Still On the Payroll, But Not Getting Paid

It's great to keep your job when others are getting laid off, but you've got to get a paycheck.

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Suzanne Lucas

I work for a small-to mid-size company and have been told that I am not being laid off, but I also did not get my paycheck because the company does not have the funds for payroll for their management staff. Can they do that? Would this be a de facto layoff? Can they really just expect me to work for free and refuse to lay me off so that I can’t collect unemployment?

Well, obviously they can because they did. Should they have? Of course not. Can you do anything about it? Maybe.

A company that doesn’t have enough available cash to meet payroll is in serious financial trouble. I doubt their logic is, “We won’t pay people but we won’t lay them off either, so no unemployment for them! Bwa-ha-ha.” I’m guessing their thought process is more like: “Oh crud. We don’t have any money. We need our employees or we won’t ever get any money. I’m sure our employees are willing to hold out. After all, we’re like family here.”

The family thing comes from working in a small group. Sometimes executives or owners forget that the only reason you hang out with them for 8-10 hours a day is for the money. They know they are in it for the long haul and forget that you are there because it is a job.

The first step is to pull your resume together and start working on finding a new job. The second thing is to find out what is really going on. Are they going to be able to pay you (including back pay) next week? Or are they uncertain of when they are going to have money again? Third, call up your local unemployment office and explain what is going on. Each state has individual rules for granting unemployment, but I would bet this qualifies.

What you probably have is a situation called a “constructive discharge.” This is where company doesn’t actually terminate you, they just make it so miserable to work there that any rational person would quit. To the best of my knowledge, if the state agrees that this is a constructive discharge situation, you would be eligible for unemployment.

Usually constructive discharges are for things like harassment and unsafe work environments. I think not getting paid would qualify as well.

Another option would be to negotiate that since you aren’t getting paid, you want a stake in the company if they want you to keep working. This may be helpful to them as well as you. It gives you additional motivation to work when a paycheck isn’t forthcoming and allows them to keep employees so they have hope of getting money again. If your health insurance is through this company, is that still being provided? If so, that may be worth more to you than whatever you’d get in unemployment.

This sounds like a terrible situation to be in. Hopefully the cash flow situation will change rapidly. If not, don’t feel guilty about leaving and apply for unemployment. And regardless of whether you stay or go, they still owe you the money. I hope you get it.

Suzanne Lucas has nine years of h uman r esources experience, most of which has been in a Fortune 500-company setting. She holds a Professional in Human Resources Certificate from the Society for Human Resource Management. She blogs at Evil HR Lady .

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