Legal Question in Employment Law in California

Re: Contracts Signed before Chapter 11 Filing

First, nothing regarding the bankruptcy affects your legal obligation to repay the reimbursements if you signed a contract that says you would repay if you left prior to the end of the one year. In fact, if you leave, it will become the duty of the bankruptcy trustee to recover those funds from you, which they will make every effort to do because their compensation is based on how much they increase the bankruptcy estate. Typically, however, I have been informed that trustees rarely go after amounts less than $1000. So you may want to keep that in mind. [Note: Do the contracts say you will have to repay in full, or do they allow a pro-ration for the months you continued to work? If the contract is silent on this point, I would argue that all you owe is a pro-rated amount for the remainder of the year, which will bring the value down, perhaps to less than $1000.]

Moreover, none of the changes in employment policies or pay structures affects your obligation to repay the reimbursements if you continued to work there after those changes were made. An employer has a right to change those policies at any time, and if an employee continues to work there with the changed policies, that creates an implied acceptance of a modified employment contract. That implied acceptance will stand unless there is an explicit written agreement that states the employer would not change those policies, for instance, for the year that the repay obligations were in effect. If no explicit contract prevented the compensation changes, then your continued employment after the changes preclude you from balking now.

It's definitely not a pretty situation. If you really want the new job, take it. Perhaps you can negotiate with the new employer (if they want you bad enough) to repay the prior employer's expenses if the prior employer (or the bankruptcy trustee) chooses to pursue that collection against you.

Good luck.

Re: Contracts Signed before Chapter 11 Filing

Without more facts, it is impossible to give you meaningful advice. I would have to see the actual contracts you signed. Also, was there a written agreement covering your employment (apart from the two contracts you mentioned)? If not, is there an employee handbook? Have you received a summary plan description of the 401(k) plan?

It is entirely possible that you are not bound by the contracts you signed because the employer has not lived up to its end of the deal. Again, however, it is impossible to assess the situation and give you a feel of what might occur if you leave and the employer sues without more facts.