When Can Employers Not Honor Employee Contracts?

On Behalf of | Nov 11, 2021 | Wage-And-Hour Claims

When your employer stumbles into financial hardship, they may even need to file for bankruptcy or could get forced into total shut-down of operations. In these dire times, it is highly likely that certain positions will end up getting cut.

It is important to understand what happens to employment agreements in a situation where your employer suffers from financial hardships.

What is the company designation?

Chron discusses the potential overlapping of financial or economic struggles and the ability to honor contracts with employees. First, look at the designation of your agreement with the company. Is the designation at-will or contract? Did you sign an employment contract? If so, it likely contains terms of termination and a minimum period of employment. However, at-will companies can terminate employees for any reason as long as it is not discriminatory.

Next, if they filed for Chapter 7 bankruptcy, they do not have to honor contracts. You can work to protect your agreement if they filed for Chapter 11, however, as this involves restructuring rather than liquidating assets.

Make negotiations where possible

Finally, you can take your contract to negotiation if possible. Most companies would prefer to go this route if it saves money, which is often the case when the alternative option involves litigation of any sort. You can try to rework the terms and come to a new agreement that suits all parties.

But if you find this impossible, you can seek legal action to protect your contract and the wages that it entailed. Consider seeking legal aid as you pursue your options and look over the possibility of taking your employer to court.