Help! My Boss Can’t Make Payroll and I Just Found Out He Went to Jail

I know the title sounds a little click-baity, but it’s true. A good friend of mine came to me with one of the most interesting personal finance problems I’ve ever heard of this weekend. Not only could his boss not make payroll, but the boss had an unknown criminal record. To protect his identity from his shady (former) employer, I’m keeping his identity anonymous. Here is the summary of his story:

The Story

I always wanted to work on airplanes in college, so I got a degree in aerospace engineering. When I graduated, I started out with a generic (non-aerospace) engineering job that I stayed in for about three years. Imagine my excitement when I finally got an opportunity with a small aerospace firm in a big city. The firm only employs a few dozen people. A sole founder runs the whole operation. I could finally use my degree and pursue my passion.

After a couple of months in on the job, the payroll folks told the engineers on staff that our paychecks would be a couple days late. Apparently, a supplier was late on a bill to the company. I decided to write it off and just hope it didn’t happen again. A few weeks later, the founder spoke with the salaried professionals at the firm. He told us that we would need to take pay cuts so that the hourly workers paychecks would clear. In exchange, we’d receive some big bonuses in the future once the contracts he was expecting started to come in. I became frustrated. The final straw was when the founder told us that there would be another delay in paycheck processing. Additionally, he gave us no estimate as to when this problem would be remedied. 

I decided it was time for me to move on. I applied for another job and had one within a couple weeks time. The company still owes me for 2 weeks of pay. I started hearing rumors that the founder had a questionable past, and I discovered after searching his name online that he had just returned from jail. He told me they had a bunch of turnover from employees moving on to other cities to be closer to family. The real story seems to be that he cleaned house of any employee who would oppose him. He served one year for lying to the federal government about faulty airplane parts that the company delivered to a defense contractor that failed in testing. 

I emailed the founder and asked him when I’d receive my paycheck. He tells me they have to go through a process to make sure everyone gets paid. He’s loaded with money so I don’t understand why the company is struggling to pay the employees. I’m starting to wonder if I’ll ever get what I’m due.

-Worried Engineer

When the Boss Can’t Make Payroll, He or She is Committing Wage Theft

Wage theft is a very real crime, especially with small businesses. The whole point of being an employee instead of a contractor or business owner is to have stability. If you do the work, you are supposed to be paid no matter what.

This story fascinated me since it’s wage theft combined with another problem that the company founder in this situation is a convicted liar. You cannot believe anything he says, especially when it comes to the finances of the company. If he has the balls to lie to the feds, there’s nothing this man won’t say to trick his poor employees into working for him.

When you go to work for a family business, PLEASE enter their names on Google and see what you find. If they have any major criminal convictions, their names will probably show up. Also, before taking a job try to speak to someone who left the company to see what their true motivation was. Many people change for benign reasons like career opportunities or geographic relocation. In this case, my friend could have saved himself a lot of grief if he’d only have talked with some of the people fleeing this failing company before joining.

Whenever an employer does not meet the payment terms of your agreement with them, they commit wage theft. Maybe they do have a customer behind on payments. If that’s the case, they need to go down to the local bank immediately and request a line of credit. If they can’t qualify for one, you should quit immediately because the ship is sinking and you might as well get out.

Scumbags Like My Friend’s Boss Will Try to Manipulate Your Emotions

My buddy mentioned that the founder laid a guilt trip on him when he quit for a more stable position at another company. The founder wanted him to work part time, and may even try to blame him for some of his friends not receiving their paychecks.

I told him no matter what excuse his former boss uses for why he isn’t getting paid, that he should totally ignore it. The man is a convicted liar after all. I suggested that when the inevitable “how could you do this to us” email comes along, that my buddy imagine the founder blaming him for the deaths of 10 children in a Romanian orphanage. The excuse he uses as to why he can’t pay my buddy is likely to be similarly true.

Why Wage Theft Happens, and Why This Founder Isn’t Putting More Money into the Company

Smaller employers are more likely to commit wage theft. They do not have a sophisticated operation or a national reputation to maintain. If Walmart suddenly started paying their employees late, word would get out and people would stop wanting to work there. When it happens in a small family business, you might never hear about it as widespread news.

Unethical employers might use wage theft as a form of free financing. My friend’s employer probably cannot get access to a low cost line of credit, so instead of paying a high fee to a bank for temporary funds to make payroll, he simply extracts an interest free loan from his employees. It’s telling that the founder in this case does not want to make an additional investment in the company. He clearly thinks the company has a strong chance of going under, so he doesn’t want to throw good money after bad.

What My Friend Can Do To Maximize His Chances of Being Paid for His Labor

When your boss can’t make payroll, you need to Google search “wage theft” along with your local area name. I typed in the county of my friend’s place of residence and wage theft. I found a local county commission page that specialized in reporting this type of behavior.

When a boss can’t make payroll, its a horrible sign and likely foreshadowing a future bankruptcy filing. I warned him that even though a failed company must pay unpaid wages first in bankruptcy, whoever submitted a claim firm likely receives more money that those who waited. We found an online form on the local county commission website where he could submit his documentation. He could also attach his email chat with his boss showing that the company did not pay him for two weeks pay in over a month.

In other words, do not sit back if you are a victim of wage theft. Find a place to file a complaint against your employer as soon as possible. Follow up with the agency in charge of these complaints.

In the case of my friend, we found that local ordinances require that businesses repay victims of wage theft within 30 days of the application. If they fail to do so, then they must pay three times the wages owed as a financial punishment.

Moral of the Story: Do a Background Check on Your Employer, File Immediately For All Wage Theft Claims

My friend could have avoided all this trouble if he had checked into the history of the company before accepting the job. It was a great life lesson for him. Luckily, he is making significantly more in his new job.

If you or someone you speak to is a victim of wage theft, make sure you file your claim quickly with the appropriate local agency. Otherwise, an employer can drag their feet. They will hope they don’t have to deal with you until the bankruptcy court holds session. At that point, you might get a small fraction of what you’re owed. The boss who can’t make payroll in this example talked a big game but at the end of the day he’s a bag of hot air.

He was trying to put off my friend for as long as possible to maximize the chances his failing company survives. My friend should not wait around to discover he will not receive a paycheck. Helping him fill out the form made him feel empowered. Don’t tolerate wage theft. Try to dodge it first by doing your homework, then by making expectations with your employer clear and when they are late on their pay to you, be aggressive.

Readers, what words of advice do you have for my friend? Have you ever been a victim of wage theft? Know of any good resources to help victims? Comment below!