Chapter 11 -- Priority of wrongful termination claim.

Discussion in 'Bankruptcy' started by mountainview_2006, Oct 23, 2006.

  1. I had filed a case in California state court against the company for
    wrongful termination (age discrimination). Before going to trial in
    State Court, the company filed for Chapter 11 in Bankruptcy court.

    I am deciding whether to pursue the case in BK court.

    I consulted with a BK attorney who advised me that if the claim can be
    shown to be for back wages then it would be considered a higher
    claim than claims of other unsecured creditors -- Back wages can be
    claimed up to a maximum of $10,000.

    But the attorney did not know if wrongful termination could be
    classified as back wages. My attorney in the state case was also not

    The company has paid me for all work done. My case against them is for
    wrongful termination and demand for damages and/or reinstatement.

    Could the demand for reinstatement be classified as a higher priority
    claim, i.e., from the date of wrongful termination to the date the
    company could have legally terminated me?

    Are there any case precedents for this?

    I think I would only want to proceed if it could be classified as
    higher priority -- paid at 100% up to a maximum of
    $10,000 -- (anything beyond that would be normal priority unsecured
    claim with a fractional payout based on normal unsecured creditors.)

    If it could not be classified as high priority, then the claim is only
    limited to a fractional payout based upon the list of other unsecured
    mountainview_2006, Oct 23, 2006
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  2. mountainview_2006

    Kent Wills Guest

    I have it on good authority that on Mon, 23 Oct 2006 07:09:52 -0400,
    I don't see how it could be viewed as back wages. You state
    you were paid for the work you did. What you are seeking appears to
    be punitive damages. If you win your case, you will join the other
    creditors as a normal priority debt.
    I can't see it.
    Kent Wills, Oct 25, 2006
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  3. mountainview_2006

    Barry Gold Guest

    [OP is pursuing a wrongful termination case against a corporation that
    is in Chapter 11 BK, wants to know if his claim can be considered
    "back wages" and hence have a higher priority than non-wage claims.]
    But OP has also asked for reinstatement -- to be "made whole" by being
    put back in the situation he would have been if he had not been
    wrongfully terminated.

    If the court orders reinstatement, it would be fairly normal to also
    order payment of wages at his old salary(*) from the time of
    termination up to the time the order is issued. I think one could
    make a good argument that those are "wages" and entitled to the higher
    priority given under BK code.

    Frankly, if OP's lawyer can't figure out whether a reinstatement order
    will result in "back wages", I think he needs another lawyer.

    Now other damages, e.g., punitive damages, would be ordinary debts at
    a lower priority.

    I also note that the corporation is in Chapter 11, not Ch. 7. That
    implies that the business will continue to operate, and OP might be
    entitled to continued employement under a reinstatement order. Then
    he would continue to be paid, at the same priority as other employees.

    Also, a ch.11 filing usually implies that there is _some_ chance of
    the corporation emerging from BK to normal operation, if granted
    partial relief and extension of the time to pay debts. I would expect
    that to mean that the corporation's debts are worth at least, say,
    $.25 on the dollar. If the corp. is much deeper in debt than that, I
    don't see any way for it to ever recover.

    (*) possibly updated if the company was in the habit of giving regular
    raises, e.g., the average employee got a raise approximately equal to
    inflation once a year, even if labeled as "merit".
    Barry Gold, Oct 26, 2006
  4. mountainview_2006

    peter law

    Jul 22, 2015
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    peter law, Jul 22, 2015
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