My business is crashing hard!!! Like really hard… I had to let go of some of my employees and they had many hours of PTO that I cannot pay due to clients not paying their invoices. I currently owe $7k in PTO and Sick time to employees but I have $20k outstanding from clients not paying.
What happens I’m freaking out!!! I need help!!
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You have to pay what your employees are owed… borrow it, pay it out of pocket, sue your clients… Unless you are claiming bankruptcy and shutting down the business expect to pay payroll.
It is best to pay it up front rather than wait for a labor lawyer and the government to come after you because they will look for damages, at which point it won’t just be a few hours of unpaid PTO, it will be tens of thousands per employee, plus any lawyer fees you need to deal with…
Other people suggest lawyering up yourself honestly unless you think you have a way out of paying your employees legitimately this is probably just a waste of money… but a conversation never hurt anybody if you already have a lawyer on retainer.
Do you have an employee handbook? What does it say about PTO? Most States don’t require you to have PTO, but if you offer it, you need to pay it.
I mean you have two options. You find a way to pay it (credit, personal funds, get clients to pay, whatever), or you get a lawyer. Up to you to decide which is more financially viable. But, in almost all jurisdictions, withholding PTO is going to be treated the same as withholding wages. So, plan accordingly
As a business owner, I would advise to shutdown the business and file for bankruptcy.
Start anew and learn from your mistakes. Don’t stress about employees, they don’t stress about you. The government is unforgiving to businesses having a really hard time. Everyone will want their pound of flesh.
In CA, you can go to prison for evading these payouts. So…good luck!