Can an employer not pay me because they don’t have the money to cover payroll?

UPDATED: Dec 23, 2011

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Can an employer not pay me because they don’t have the money to cover payroll?

My boss has, for the last 3 pay periods, not paid us on payday because he didn’t have enough to pay the accounting firm that does our payroll.

Asked on December 23, 2011 under Employment Labor Law, Indiana


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Legally, can your employer not pay you because they don't have money? No...not having the money to pay is not a legal defense to a debt or obligation, including for wages.

Practically, if they don't have money, of course--truly don't have money, and not merely don't want to spend what they have on payroll--you may not be able to be paid; no matter what the law says, there must be money available.

In a case like this, the employer could stop using the accounting firm and cut payroll checks manually to reduce costs; this may be a case where they they choosing to not spend the money on paying staff, rather than being completely unable to do so. Also, if they are continuing to pay vendors or pay for operations, then again, they may have money but may be choosing to not pay. They could also partially pay employees, if they can't cover the whole payroll.

In short, there is at least some reason to think that the company is choosing to not pay for some reason. Therefore you--possibly with other affected coworkers--might want to consult with an employment law attorney about the situation, and about whether you should take legal action.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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