrongful termination, discrimination, wage violation, etc., you would have to stop all efforts to recover compensation from your employer.
Any attempts to violate the stay and demand payment from the petitioner is punishable by the court. Most likely, you will be ordered to cover your employers’ legal fees and any monetary damages resulting from your efforts. To continue with your lawsuit, you will need to be exempted from the automatic stay or continue the lawsuit with the bankruptcy court.
The right strategy for your case depends on the type of bankruptcy that’s being filed and whether your claim was filed as part of the bankruptcy. Due to the complications that are involved, it’s best to leave this in the hands of an experienced workers’ rights lawsuit attorney. For a free case review on how to continue a lawsuit against your employer after a bankruptcy, contact our law firm.
What if the EEOC is Handling my Case?
Based on the circumstances between you and your employer, you may have a pending claim with the U.S. Equal Employment Opportunity Commission (EEOC). Normally, the stay on litigation against employers applies to hearings by the EEOC for claims involving civil rights violations against an employee.
However, there is an exception for “public interest” cases, meaning that your case serves a higher purpose than compensation to cover your monetary losses. Examples include employment discrimination claims that affect many workers at a company, or human rights issues that have the potential to impact workers’ rights throughout the country.
The bankruptcy courts can make an exception for legal proceedings that meet these standards, though this is, of course, on a case-by-case basis. If an exemption is granted, the EEOC and any state agencies involved in the case may continue legal proceedings against the employer.
Steps You Should Take to Protect Your Claim
Asserting your rights and protecting your right to compensation is crucial when you are suing an employer that has filed for bankruptcy. Filing a proof of claim is the first step you should take, which one of our attorneys can assist you with. A lawyer will ensure that your proof of claim is filed by the correct deadline and that you include all the necessary information, including supporting documents (employment contract, any previous judgments, list of compensable damages, etc.).
How to Request that the Automatic Stay be Lifted on Your Case
The answer to this question is quite complicated, so we recommend that you schedule a time to discuss the legal process with one of our attorneys.
Essentially, you will need to prove that there is legal justification to allow your lawsuit to continue, even with a pending bankruptcy petition. To make a determination in your case, bankruptcy courts consider numerous factors, including:
- Is there insurance coverage that’s available to defend the debtor in a legal proceeding?
- Will defense of the suit impose an unreasonable financial burden on the petitioner?
- Does your case have a high chance of success if it were allowed to proceed?
- Are there bankruptcy law issues that need to be addressed before the employee’s lawsuit continues?
After considering all the relevant factors, the bankruptcy court may lift the stay to allow your lawsuit. Once you obtain a judgment in your favor, you will need to wait until the remaining assets are distributed in your employer’s bankruptcy case.
Do Certain Claims against an Employer have Priority in a Bankruptcy?
Yes, wage and hours claims have priority over other employment dispute cases, according to the bankruptcy laws. This is good news if you have an employee wage claim against your employer, but it’s important to understand how your claim is paid and how much you can receive. Your payment will be issued after payment is made to cover the
administrative expenses of the bankruptcy. In addition, your compensation award will be for unpaid wages and other damages earned within 180 days before the bankruptcy was filed.
There are additional guidelines that dictate the amount and method on how these claims are paid by the bankruptcy court. For more information on wage and hours violation claims against a bankrupt employer, please give us a call.
Will a Bankruptcy by my Employer Affect my Workplace Injury Claim?
Your employer filing for bankruptcy will not affect your right to worker’s compensation benefits. This is due to the fact that benefits for at work accident claims are paid by the state of California, not by your employer. Thus, you should have no problems receiving payment if your claim was approved or continuing to get paid on an existing claim.
Most employers obtain workers’ comp insurance coverage with an outside company. In these situations, there should be no disruptions at all to your benefits, since a company other than your employer is handling your claim. If your employer is self-insured, on the other hand, there may be delays, as an automatic stay is placed on all debts and monetary claims.
Your employer is still responsible for paying out the remainder of your claim, but an outside administrator may be appointed to handle this task. In the event your employer lacks the funding to fulfill your claim, benefits will be provided through the state’s Self-Insurers’ Security Fund (SISF).
Free Legal Services from a Labor and Employment Attorney
It’s likely that you have many questions about the information we’ve presented here today. That’s perfectly normal, as bankruptcy laws are highly complicated to begin with. When you couple that with the complexities of a labor law dispute, it’s more than likely that you will feel confused and defeated about your prospects of recovery.
Having an experienced lawyer by your side is essential when you are trying to sue an employer that has filed for bankruptcy. We can help you explore every possible avenue to continue your claim and receive the compensation you deserve. Here at Normandie, we have skilled attorneys with extensive experience in the Bankruptcy Code, as well as federal and state labor laws on issues like wrongful termination and wage and hour complaints.
Our legal services are free to you, as we offer a Zero Fee Guarantee to all of our clients. We ask for payment from your employer, which is paid to us along with your settlement check. This is the only way we get paid, so there’s no need to worry about legal fees if we don’t win your case.
Normandie Law Firm is here for you 24 hours a day, 7 days a week. Contact us anytime if you need assistance with a workers’ compensation or employment law violation claim.
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