Legal Question in Business Law in California

Re: Payroll Hung Up In Frozen Bank Accounts

It is generally untrue. An employer must pay its employees within a certain time after the close of the pay period. If the employer's funds are frozen, it obviously cannot use those funds, but unless it finds other funds and makes payment, it will be violating the Labor Code.

If the employer fails to make the payroll through no fault of its own, even though a technical violation occurs the penalty is likely to be light, or none at all.

An exception would apply if the employer filed for bankruptcy. The 'automatic stay' of bankruptcy temporarily freezes debt-collection or contract-enforcement procedures against the bankrupt by anyone, including the employees and the labor commissioner. Nevertheless, many bankrupt companies, especially those in Ch. 11 where reorganization will be attempted, will voluntarily continue to make payroll.

My guess is that the judge in this case will thaw enough funds to meet payroll, but it would be a good idea to have at least one employee follow the legal proceedings and if necessary become involved on behalf of the employees' interests.