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

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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

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 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.


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