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Does bankruptcy mean employees won’t get paid?

by on
in Employment Law,Human Resources

Q. Can an employer that files for bankruptcy refuse to pay employees for their work and blame the bankruptcy court for not allowing them to? — Sabrina, Texas

A. Yes. Once an entity has filed for bankruptcy, the creditors get in line to see who will get paid from the assets. Employees typically have a better claim for unpaid wages than do other unsecured creditors. But that doesn’t mean they are first to get paid. Once the employer has filed for bankruptcy, it may not pay any debt unless and until the bankruptcy court approves the distribution of the remaining assets.

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