Employment Law and Bankruptcy

Written by Small Business Magazine on November 12, 2018. Posted in Bankruptcy law, Corporate governance, Judge f a little jr

Business and the law often have strong ties, with the law dictating what a business can and cannot do, as well as setting precedents for how a business and the employees in it should behave during certain procedures. Employment law, for one, is the general term for how various labor laws affect the relationship of employee and employer, and aside from employment law, a business may need to know how bankruptcy law works when an event such as chapter 11 bankruptcy is declared. How can bankruptcy filing work with minimal pain to the company filing it? How can an experienced mediator smooth out this process? What exactly does labor law entail?

Employment Law

As described at Legal Career Path, employment law is the legal bounds for an employer’s relationship to an employee. Minimum wage, for example, is set by the federal government and state governments, and employers must abide by it. What is more, employment law extends to prohibiting discrimination among a company’s applicants based on personal attributes such as sex, sexual orientation, religious beliefs, disability, and ethnic origin. A safe working environment must also be provided, safe from such hazards as excessive heat or cold, gases like carbon monoxide, electrical hazards, and more. Collective bargaining among employees is another right that is enforced by law. Such act as the Clayton Act of 1914, the National Labor Relations Act (1935) and more set legal precedent for collective bargaining. Under these conditions, a collective of 50% or more of a company’s employees must have the right to their manager negotiating with them on good faith. Employers also cannot discriminate against employees based on age in concerns to termination or opportunities for raises or promotions.

Employment lawyers are essential for the government, employees, and employers alike, and they can provide counsel in-house or from a hired firm. Employers can use them to make sure that they follow the numerous and sometimes complicated legal precedents for employee treatment, and this can save time and money in the long run. What is more, employees can use such lawyers if they feel that employers are breaking the law in their treatment of employees, and unions can also reach out to such lawyers for bargaining with owners and managers. These lawyers can be used by both sides when negotiating and drafting a contract.

Bankruptcy and Arbitration

According to Nolo, chapter 11 bankruptcy is when businesses are struggling and reorganize their finances so they can pay off creditors and remain functional. Filing a petition in bankruptcy court is usually the first step, and this is nearly always a voluntary action on the part of the company filing for bankruptcy. On occasion, however, several creditors may coordinate to file an involuntary petition against a defaulting company.

Sometimes, an individual who has too much debt or income to qualify as a chapter 7 or 13 debtor will file as a chapter 11 debtor. Among all chapter 11 debtors, about 90% of them have $10 million in assets or less, and under that amount in annual revenue and a staff of 50 or fewer employees.

During a bankruptcy court case, the debtor will typically stay in business and be considered DIP, or Debtor in Possession, and no trustee is appointed for the defaulting company, unless the court determines that the defaulting company has acted in dishonesty or incompetence and thus cannot be trusted to operate independently. Either way, the court must approve major decisions on the debtor’s part such as paying expenses to attorneys, expanding or closing business operations, and sales of assets or property that are not the commercial product that the company normally sells.

During the first four months, the debtor may submit a reorganization plan for its finances, and such a plan will usually downsize the company to open up more money and assets for creditors. Sometimes, though, the debtor’s entire operations will be shut down and liquidated, and the remaining property sold off.

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