Human Resource Blog

Laid off workers/business $ problems/benefits

As exec. Dir./owner of small human service agency (SCorp) I have needed to lay off three workers at beginning of month, as a result of contract financial difficultities. For six years, contract (Denver Department of Human Services) verbally indicated intent to add funds as an addendum to contract. late October 2008, this occred again, however county took additional cuts (12.5%) and the additional funds would not be added. As a result the funds left in the contract period (June - May) would not sustain salaries, and then some. I have been able to financially pay the workers through their last day of work, however not their accrued vacation time. I have also officially laid myself off as an employee as I am unable to pay myself either. The referrals for services and accounts receivable have plumited even further than predicted, and I do not forsee an ability to pay laid off workers’ vacation time anytime soon, as I need to make payments on Mileage reimbursements, back payments on Simple IRA plan and taxes. If the company does not file bankruptcy, and maintains (sort of) through the next couple of months, am I in violation of labor laws without prioritizing payment of accrued vacation time?

Yes, if you proceed as you propose, you will be in violation of Colorado employment laws. In fact, it appears that you may already be.

Under Colorado statute, earned vacation is wages, and payable on the final paycheck. Earned vacation time is treated exactly like hours that the employee has worked, under Colorado law. (At least, for the puposes of this question.) When an employer terminates a worker for any reason, the employee must be paid immediately if the accounting department is open. If an employee is terminated on a day when the accounting department is closed, the employee must be paid within 6 hours of the start of the next business day. If the accounting office is off-site, the employee must be paid within 24 hours of the start of the next business day. All of these payments must include hours worked plus earned vacation.

If the employer does not comply, the employee can take the employer to small claims court, where no attorney is required. The employer may be forced to pay back wages plus a penalty of 125% or 10 days wages, whichever is greater. Manipulating the hours of the accounting office to avoid this obligation may be fraud. By law, you must display a poster with this information on it in the workplace.

Mileage reimbursement is not considered wages under Colorado law. If the payments to the Simple IRA were deductions from employee wages, you may be in violation of federal law by not paying them.

If the company goes out of business or declares bankruptcy and there are no assets, then the employer may not be required to pay back wages. However, since you plan to remain in business for several months, apparently this is not the case.

Read more about this at: http://www.coworkforce.com/lab/WageActFactSheet.pdf