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HELP!! A friend got sued by a former employee...


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Hello all,

I haven't been around much. My work has been keeping myself busy as of late. I hope everyone is well. :)

I have a friend who is in trouble. This week, he received a certified mail from the state of VA containing a "Notice of Service of Process" of Warrant in Debt. He is being sued by a former employee of a now defunct corporation for back wages. The employee claims that the corp owes him back wages from August 2000. The corp, of which my friend was a CEO, was declared defunct in April 2002 by the VA SCC.

My friend was not aware that there had been unpaid wages. Someone else in the company was responsible to issue paychecks. Additionally, as much as he wants to make good on all his debts (if he is indeed liable), he is not in a position to be able to make this payment anytime soon.

I know this is not a legal "credit" issue, but it is debt related, so I thought maybe someone here can point me to the right direction to help my friend out. My questions are as follows:

1. As what type of debt would back wages be considered? In the warrant in debt, it is specified as "other" with a handwritten description of "employment". I want to find out the statute of limitations on this matter. It has been more than 5 years since the employee claims the back wages were accrued, and it has been more than 3 years since the corp was declared defunct. There had been no communications regarding such claims prior to this notice.

2. What can my friend do to answer this claim? Since the corp is defunct, my friend is not sure whether he can get access to any records to prove or disprove the claim. The affidavit attached an exhibit A which is a copy of an employment offer letter which my friend signed. However, although it is stated that there is an exhibit B containing a copy of a paystub, it was not included in the notice. Would these two exhibits meet the burden of proof that the corp failed to pay back wages?

3. Can you point any additional resources that my friend could research prior to appearing at the hearing which is set for early January?

Much thanks, and best wishes for a safe, relaxing holiday!!

Regards,

TD

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In some situations there could be liability on the former owner/controller of the corporation. Commonly when enterprises fail they leave behind unpaid obligations and when these obligations include unpaid wages the state's labor board gets involved and usually at no cost to the former employee. The former owner would answer the complaint denying knowledge and demanding proof and then in court will need to open the records for inspection to determine where the money went.

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Hello all,

I haven't been around much. My work has been keeping myself busy as of late. I hope everyone is well. :)

I have a friend who is in trouble. This week, he received a certified mail from the state of VA containing a "Notice of Service of Process" of Warrant in Debt. He is being sued by a former employee of a now defunct corporation for back wages. The employee claims that the corp owes him back wages from August 2000. The corp, of which my friend was a CEO, was declared defunct in April 2002 by the VA SCC.

My friend was not aware that there had been unpaid wages. Someone else in the company was responsible to issue paychecks. Additionally, as much as he wants to make good on all his debts (if he is indeed liable), he is not in a position to be able to make this payment anytime soon.

I know this is not a legal "credit" issue, but it is debt related, so I thought maybe someone here can point me to the right direction to help my friend out. My questions are as follows:

1. As what type of debt would back wages be considered? In the warrant in debt, it is specified as "other" with a handwritten description of "employment". I want to find out the statute of limitations on this matter. It has been more than 5 years since the employee claims the back wages were accrued, and it has been more than 3 years since the corp was declared defunct. There had been no communications regarding such claims prior to this notice.

2. What can my friend do to answer this claim? Since the corp is defunct, my friend is not sure whether he can get access to any records to prove or disprove the claim. The affidavit attached an exhibit A which is a copy of an employment offer letter which my friend signed. However, although it is stated that there is an exhibit B containing a copy of a paystub, it was not included in the notice. Would these two exhibits meet the burden of proof that the corp failed to pay back wages?

3. Can you point any additional resources that my friend could research prior to appearing at the hearing which is set for early January?

Much thanks, and best wishes for a safe, relaxing holiday!!

Regards,

TD

Happy you posted here. Check your state statutes. There must be a statute of limitations on this. I believe it is one year in the state of Florida. I had researched under GENERAL LABOR REGULATIONS, CHAPTER 448, FLORIDA STATUTES, §448.07(3).

It appears that NO employee should be able to go as far back as five

years for some Unpaid Wages. That's outrageous! If an employer owed me any money I know I would not wait five or six years to sue.

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Thank you for all the replies so far!! You guys are great!! :D

Upon reading your responses, it seems that SOL would be the way to go for defense.

I did a bit of research on FLSA (Fair Labor Standards Act) and apparently the SOL is 2 years for back wages, or as much as 3 years if it's determined to be "wilful" (which in this case it is not since he didn't even know this happened). In either case, the claim is definitely passed the SOL. So, if this applies to my friend's case, it seems that he can bring up the SOL defense.

June, that's great info about Florida labor laws. I'll definitely look into Virginia labor laws more closely, specifically on SOL.

Just as a "plan B" defense, I guess if it were me, I don't think that an employment offer letter and a copy of a paystub constitutes as convincing evidence that one is owed back wages. I mean, if this was enough, anyone who has a copy of his/her employment letter and paystub could sue a former employer for back wages, whether or not the claim is valid. That doesn't sound right. I guess what I'm asking is, whose burden of proof is it to show that the claim for the alleged back wages is valid? Is it up to the former employee to show this, or is it up to my friend to dispute its validity?

Thanks again for all the responses so far!

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It also depends on the type of corporation and your friends ownership. If it was a C Corp, LLC, or LLP, your friend probably has no liability at all for back wages (back taxes are another matter). If it was an S Corp, there may be a problem. If it was operated as a sole proprietership, that too may be problem.

Your friend needs a lawyer, as each state has a slightly different take on some of this.

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In some situations there could be liability on the former owner/controller of the corporation. Commonly when enterprises fail they leave behind unpaid obligations and when these obligations include unpaid wages the state's labor board gets involved and usually at no cost to the former employee. The former owner would answer the complaint denying knowledge and demanding proof and then in court will need to open the records for inspection to determine where the money went.

I just asked my friend, he was not contacted by the state's labor board at all. This notice of service was the first he heard about any back wages.

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It also depends on the type of corporation and your friends ownership. If it was a C Corp, LLC, or LLP, your friend probably has no liability at all for back wages (back taxes are another matter). If it was an S Corp, there may be a problem. If it was operated as a sole proprietership, that too may be problem.

Your friend needs a lawyer, as each state has a slightly different take on some of this.

Hi willing!!! :)++

The corp was a private C Corp. You're right that he definitely needs a lawyer. But, his funds are limited, and I guess he wants to see that if he can simply bring up the SOL defense, he'll try to handle this himself. I'll definitely still strongly suggest to him that he gets a lawyer though...

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Again, state laws vary, but based on our experience in Ohio, if it was a C

Corp and even if you friend was an owner...its the C Corp that was responsible for back wages and your friend has no liability. Did the C Corp declare BK or just cease operations. With a BK, even the Corp's liability is discharged...in either case, I don't think I'd bother with the SOL (as that does at least IMPLY some liability) I'd respond with a "...ain't my responsibility..." kind of letter. Maybe there's a legal aid operation your friend can turn to.

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You can claim SOL without admitting liability.

"I have no knowledge of the accusations made by the Plaintiff. It is the Defendants belief that he is not responsible for the damages sustained by the Plaintiff for the following reasons:

1 The Defendant has no knowledge of the Plaintiff's case, nor is he in possession of any documentation to investigate the Plaintiff's claim.

2 The Defendant believes he is not personally responsible for any acts, omissions or transgressions committed by the ------ Corporation.

3 The statute of limitations in FLSA cases has long since run out on this debt and due to the extensive delay in filing this case, the Defendant feels that locating documentation to defend himself from the Plaintiff's claims would be difficult if not impossible to achieve."

Or something like that.

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